A restructuring of more than $130 million in bond debt by Lincoln-Way Community High School District 210 will ultimately help district taxpayers, as the district continues to recover from a borrowing binge that put it on the state’s financial watch list.
At a special board meeting Wednesday, the school board approved the sale of $136 million in refunding bonds that will dramatically lower its annual debt service payments and within a few years be reflected in the tax bills of property owners.
The restructuring moves the final debt service payment for the district from 2033 to 2035, while also lowering the overall outstanding debt service tax burden, district officials said.
Overall, the district will save $24.5 million in annual principal and interest on its existing debt load by the time it is retired in 2035, according to PMA Securities, the districts financial adviser.
The district levies each year for paying off debt, and that was projected to go from about $21 million a year now to more than $41 million by 2031, according to PMA.
At the same time, individual district taxpayers, now shelling out $484 a year for funding District 210’s debt service, would have seen that portion of their tax bill soar to $874 a year by 2031, according to PMA. That amount is based on a home with a market value of $300,000.
With the restructuring, the annual tax bill for the same home is projected to increase to $612 by 2024 before gradually settling down to $564 in 2033, according to PMA.
The amount of debt owed by the district will, under the restructuring, drop by just under $22 million by the time the refunding bonds are paid off, officials said.
The board accepted a bid from J.P. Morgan to lock in an annual fixed interest rate of 1.76%, in advance of expected interest rate hikes by the Federal Reserve. The first rate hike could come in March and, financial experts say, could be followed by other rate increases.
Those increases will make the cost of borrowing more expensive and the Fed sees the increases as steps toward tamping down inflation after allowing an easy money policy that helped stimulate borrowing and spending.
District 210 said securing a favorable interest rate was helped by a newly issued credit rating of A-plus from credit rating firm Standard & Poor’s, with a recent S & P report noting the district’s strong tax base, financial reserves and solid financial management practices and policies.
That’s a far cry from 2015, when, after years of deficit spending, the district found itself on the Illinois State Board of Education’s financial watch list, indicating the state board’s concern about how the district was handling its finances.
In 2016, district officials were forced to close one of the district’s schools, Lincoln-Way North in Frankfort, to cut expenses.
In September 2017, former district Superintendent Lawrence Wyllie was indicted on federal fraud for allegedly misappropriating school funds for his own benefit and concealing the district’s true financial deficit from the public. A status hearing for Wyllie is tentatively scheduled for the week of April 11.
A building boom during Wyllie’s tenure saw the addition of North and Lincoln-Way West in New Lenox, with the district taking on a substantial amount of debt and facing skyrocketing principal and interest payments.
In 2006, voters approved a $225 million bond issue to build the new schools and make improvements to Lincoln-Way Central in New Lenox and the East campus in Frankfort.
At that time, the bond payments were structured to balloon in later years, with the assumption that continued residential and commercial development in the district would provide sufficient property tax revenue to cover debt payments, but that anticipated growth was stalled by the 2008 recession.
The district’s precarious financial situation prompted Moody’s Investors Services, in December 2016, to assign a “negative” outlook to the district, noting “lingering financial uncertainty” and a reliance on short-term borrowing to cover operating costs. Moody’s changed the outlook to “stable” in March 2018.
In 2019, however, Moody’s twice upgraded the district’s creditworthiness, and in March of that year the state board of education removed the district from the financial watch list.
Although not tied to the debt restructuring, the district is hopeful that steps it has taken to improve its finances will result in state board assigning the “Financial Recognition” to the district, indicating the highest category of financial strength and requiring limited oversight by the state.
“The restructuring of debt is a crucial step in recovering the district’s financial health,” Superintendent Scott Tingley, District 210’s said in a news release about the debt restructuring. “We are continuing to do the work necessary to stabilize and preserve our financial situation.”
mnolan@tribpub.com
