Whitnall School Board Investigates Defeasing Debt

The Whitnall School Board asked to factor a debt repayment through defeasance into its new budget at its meeting Monday night, a move that could use a to further strengthen the district’s finances.

The option was one of several considered at a special board meeting called to address the surplus in advance of the board’s 2011-2012 budget meeting Sept. 26.

The district finds itself in a “pretty incredible position” relative to other districts in the state, according to board member and finance committee chair T.J. Anderson.

The district accumulated a fund balance of $10.75 million through the 2010-2011 school year. That amount was projected to reach $12.3 million next year, which would represent more than 53 percent of its budgeted expenses. District policy calls for a fund balance to represent only 15 percent of its expenditures.

By setting aside $8.3 million, the district could eliminate its debts and bring the fund balance total back in line with policy.

Whitnall is up to date on its debt payments, but it could still eliminate debt through defeasances. The district would invest money with a bank to pay off borrowed bonds ahead of schedule, once the early repayment dates in its debt agreements arrive.

The debts would factor as essentially paid when rating and evaluating the district’s finances, according to district financial advisor Lisa Voisin of Robert W. Baird.

“It’s still taking it off your books,” Voisin said.

Using the surplus in that way would have the added benefit of eliminating annual loan repayments, a savings of around $745,000 in each of the next two years.

“We’re still in a surplus situation,” Anderson said of the scenario.

Those savings could be used for anything from improving facilities to reducing class size, said Whitnall Superintendent Lowell Holtz.

“There are no other districts in the state that are in as good of a financial situation as we are, after we do that,” Holtz said.

Board president Bill Osterndorf said the district was in a position of tremendous flexibility.

“We have the capacity to do a ton of stuff now, but we also have the capacity to do a ton of stuff later,” Osterndorf said.

Another option the board considered was setting aside money for future capital projects, including installing air conditioning in the high school gym, replacing the pool and upgrading the entrance to Hales Corner Elementary School.

Attempting those projects in the next year could be too much change for students and staff to tolerate, with a large outdoor project to manage storm water and replace athletic fields already underway, Anderson said.

Using the unwieldy fund balance to tackle building projects would also not completely address the budget surplus and outstanding fund balance. The district could still address those projects with the additional money saved from executing the debt repayment option.

The board also considered an option of under-levying next year, to essentially give money back to taxpayers.

That option would not address the problem of the rolling fund balance, which would surpass the district’s entire annual expenditures next year.

“We may be helping taxpayers this year to the detriment of kids in the future,” Osterndorf said.

The board asked interim business manager Douglas Johnson to include debt defeasance into the budget draft that he could bring to the board at its Sept. 12 meeting. The board could then approve or modify that draft for public notification in advance of its annual budget meeting Sept. 26.