Cleveland School District Seeks Additional $217M for Repairs

20080521tl61ypds-1-0522ohio.jpg

CHICAGO - Seven years after winning voter approval to borrow $335 million, officials at the Cleveland Municipal School District say the money is close to running out and they need to borrow at least $217 million more to continue financing a plan to replace and repair aging school buildings.

The new bonds would finance the district's share of an ongoing $1.5 billion school building plan launched in 2002 and scheduled to be completed in 2015. Ohio provides state funding for 68% of the plan. Under the current proposal, the district would build 51 new schools and repair 59 schools.

The district's proposal to ask voters to approve $217 million in borrowing comes as officials hold a series of public meetings through May to announce revisions to the capital plan ordered by the state to adjust for declining student enrollment. The eight-member school board is expected to vote on the plan June 24.

Originally approved by voters in May 2001, proceeds from $335 million bond are expected to run out by the end of 2012, according to a district report. The district has entered the market with bond or note sales every year expect one since 2001 to finance the construction plan, and will likely issue the remaining $70 million sometime this year, according to Jim Larson-Schidler, the district's deputy chief financial officer.

Depending on final revisions to the master plan, at least $217 million of new money will be needed to finance the district's share of the final three construction stages. Voters would need to approve any bond issue. At recent meetings, officials have said that instead of increasing the property tax rate to pay for a new bond issue the collection time would be extended.

Fifth Third Securities Inc. and SBK-Brooks Investment Corp. are acting as financial advisers to the district. Squire, Sanders & Dempsey LLP is bond counsel.

The state and the district disagree over projected enrollment, which dictates how much funding the state will distribute under the plan. The Ohio School Facilities Commission, which distributes state money for school construction projects, decides how much it will fund depending on projected enrollment by 2015.

Enrollment at the Cleveland district has fallen to 50,000 from 70,000 10 years ago. The state estimates enrollment will drop to 40,000 by the end of construction in 2015. That's about 31,000 fewer students than originally projected in 2002 when the plan was launched. The enrollment drop is due at least in part to population decline throughout the area, high school drop-out rates, and rising enrollment in local private or charter schools.

Ohio's contributions to the capital program come from a mix of cash and borrowing against from last year's $5.5 billion tobacco bond sale.

The state will order another enrollment project study this year that could lead to more revisions to the master plan.

A civic commission that recommended asking Cleveland residents to approve the issue in 2001 cited "deplorable conditions" the in the school system, including freezing classrooms, leaking ceilings and roofs, and falling plaster.

 

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER