City school board seeks OK to raise funds with bonds

$25 million sought for repairs, Internet

November 18, 1999|By JoAnna Daemmrich | JoAnna Daemmrich,SUN STAFF

Looking to raise some of the millions needed to wire city schools for computers and make basic repairs, the Baltimore school board wants permission to issue its own bonds.

School officials went to Annapolis yesterday to seek legislative support for an unusual arrangement that would allow them to sell bonds worth $25 million -- even though they are not elected and do not have taxing authority.

The school board hopes to persuade state lawmakers to agree to the one-time bond sale, which would be used to leverage an additional $37.5 million in matching state funds. The proposal, carried over from the last legislative session after being introduced too late for a thorough review, was greeted with some skepticism by lawmakers.

Only 20 percent of Baltimore's 180 public schools are wired for the Internet, a tiny fraction compared with surrounding suburbs. The board wants to use $12 million from the proposed bond sale to leverage state and federal funds to wire 75 schools next year. To bring all of the schools on line will cost an estimated $78 million.

"Every year, students graduate from Baltimore City schools without ever turning on a computer," said Robert Booker, the schools' chief executive officer. "Every year, the digital divide for our students grows larger."

Many city schools have even more basic structural problems, he said: antiquated boilers, leaking roofs and dilapidated classrooms. A consultant has identified more than $600 million in necessary repairs.

The school board, which is taking over management of its finances from the city, plans to use $3 million in annual interest earnings for the debt service. State revenue to the schools would be pledged as an additional guarantee in case the board defaulted.

At a joint hearing of the House Appropriations and Senate Budget and Taxation committees, several lawmakers said they were sympathetic to the school construction and computer woes, but feared setting a precedent.

"We may have 23 school systems coming in here and saying `This is a great idea, and we want to do it next,' " said Sen. Robert R. Neall, an Anne Arundel Democrat. He added that he was worried by the state guarantee, saying: "That could put the legislature in the awkward position of saying, `No, we're not going to buy books -- we have to use it for debt service.' "

Legislative analysts cautioned that they could find no example of another school district in the nation that had sold bonds without having some taxing authority to raise its revenues.

Booker said similar bond sale arrangements exist in Texas and California. School districts in both states, however, have taxing authority.

Some lawmakers suggested that the city sell the bonds on the school board's behalf. The city has been reluctant to incur more debt at a time when its population and tax base are shrinking.

One local investment banker pointed out that investors will be more cautious about buying bonds that are not backed by an entity that has a guaranteed source of income.

"It is not illegal, not immoral and it is a practical solution to the problem," said Richard O'Brien, senior vice president of Folger Nolan Fleming Douglas Inc. "In a perfect world is this the best solution? No, because it will be more costly."

The school board president, J. Tyson Tildon, said it makes more sense to try to leverage a large sum at once. Otherwise, he said, repairs would be made a little at a time, and the city schools would never quite catch up.

"By being creative, being innovative, we've established a mechanism now to help us get a jump start," he said.

Sun staff writer Liz Bowie contributed to this article.

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