Erie School District aims for future with Central expansion

The Erie School District, Pa., wants to grow at the same time it shrinks.

A proposed three-story addition to Central Career & Technical School has become a major part of the same reconfiguration plan that will reduce the size of the 11,500-student district.

The reduction will come with the closing of Emerson-Gridley and Wayne elementary schools and the transformation of East and Strong Vincent high schools into middle schools, all in 2017-18.

The historic moves, which the Erie School Board gave preliminary approval a week ago, are designed to save money and save space. The proposed addition to Central, which the School Board also gave preliminary approval a week ago, would cost money and add space -- if the Erie School District receives enough extra state funding to finance it.

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  • The school district's reconfiguration would trim as much as $6.7 million from the district's annual budget and bring the district's physical plant in line with its demographics by eliminating as many as 5,000 unused seats.
  • The new 70,000-square-foot building at Central would replace the school's south wing, where Roosevelt Middle School is now located. The new south wing would take two and one-half years to build and would include 47 classrooms and cost $15.8 million, according to an April 6 report by the Erie School District's architectural consultant, McKissick Associates of Harrisburg.
  • All the renovations at Central, including the construction of the new wing and renovations to the existing building, would cost about $49 million, according to the report. The $49 million would be about 73 percent of the $67.3 million in bonds the school district would use to pay for the entire Central project and renovations to other schools, the report said.

District officials believe now is the time to expand Central, where the new building would house specialized "magnet school" programs, such as those in finance, health care and the arts, that are also critical to the reconfiguration plan.

With the closings of East and Strong Vincent as high schools, Central's high school population, now at 894 students, is expected to grow by 1,400 students. Another 180 students now at East or Strong Vincent would attend Northwest Pennsylvania Collegiate Academy, which now enrolls 771 students.

Adding so many students to Central without improving the 60-year-old building would undermine the district's efforts to increase its offerings under the reconfiguration plan, said Brian Polito, the district's chief financial officer, who becomes superintendent on July 1. He said construction of the new wing would help reverse the district's pattern of cutting programs year after year to deal with its chronic budget crisis.

Without improving Central, "ultimately the same thing is going to happen," Polito said. "When we make the cuts, we become less and less competitive with the charter schools and more students leave. We need to become more competitive and consistent with other school districts in the area."

The addition of the new wing at Central would provide a boost throughout the district, School Board President Frank Petrungar Jr. said.

"Anything to improve our buildings is a plus for the kids," he said. "It is kind of turning something into a positive. It is really something we need at this point."

Waiting on the state

To abide by a state-mandated timeline for school closings, the Erie School Board will vote on final approval of the reconfiguration plan on June 22. The district most likely will have to wait after that vote to determine whether the Central building project will proceed.

Construction hinges on the response from the state. Polito said the project will stall unless the General Assembly allocates additional money to the school district in the 2017-18 state budget, due July 1.

"That is what is going to make it happen," Polito said.

The district needs the additional money to offset a projected deficit of $9.5 million in 2017-18. It is reconfiguring its schools to eliminate much of the shortfall, but is hoping for more state aid to erase the shortfall and stabilize its finances in the years ahead.

The district asked for $31.8 million in additional annual state aid in the financial recovery plan it submitted to the state Department of Education in December, and which Education Secretary Pedro Rivera rejected in February. The district said the $31.8 million would help make up for years of underfunding at the state level.

The district has until the end of May to submit a revised financial recovery plan, which, based on Polito's indications, likely will include a request for $10 million to $15 million in additional annual state aid. If the district receives that much, Polito said, it would balance its budget and set aside $3 million a year for debt service to pay for the Central project and other renovations.

Financing the project
Polito said the district worked backward to come up with a figure of $3 million. He said bankers have told the district that it could afford a maximum of about $67 million in additional debt, given its financial circumstances. The district determined it would need $3 million a year to pay off that debt, Polito said.

The Erie School District's current annual debt service is at about $10 million and, with no additional loans, all the district's bond debt would be paid off in about 15 years, or in 2032. To pay for the new debt of $67 million, Polito said, the district would extend its debt payments by about another 14 years, and "wrap" the new debt payments around the current payments, similar to when a homeowner extends a mortgage.

Using that strategy, Polito said, the district could issue 25-year bonds to raise the $67 million but pay the bonds off in 21 years. He said the district would rather not extend its debt payments, but that Central needs repairs.

"It is not ideal financially, because we are saddling ourselves with interest, but it is a 60-year-old building," Polito said. "We have to do something."

Polito said the district also hopes to get keep its debt payments as low as possible by getting other help from the state. He said the district wants to enroll in what is called the state's intercept program, in which the state would directly pay the school district's new bondholder with funds from the district's state subsidy.

By intercepting or diverting the subsidy payments for debt service, the state guarantees loans for school districts, such as Erie's, that suffer from low credit ratings. Polito said the Erie School District's credit rating is BBB minus, which is still investment grade but just above junk-bond status.

Spending the money

Though the Erie School District would like to borrow as much as $67 million, not all the money would go toward the construction of the new south wing and renovations at Central, which would cost a total of $49 million.

The district would use some of the balance of the bond debt -- a total of about $18 million -- to pay for renovations at other schools, according to the McKissick report. One possibility, according to the report, is the renovation of a dilapidated gymnasium at Collegiate.

Polito said that using the money at other schools is another possibility.

"Five million dollars at a couple of these elementary schools will go a long way," he said.

Polito also said the Erie School District is exploring grants and private donations to help fund the renovations at Central. He said potential donors have already contacted the district.

"This is a project that we think the community can get behind," Polito said.

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