July 22, 2014

Elyria
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Lorain school board to weigh loan vs. takeover

LORAIN — Whether it makes sense to take on more debt to avoid losing local control of Lorain Schools is expected to be debated at tonight’s Board of Education meeting.

Despite last week’s passage of a seven-year, 4.8-mill property tax levy that would raise about $3.1 million annually, the school district has a projected $4.7 million deficit and is expected to go broke in the spring, which would trigger a state financial takeover. To avoid a loss of local control and voter disenfranchisement,

Superintendent Tom Tucker and Treasurer Dale Weber recommend borrowing $3 million over five years with a $240,000 borrowing cost.

“Is it worth about $240,000 of interest expense over five years to have more freedom, control and expediency to make the academic and financial decisions that will affect Lorain City Schools for many years to come?” Weber wrote in today’s meeting agenda. “My recommendation is yes.”

However, board member Jim Smith argues that borrowing is a betrayal of voters who supported the levy, the first new levy approved since 1992. Devastated by a shrinking local tax base, dwindling enrollment due to depopulation and competition from charter schools and open enrollment, the district borrowed $5.3 million in 2006 and $4.7 million last year. While the first loan has been paid, payments on the second begin in July.

Instead of borrowing, Smith recommends the district go into fiscal emergency, which would allow it to obtain an interest-free advance on state taxpayer funding of between $3 million and $6 million. The district would have between three and 10 years to repay the advance.

“We can get free money,” Smith said Tuesday. “What business would not take advantage of getting $3 million to $6 million to use for three to 10 years to pay back and owe no interest.”

Smith compared the borrowing to taking out a loan to pay back credit card debt. He said Weber projects a $1.1 million deficit in the 2013-14 school year, even with the borrowing.

“All they’re doing is forestalling the inevitable by a year. And by doing that, it’s costing $240,000 in interest,” he said. “Tell me how that helps kids.”

Board member Bill Sturgill counters that borrowing is the lesser of two evils. A takeover would mean a five-member, state-appointed panel would have to approve all spending. Sturgill said the panel could reject spending initiatives like Tucker’s plan to return full-day kindergarten in January and possibly bring back high school busing.

Both programs were cut as part of $7.3 million in cuts earlier this year, which included 182 employee layoffs.

Panel members could also reject spending on efforts to recruit and retain students.

“You lose a certain element of control,” Sturgill said. “They could even change our programming.”

Tucker said he spoke this week about finances with Roger Hardin, Ohio Department of Education Finance Program Services assistant director. Tucker said Hardin, who briefed board members in January on their options, recommended borrowing rather than a takeover.

Contact Evan Goodenow at 329-7129 or egoodenow@chroniclet.com.