Harrisburg has another burning debt problem, and it’s not the incinerator.
The chief recovery officer of the school district in Pennsylvania’s capital city said Thursday night that the district is staring at $261 million of long-term bond debt that “keeps me up at night.”
“I’ve met with some financial experts, and I’ve met with some local banks. And I can’t get them to restructure that loan yet,” Gene Veno said while outlining his five-year projections at Camp Curtin Elementary School.
Pennsylvania education Secretary Ron Tomalis appointed Veno two months ago after declaring the school system in “moderate financial recovery.”
“As soon as we can get that payment down, which we see going to $21 million per year, what we can then start to do is concentrate on other numbers that are of concern to me within the budget,” Veno said.
The city itself, under state receivership, has $340 million of bond debt that it cannot pay, mostly due to financing overruns related to the incinerator retrofit project. It has missed its last two general obligation payments and its next one is due March 15.
The school district has an $11.7 million shortfall for this fiscal year.
According to Veno, debt-service payments will increase in the upcoming fiscal year by $2.2 million, or 14.2%, to $17.4 million from $15.2 million. Other big cost drivers, he said, are pension contributions, up 41.4% to $7.9 million, and charter school payments, up 120.6% to $14.7 million.
But, Veno added, capping charter growth alone is no panacea. “If the district can improve enough to become attractive to parents and halt the outflow of students to charter schools, that alone would not be sufficient to cure the district of its financial ills,” said his report, which Public Financial Management Inc. presented.
Even with 0% growth in charter enrollment after 2013-14, the deficit would still increase to $35.9 million by 2017-18, resulting in a negative fund balance of $143.2 million.
According to local television, teacher Will Davis said he won a lottery among staffers for paper to give to his students.
“The reality is that without the state coming in to provide a no-interest or low-interest loan and extending the debt for the long-term, there really isn’t any solution,” Davis said.
Veno said he may have to push back the target date for his recovery plan from March 12 because of difficulty obtaining the necessary numbers. Should the district reject the plan, Tomalis could petition a court for state receivership.
Earlier Thursday, the school board finalized a $2.4 million settlement with former superintendent Gerald Kohn and his two deputies, all fired in March 2010 with 16 months left in their contracts at the behest of Mayor Linda Thompson shortly after her election.
Kohn, whom Thompson predecessor Stephen Reed had appointed in 2001, will receive $1.2 million, while Julie Botel and Becky Hostetler will each split $1.2 million.
In the lawsuit, Kohn had cited wrongful discharge, saying he was fired without notice or a hearing. According to the suit, local attorney James Ellison and then-state Sen. Jeffrey Piccola said none was necessary under the state’s Education Empowerment Act.
The payout will feature $2 million by the district’s insurer; $250,000 by Ellison’s law firm, Rhoads & Sinon LLP; and $125,000 by the district.
Kohn’s attorney, Walter Cohen, accused Thompson — whose appointees dominated the school control board — of having a vendetta against his client, who had canceled a contract with Thompson’s former nonprofit organization, Loveship.
“The mayor is happy with the settlement. She is pleased with the opportunity to move on to other issues facing Harrisburg.” said Thompson’s attorney, Christopher Dreisbach. The settlement dismisses a charge of criminal conspiracy against Thompson, who will pay no money.