Kokomo-Center School Corp. proceeds with emergency loan from state

danielle.rush@kokomotribune.com

Administrators in the Kokomo-Center School Corp. will move forward with applications for an emergency loan from the state, to cover the approximately $2 million property tax revenue not paid by the Chrysler LLC because of its bankruptcy.

Eric Rody, corporation director of business affairs, said the shortfall amounts to approximately 12 percent to 15 percent of the corporation's property tax revenue.

He said the proposed loan is similar to one the corporation received after Delphi filed for bankruptcy in 2005.

He said the corporation borrowed about $2.8 million from the state, in an interest-free loan, and has been budgeting $280,000 per year in the debt service fund.

That money was placed in the debt service cash reserve fund to repay the entire loan at once after 10 years.

He said the new loan is intended "to get us by until all of these issues are settled."

Rody said school officials learned during the weekend that Delphi will repay its property taxes from 2005, and the corporation will use that money to pay off the loan.

Board member Karen Sosbe said she had initially thought the new emergency loan would be interest-free, but she's heard from city and county officials that is not the case.

Superintendent Christopher Himsel said he and Rody are working with city and county representatives, as well as Northwestern School Corp.'s superintendent, as a team to negotiate "loan terms as favorable as possible."

He said the state Legislature did not guarantee a zero percent interest loan in the legislation it passed for the emergency loans, but it did not say the loans could not be interest-free.

Board member Harold Canady asked how the corporation will pay back the loan if accepted.

Rody said the hope is that the Chrysler bankruptcy will work out as Delphi's did, and the tax money would be paid and used to pay off the loan.

He added that the loan amount would be less than that borrowed in 2006, so the amount that would have to be raised through the debt service fund each year would be less.

He said the money already accumulated in the debt service cash reserve fund to repay the Delphi loan can be shifted to the Chrysler loan instead.

Rody added that in 2005, property tax still supported the general fund, the corporation's largest fund. Since January, the state has supported the general fund, removing it from the property tax. Property tax now funds only the debt service fund, pension bond fund, capital projects fund, transportation fund and transportation operating fund.

The board also approved advertising its 2010 budget.

Rody said the state Legislature did not finish the budget until June 30, and the Department of Education has not yet had its budget workshop. Because he does not have all the information he needs, he said, he's advertising higher numbers than he expects to receive.

Rody said the general fund will be higher than in the past, because the special education preschool fund is being eliminated and that funding will be placed in the general fund.

The budget advertised is $5.2 million in debt service, $420,000 in retirement bonds, $13.7 million in capital projects, $2.5 million in school transportation and $775,000 in school bus replacement.

The budget estimate for the general fund is approximately $49.8 million.

The board will have a budget workshop to examine the 2010 budget in-depth Aug. 17. There will be a public hearing at a date to be determined in September.

The board also approved moving the Kokomo Area Special Education Cooperative offices from the Lincoln School building to Central Middle School for the 2009-2010 school year.

Himsel said that allows him to close the Lincoln building, saving utility and maintenance costs, and making the building available for sale or lease.

The building is closing as part of the corporation's reorganization process. The special education cooperative will eventually be housed in the Darrough Chapel building, which also hosts the Head Start program.