When July 1 rolls around, the St. Vrain Valley School District could be $2.98 million in the hole, instead of the projected $6.26 million, thanks in large part to the sale of bonds.
District officials made this announcement Monday while presenting a preliminary draft of the 2003-04 budget during a Board of Education retreat.
By the end of the 2003-04 budget year, the district is projecting to have a final balance of $0.
This preliminary draft came on the heels of the district announcing it would need to cut $3 million from the 2003-04 budget because of, among other things, unexpected leases for energy-saving equipment and the lease of two “too-sophisticated” copy machines.
On Dec. 20, the school board signed an agreement with state Treasurer Mike Coffman to secure $9.8 million in interest-free state loans. This agreement laid out a spending plan for the rest of the 2002-03 budget and the 2003-04 budget.
According to the agreement, the district could spend only $124.7 million during the current 2002-03 budget year, which ends June 30. Also, the district was slated to end the year $6.26 million in the red after paying back the state about $20 million.
However, the district has “hopefully” shaved $1.77 million off of the anticipated $124.7 million in current-year expenditures, said former superintendent Roger Driver, who has returned to the district to help it through its financial crisis.
“This number is based on actual expenditures through March and projected expenditures for April, May and June, and are subject to change,” Driver said.
The district also could receive an anticipated $2.1 million in extra revenue, in what is known as a forward-purchase agreement.
This agreement, which would be the first for the district, is basically an advanced interest payment on invested bond money.
“It will give us immediate cash,” Driver said.
The district will receive $96.2 million today as a result of the sale of 2002 voter-approved bonds that occurred April 8.
In the past, when the district has received bond money, it has invested it into an account with Wells Fargo Bank and collected interest periodically, Driver said.
UBS Paine Webber, represented by Alex Brown, will begin to solicit bids today for a provider with an AA or AAA rating reputation, Brown said.
Whichever provider is chosen would hold current bond and past district bond money and give the district an advance payment on the interest the district would have collected over the life of the bonds.
The provider still will give the district the money it needs whenever a bill for any bond project is due, Driver said.
The benefit for the provider is that they might, in turn, loan the money out for a better return, Brown said.
However, there is a downside. By getting the interest now, the district could lose out on receiving higher interest over the next 19 years.
“We will probably lose out on some of the interest over the years,” Driver said.
“But it depends on what rates the future brings,” Brown said.
The district also will lose the security of receiving this interest money on a regular basis throughout the lifetime of the investment.
“This is a one-time fund,” Driver said. “We won’t be able to expect it ever again.”
By next week, the district could see the anticipated $2.1 million.
The school board is slated to approve the forward-purchase agreement at Wednesday’s meeting.
As a result of cutting $1.7 million from expenditures and receiving the $2.1 million in advanced interest, the district also has cut its loan payment to about $5.1 million from its anticipated $7 million to be paid back by June 30, 2004.
The 2003-04 budget also allows for a $2.04 million contingency reserve.
“Even though the budget is tight, it’s good to see this reserve. We weren’t expecting to build this reserve this year,” said school board President Kathy Hall.
The preliminary budget, however, does not allow for a 3 percent TABOR — or Taxpayer’s Bill of Rights — reserve required by state law.
“This is still not a good budget,” Driver said. “It’s balanced, but it’s not a good budget. People will see we don’t have a TABOR reserve.”
The district is hoping to garner a TABOR reserve by selling two plots of district-owned land and/or unlocking $3.5 million in a self-insurance pool shared with two other school districts, Driver said.
A problem the district could encounter during the 2003-04 budget is a requirement by a state school finance law. If the district receives $118 million in state equalization funds and property taxes — or about $5,813 per full-time student — it is required to put $3.4 million to fund things such as school supplies, field trips and library books, said Joanne Harbert, the district’s director of finance.
Since each school was instructed to cut 5 percent off its budget during the 2001-02 school year and 15 percent during the 2002-03 current year, and schools are being asked to cut another 5 percent off budgets for the 2003-04 school year, giving each school its allotted amount “will be difficult,” Harbert said.
The preliminary draft will go through numerous revisions, Driver said. The school board will have to adopt a proposed version by its June 11 meeting.
“There are some small cushions built in the budget for some funds,” Driver said. “But it’s a bare-bones budget, and to get it balanced, you can’t have too many cushions.”
Monday was Mark Pillmore’s first day on the job. Pillmore is the district’s recently appointed chief financial officer.
Pillmore is working part time and, on May 12, will begin working full time.
“I’m trying to get involved as much as I can,” he said. “I’m still looking forward to getting in here.”