School board OKs maintenance plan, will refinance loan

Ramona Unified School District trustees outlined two years of maintenance projects costing about $1.5 million, set the stage to refinance the district’s debt, and learned that for the first time in five years the district has a report showing it can meet its financial obligations through June 2017.

“There isn’t one single red number up there,” Assistant Superintendent David Ostermann said, referring to the PowerPoint budget update he presented to trustees last Tuesday.

Three months ago, trustees in a 3-2 vote, with Bob Stoody and Rodger Dohm dissenting, approved a budget report that showed a $2.6 million deficit in the 2016-17 school year. That gave the district “qualified” status, meaning it wasn’t sure it would meet its financial obligations.

Stoody’s proposal in December left a $1 balance at the end of the 2016-17 budget year.

“It’s important that we send a message that we spend within our means and budget...that we don’t think of deficit spending as a standard procedure,” he said. “There was a time for it back when the Great Recession came along, but for ongoing business and looking toward the future, our responsibility to the taxpayer is to make sure we live within our means.”

Earlier this month, the state Department of Education listed Ramona Unified as one of six districts in the county and 43 in the state that filed a qualified certification.

Ostermann’s update last week shows the district ending this school year with a balance of $3.1 million. The projected balance at the end of 2015-16 is $3 million, and at the end of 2016-17, $1.3 million.

The state requires school districts to project budgets for the current and the next two fiscal years “to maintain fiscal health and to identify any significant issues,” Ostermann said in his report.

What changed the fiscal outlook for the district was revenues, said Ostermann. The governor’s proposal in January for 2015-16 means additional revenue for the district of about $3 million, and projections for a stable economy are strong, said Ostermann.

While San Diego Gas & Electric costs are higher than projected, the district received about $90,000 more in developer fees than anticipated in the last fiscal quarter, the county bill for the November election was $15,000 less than projected, and legal expenses are down, he said.

Also in the meeting, trustees discussed options for refinancing the $25 million debt the district assumed in 2004 and refinanced in 2007. Of that, the district still owes about $22.7 million with escalating annual payments from about $1.8 million this year to $3.5 million in 2032.

The 2004 loan, taken in certificates of participation (COPs), was for school construction and upgrades. Trustees voting to borrow the money said developer fees would repay the loan.

“The developer fees didn’t materialize,” said Jon Isom, district financial adviser from Urban Futures.

Low interest rates give the district an opportunity to refinance, said Isom, presenting trustees with several options and potential savings between $159,000 and $9.1 million. Interest rates on the 2007 COPs range between 4.3 percent and 5.13 percent. Interest rates on a 2015 refinance are estimated to be between 0.41 percent and 3.6 percent, Isom reported.

If the district does nothing, it will pay $26.9 million in interest through May 2032, for a total principal and interest of $51.3 million on the 2007 principal of $24.3 million.

One option is to apply $3 million of the $4 million still in the COP account to loan payments and to refinance at the lower interest rates. Another option is to set level annual payments, similar to a home mortgage — with or without applying the $3 million, and another is to extend the maturity of the loan five years, with or without applying the $3 million.

While trustee John Rajcic argued for pushing the maturity to 40 years, the consensus of the board was against extending the maturity.

“I’m not interested in extending the term at this time,” said Dawn Perfect, board president. “...Let’s take care of our debts.”

Saying they were not ready to choose a specific option, trustees directed district staff and Isom to prepare legal documents to lay the groundwork for a future vote to refinance.

The trustees’ review of the two-year maintenance plan that Ostermann presented includes projects at each school site and the district office. A copy of the plan is on the district website, www.ramonausd.net. Click on “Yesterday” under “Headlines.”