Board loans itself $5.2M

By Harold Gwin

One board member expressed concern about the ability to repay the loan.

YOUNGSTOWN — The city school board has decided to borrow $5.2 million from itself to help make ends meet this fiscal year, despite the reservations of one board member.

The board voted this week to borrow the money from its school building construction bond account, which has $6 million temporarily available.

The debt will have to be repaid over four years out of revenue from a new four-year, $9.5 million tax levy approved by voters in November, said William Johnson, district treasurer.

The idea is to reduce the district’s reliance on state solvency loan funds to deal with a projected $8.7 million budget deficit, school officials have said.

Board member Michael Murphy cast the lone vote against the borrowing plan, expressing concern about the effect on overall district finances in the coming years.

“If we lose 400 more students, how will we pay it back?” he asked, a reference to a report from Johnson in December that showed a loss of 400 pupils this year resulted in a loss of about $1.5 million in state subsidy funds, adding to the district’s fiscal woes.

Both Murphy and Lock P. Beachum Sr., chairman of the board’s finance committee, expressed reservations about the borrowing plan last week, but Beachum voted for the proposal this week.

The difference, he said, was the position of the state fiscal oversight commission. The state commission has been controlling Youngstown’s finances since the state placed the district under a fiscal emergency designation in November 2006 — when the Youngstown district reported a deficit in its general fund.

It was the commission that came up with a suggestion that Youngstown find a way to lessen its need for state solvency loans to balance its budget, Beachum said, adding that the commission indicated the borrowing plan would move forward.

The new tax levy will generate $5.2 million a year in additional revenue, and, by law, that’s the maximum amount the district can borrow in the form of a tax anticipation note, which is the way the self-borrowing plan is structured.

Johnson has said the district will repay the loan at an interest rate of 2 percent.

The district has already borrowed $25 million in state solvency loan funds to cover its budget deficits over the last two years. All but $5.2 million of that amount will be repaid by the end of June this year, with the rest to be repaid in fiscal 2009-10.

But the district will have to borrow more.

Borrowing $5.2 million from its own bond fund will still leave the district about $3.5 million short for fiscal 2008-09. That’s money the district expects to get from the state solvency loan fund.

gwin@vindy.com