Debt Payments

In 2023, the school corporation will make debt payments of $6.15 million. This is about $800,000 more than the projected tax revenue to the debt service fund. This means that funds that had been intended for other purposes will be diverted to pay the debt on the recent construction. The school board already transferred $1.4 million from the referendum fund and then authorized using it to make future debt payments at the March 2021 school board meeting. Our school leaders are spending much more than just “construction money” on construction and by doing so have chosen to prioritize construction projects over teachersclass sizestudent support, etc. Some of the construction was definitely needed and I like beautiful new school facilities as much as everyone else, but I believe that supported and engaged teachers are far more important to the overall health of a school than new buildings.

Our school board has committed to large and increasing debt payments every year through 2039. This ties our hands for two decades and means that school budgets will be even tighter than normal. With no additional borrowing capacity until 2040, our schools will have a reduced ability to adopt new technologies and deal with future remodeling and construction needs.

In a ranking of every school district in Indiana, WLCSC comes in second highest for debt per student. One reason that the debt per student is so high for our district is that our debt was incurred recently and over a short time period (2017 – 2020). Other school districts spread their borrowing out over many years and as they retire old debt, they can take on new debt. Our school district will have a very difficult time trying to take on new debt over the next two decades.

In the chart above, you may have noticed the spike in debt payments in 2019. This occurred because the school district was still paying back old debt (the final payments on a bond from 2008) while starting payments on the new debt. The large debt payment in 2019 caused a very tight school budget that year and the school board approved a reduction in force (RIF) process for all first-year teachers in WLES and WLIS (I wrote about this here). After informing first-year teachers that they may be fired, 15 teachers (9% of the teachers in our district) left over the next 4 months. New teachers don’t like working in school districts with tight budgets because they are the first to be fired if the budget doesn’t balance. Having to resort to “emergency hires” the week before school starts has unfortunately become a common practice in our district.

The thing that I find the most frustrating about all of this is that the school board borrowed all this money without telling the public. In a series of town halls, school leaders presented plans for $50 million in construction with alumni donations covering a portion of that cost. But then the school board approved borrowing $95 million for these construction projects. Their justification seems to be that construction costs went up (by 90 percent?). Rather than advertise the bond hearings and invite the public, as was done with the town hall meetings, the school board only provided the minimum notice required by law (posting a public notice in a newspaper and taping a notice to the admin building door). Community members had no idea that big financial decisions were being made. When the school board learned that construction costs had increased, they should have considered adjusting construction plans. They definitely should have provided financial projections and then solicited feedback from the community before imposing these debt payments on us.

There is also the question of why the school board decided to use lease agreements through a building corporation rather than just issuing bonds for all this debt. In elections between 2015 and 2019, 58 Indiana school districts sought voter approval in construction referenda in order to borrow to finance school construction/remodeling projects. Indiana law requires public approval in an election in order for school boards to issue bonds that exceed debt service property tax revenue – so why didn’t our school board do this? The answer seems to be that the school board used legal loopholes to avoid having to tell the public. By dividing the projects up into groups of less than $15 million each with at least one year between bond hearing approval votes and using lease agreements through a building corporation, our school board avoided having to hold a bond election. An Indy Star article explains: “A school district sets up a nonprofit building corporation, which takes on the debt needed to fund big projects instead of the district. When the nonprofit issues the bonds, the security is a lease agreement with the district. Meaning, the land, or building in need of renovation, is sold to the nonprofit and leased back to the district. Then the land or building is returned when the bonds are repaid using the district’s lease payments. That lease agreement is not technically counted as school debt. Therefore it doesn’t count toward the district’s debt limit.” Using this loophole is a legal way to avoid having to tell the public about all the debt the school board is approving. My view is that for decisions this big (deciding to borrow $95 million rather than the $50 million we were told) the community should have been given the opportunity to vote.

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