CHICAGO The Columbus City School District will take bids from five of Ohios largest banks today for $60 million of revenue anticipation notes to raise cash to bridge a budget gap until tax revenues come in next year from a recently approved levy increase.
The district invited Bank One, National City, Huntington Bank, Key Bank, and Fifth Third Bank to submit bids, said Richard Simpson, an attorney with Bricker & Eckler who is working as bond counsel on the deal. The banks will submit the bids to Simpsons office.
Because of the need for cash flow, the district bypassed issuing requests for proposals from potential underwriters. In addition, Treasurer Jerry Buccilla submitted his resignation last week and is expected to leave his job sometime this week.
The sale will bring in cash for the district as it awaits the distribution of funds next year from a recently approved tax levy.
Its not uncommon for school districts [in Ohio] to need to borrow against the net property tax settlement to even out their tax situation within a fiscal year, Simpson said.
The district came close to the end of its operating revenue cycle before seeking approval of the levy from voters. Though that put the district at risk for having to cut its budget, the timing paid off.
Its very important to choose your timing correctly, Simpson said of the need to seek approval from voters. They wanted to get in front of a big turnout of voters if they could.
Voters in November approved the levy that will bring in about $60 million each year, said Fitch Ratings analyst Joe OKeefe. Ratings analysts warned earlier in the year that the districts budget would have to be cut if the levy failed. The districts rating remains stable, OKeefe said, in part because of the levy approval.
They were prepared even if they didnt get voters approval, he said. They were prepared to make the cuts, which would have been a step backwards for them.
The district expects to end fiscal year 2004 with an $8.3 million carryover balance, Moodys Investors Service analyst Michael Johnson wrote in a rating report. That is down from the $49 million carryover the district saw in 2003, he said. Earlier this year, the district reduced its budget by about $7.5 million, including savings from layoffs.
As the district enters a new levy cycle, Moodys expects the cash position will improve given passage of a new operating levy in November 2004, Johnson wrote.
Moodys, Fitch and Standard & Poors have assigned their top short-term ratings to the notes.
The district will need to keep the voters confidence as it gears up to issue debt for its 10-year capital program, OKeefe said. Improving academic performance will be key, he said.
The district will spend $1.3 billion to build 15 new buildings under the statewide Classroom Facilities Assistance Program. The district must win approval for $551 million of additional financing. Voters approved $392 million of borrowing in November 2002 for the first two segments of the seven-staged program for which construction will begin in 2005. The state share is 30%.
Last week, some board members questioned the timing of Buccillas resignation given a $13 million shortfall in the districts self-insurance fund. The board members said that Buccilla failed to tell them of the shortfall. Buccilla said he had told them about the shortfall and that the information was in previous audits. The shortfall grew this year because of layoffs and the subsequent loss of contributions into the funds, he said.
Buccilla formally submitted his resignation last week. He was not available for comment yesterday but he previously told The Bond Buyer that he had told the district board of his plans some time ago.
The district must address the insurance fund shortfall, OKeefe said. However, the amount relative to the budget does not cause concern.
