Authorizes the city school district of the city of Mt. Vernon to finance a deficit by the issuance of serial bonds and/or bond anticipation notes

BILL NUMBER:A10159

Title of bill

An act to authorize the city school district of the city of Mount Vernon to finance a deficit by the issuance of serial bonds and/or bond anticipation notes and providing for other matters in connection therewith

Purpose

This legislation would allow the school district to convert this outstanding obligation into a deficit reduction bond as a revenue source and would provide a longer time frame for repayment.

Justification

The enactment of this bill would allow the school district to maintain the current level of repayment of the budget and not require a further increase in the property tax levy. However, If such legislation is not approved, the school district will need to identify 4.4 million else where in the 2009-10 budget of $203,175,490 that could be reallocated to the expenditure function to cover the balance of the principle repayment of the budget note. Finding sufficient funds is not likely due to the loss of "spin up" lottery aid of $5,000,000 from the Governor's veto and continued pressure on special education costs. This could cause the district to default and severely impact its .already weak credit rating. Repayment of this amount by a budget appropriation in the up coming 2010-11 budget would require an additional property tax increase of almost 4%. during a. budget already -adversely effected by reductions' in state aid of $6,449,000. Since repayment of a budget is not a contingent item, other budgetary costs directly effecting educational services would have to be reduced.

Fiscal implications

In the prior year of 2007-08, the Mount.Vernon City School District incurred greater than expected costs for special education and foster care, the cost associated with the opening of buildings post-construction and energy costs. As a result, the School District was required to issue a budget note of 5.5 million in June 2008 to finance these costs. Under accounting guidelines, a budget is not recorded as revenue but as a liability on the General Fund balance sheet. Budget notes are generally required to be repaid in full in the succeeding fiscal year if issued prior to the to the public's vote on the next fiscal year's budget in May. Since the budget note was not issued until June 2008, repayment was not required in the 2008/09 fiscal year but is required by the end of the 2009/10 fiscal year. Although funds were not budgeted in 2008-09, the School District did make a $500,000 payment against this budget note by reallocating other unexpended resources, thereby reducing the outstanding obligation to $5.0 million at June 30, 2009. The School District's adopted budget includes an appropriation of $600,000 for the repayment of the budget note, leaving the balance of approximately $4.4 million unbudgeted for the payment of the budget note.

Effective date

This Act shall take effect immediately.