SOUTH PORTLAND — The City Council voted unanimously Monday night to put a $5.83 million school renovation bond on the June ballot.
The council also gave initial approval to a ballot question for a $3 million bond to repair the Long Creek pump station, a project that is currently being considered for federal stimulus money.
The $5.83 million school bond would fund renovations to the high school and two middle schools. Taxpayers would pay about $2.75 million in interest over the 21-year life of the bond.
Among other projects, the school renovations would include upgrading security, electrical and fire protections and alert systems in addition to repairing stairwells.
Resident Albert DiMillo said the council should not send the borrowing question to voters, because the School Department has millions in an undesignated surplus account. DiMillo presented councilors with a copy of the state laws that limit the department’s undesignated surplus to only 3 percent of its budget.
The law states that the School Department must use funds in excess of the $1.3 million it is allowed to carry within three years. Otherwise, the state would reduce the city’s education subsidy.
“You don’t need to borrow the money; you’ve got the cash,” DiMillo said. “You’re going to have a huge surplus and it’s going ot be taken away by the state.”
DiMillo, a retired corporate accountant, contends the schools currently have $4.4 million in surplus that could be used to finance the repairs. But those figures don’t seem to account for the fact the department typically budgets a portion of that surplus each budget season to reduce the local tax burden.
The current budget used more than $865,000 in undesignated surplus to offset local taxes. Next year’s proposed budget uses $1.2 million.
Business Manager Polly Ward said Wednesday the schools have about $3.6 million in undesignated funds, which the department is trying to reduce without creating a hole to fill in future budgets. She said the size of the school’s undesignated surplus has been highlighted in recent years by independent budget auditors, but it has never been considered a reportable violation, since the schools have a plan for paying down that balance.
“We may have had to use some of this money if the state decided to cut some of our subsidy,” Ward said. “The school does need to have an undesignated fund balance for the unknown.”
The Long Creek pump station project was originally scheduled as part of the city’s current Capital Improvement Plan and would have been paid for by using tax increment financing money.
City Manager Jim Gailey said the project will be eligible for federal stimulus dollars for environmental projects. That stimulus money, however, is being funneled through the state’s revolving loan program and would be provided in the form of a no-interest loan.
It’s unclear exactly how much money the city would get for the project, but the best-case scenario is the city would not have to repay 27 percent of that loan, or $810,000.
Finance Director Greg L’Hereaux said taking this approach, rather than using cash on hand, is a “no-brainer.” If the city were to use its cash for the project, L’Hereaux said, it would likely have to borrow money for future CIP projects and be charged interest.
“This will allow us to preserve these (TIF) funds so they can be used at a later date,” L’Hereaux said.
Randy Billing scan be reached at 781-3661 ext. 100 or firstname.lastname@example.org