DALLAS – Michigan's Bridgeport-Spaulding Community School District and New Haven Community Schools have manageable fiscal stress and will not require emergency management.

That was the conclusion announced Wednesday by the Local Emergency Financial Assistance Loan Board, which also approved the terms for emergency loans for two Michigan area school districts during its meeting. Bridgeport and New Haven, which have operated with budget deficits for more than five years, were under review by the board.

The next step for the districts is to work with Michigan's Treasury to draft an "Enhanced Deficit Elimination Plan" with the outlines of how the districts plan to deal with their red ink. "This allows collaboration between Treasury and the district to work hand in hand to assess what is wrong and come up with a plan to help the district with financial issues," said Jeremy Sampson, a treasury spokesman.

Had the board found the fiscal stress unmanageable, both districts would have potentially gone the route of emergency manager oversight, adoption of a consent agreement or recommendation of Chapter 9 bankruptcy under state rules "but they determined that fiscal stress was manageable and improving," said a spokesperson with the Bridgeport-Spaulding Community School District.

Bridgeport- Spaulding schools had accumulated a $1.6 million deficit as of June 2015 and New Haven was dealing with a $296,000 budget deficit as of June 2015.

The Michigan Treasury implemented an early-warning and intervention law in 2015 designed to address financial problems in school districts before they become emergencies. The law requires that school districts, intermediate school districts and charter schools with reserve funds of less than 5 % of their general fund budget send their budgetary assumptions to the state and choose between working with the Intermediate School District or the state to build their reserves.

The Board approved the restructuring of Wayne RESA's, on behalf of the School District of the City of Inkster, 2013 emergency loan in an amount not to exceed $11.8 million. It will be paid over 27 years with final maturity in 2043. The first 2 years of this will be interest only, with the first principal payment beginning in the third year.

Inkster school district was shuttered in the summer of 2013 after Michigan lawmakers enacted legislation that allowed for the dissolution of small insolvent school districts. Wayne County Regional Educational Agency , the intermediate school district for Wayne County, by law must handle the outstanding obligations of the dissolved district.

For Benton Harbor Area Schools the board approved an emergency loan in the amount of $3.3 million. It will be repaid over 15 years at a fixed rate of 1.75%. The first 5 years are interest only, with the first principal payment being made in the sixth year. In 2014 the district signed a consent agreement with the state and is grappling with a $15 million deficit.

Chief Deputy State Treasurer Tom Saxton is chair of the local emergency financial assistance board. Other members are John Roberts, Michigan's budget director, and Shelly Edgerton, Director of the Department of Licensing and Regulatory Affairs.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.