Schools in need run up debts

Michigan districts carry a heavy borrowing load

This article originally appeared in the Detroit Free Press on July 30, 2001 at http://www.freep.com/news/education/debt30_20010730.htm.

BY JULIE ROSS

When it opened less than a year ago, Cheyenne Elementary School in Clinton Township had all the aesthetic bells and whistles.

Stone floors. Skylights. Brick facade.

What it didn't have was enough space.

Despite projections that it would open with excess space for 200 kids, Cheyenne was full when it opened and gained dozens more students as the year went on.

Enough students continue pouring into Chippewa Valley Schools, including Cheyenne, to fill a school each year.

All that construction costs money. Today, the district finds itself one of the most indebted school systems in metro Detroit.

According to data from the Standard & Poor's School Evaluation Service, analyzed by the Free Press, Chippewa Valley owed more than $238 million in 1999, the latest date available. That was $21,177 debt per student.

Across Michigan, more and more school districts have borrowed to pay for everything from computers and buses to new pools and auditoriums.

The borrowing has risen so much that Michigan has one of the highest public school debts in the country. The state ranked fourth behind Texas, New York and Pennsylvania in 1997, the latest data available, according to the U.S. Census Bureau.

That year, Michigan schools owed $8.16 billion -- enough to build 22 Comerica Parks.

By law, they can take on as much as they want, so long as they convince taxpayers to pay for it and the state Department of Treasury that it's needed.

"It's like a credit card your dad gives you," said Mike Griffith, a school finance expert with the Education Commission of the States in Denver, Colo. "As long as he's willing to pay, you can charge it up."

So, Michigan schools borrowed 2 1/2 times as much new debt as they retired in 1997.

In 1985, schools owed $1.8 billion on long-term bonds, according to the Municipal Advisory Council of Michigan, a nonprofit group that compiles the information. By 2000 they owed more than five times that much, $9.8 billion. That comes to $986 for each Michigander, not including interest.

"I'm all for education, but I think it's ridiculous how they ask for more money all the time," said David Rogala, who lives in Clinton Township, inside the Chippewa Valley district. "Where does it end? The Headlee Amendment was supposed to reduce taxes, but mine keep going up."

Chippewa Valley Superintendent Patti Kennedy said her district has no choice but to ask voters for money to build schools. "We know the growth is coming. We're trying to stay ahead of it."

Payer, tax thyself

Conventional wisdom says taxpayers won't agree to more debt than they are able to pay. But that's not always the case.

"That's the one really odd thing," said Griffith of the education commission. "For some reason, some communities really support local schools. It's ingrained in them, and they'll vote to raise taxes, even when they don't have the money."

Take Inkster Public Schools. It owed nearly $34 million for a new elementary school and other renovations in 1999. But all the taxable land in the city was worth only about $79.5 million, according to Standard & Poor's. That means residents owed 42.7 percent of their property's value on school debt alone.

The state average debt was 6.2 percent.

In a 1998 study, the Mackinac Center for Public Policy, a Midland-based conservative think tank, recommended school boards adopt policies limiting their debt burdens to 15 percent of the total value of taxable property within the district. That's the limit set by state law. But because the state guarantees bonds that it reviews and qualifies, the restriction is often waived, as in Inkster.

One out of every four Michigan school districts with qualified bonds can't afford to make their bond payments and seeks help from the state.

Through the Michigan School Bond Loan Program, the state Department of Treasury qualifies districts for bond elections and lends some money to subsidize their payments. That keeps tax bills lower, but taxpayers end up paying over a longer period -- with more interest -- in order to repay the state.

The program started in 1964 with just two districts needing help, grew to 98 districts in 1975, then fell back to 33 in 1992. Then, after Proposal A passed in 1994, changing the way schools are funded, requests for help shot up. Now 117 school districts have sought help in paying their bond debts, the highest number ever.

Footing builder costs

School officials cite a host of reasons for the need to borrow: aging schools and burgeoning enrollments, a growing demand for expensive technology and the state school funding overhaul that cut off districts' ability to seek millages for everyday costs.

In fast-growing suburban districts like Chippewa Valley, most of the debt can be attributed to skyrocketing enrollment.

Other districts are faced with an inventory of schools mostly built before 1970, and showing their age.

Griffith points to the fact that Michigan, like other states with big school debt, does not contribute any money toward construction. Other states, under mounting pressure from parents, educators and judges, have set aside money for school construction. Some, like Washington and New Jersey, cover 100 percent of the cost to build in poor districts and a smaller percentage in wealthier districts, he said.

Then there's the fallout from Proposal A.

After it passed, Michigan school districts became reliant on the state for a per-student allowance each year to cover everything from textbooks to teacher salaries to plumbing repairs.

The amount varies by district. Some received as little as $5,700 per student last year while others received double that amount.

As a result, some school officials say they're forced to go to the voters to borrow money for building repairs, new buses and computers.

Despite repeated public outcry over high taxes, many voters continue to vote themselves tax increases.

In 1993, Michigan taxpayers approved only 37.5 percent of bond measures put before them, according to the state Department of Treasury. That grew to 56.5 percent in 2000.

Build or rebuild

Voters in Dexter, west of Ann Arbor, have raised their taxes four times in 11 years, boosting the school district's total debt to $107.5 million in 1999. At $37,099 per child, it was one of the highest per-student debts in metro Detroit.

"We needed to be current," said Ross Stephenson, Dexter's deputy superintendent. "We're growing, and our buildings needed to be upgraded."

The cash helped the district build an elementary and high school, an 800-seat auditorium with an orchestra pit, and a second, six-lane practice swimming pool, in addition to remodeling older schools.

Other districts have found it more difficult to convince voters to borrow money.

Southgate residents rejected a proposal three times before accepting a cheaper version in 1999. After first asking for $68 million to refurbish schools, upgrade a swimming pool and build an administrative center and gymnasium, the district was forced to scale back the projects to $48 million worth of basic renovations and repairs.

"They didn't want to pay more taxes," said Edward Gawlik Jr., a parent who worked to pass the bonds and then won a seat on the school board. "We had to show parents how it was going to help kids."

Some taxpayers question whether districts really need the kind of facilities that have become commonplace.

Dianne Schramm, a mother of four, opposed her South Redford district's successful 1996 bond effort.

"When they're spending other people's money, they tend to waste a lot," she said.

Some Michigan districts have managed to renovate their aged buildings without going into debt.

In the Downriver community of Trenton, conservative spending, stable enrollment and high per-student funding from the state has kept the school district from borrowing money in 30 years.

It, Center Line and Grosse Pointe were the only local districts that didn't owe a dime on bonds in 1999.

"We don't buy just to buy," said William Mull, Trenton's business manager for the past six years. "We spend more to get quality stuff. We make it last. We work with what we have."

Take the district's middle school, named after board president and Trenton city engineer Boyd W. Arthurs. Built in 1971, the school was in desperate need of repairs.

So in 1999, the district restored five tennis courts. Then it replaced the school's boiler. Then it fixed the swimming pool's pipes and filter system.

In 2000, it gutted the school's basement, a former bomb shelter with makeshift classrooms. Halls were widened, skylights installed and ceilings lifted. The $1.4-million renovation cost was a fraction of building a new wing, Mull said.

"It's older, but it's serving us well," he said of the school, which still has its 1970s facade of sea-blue aluminum siding.

This summer, workers are gutting the school's top level. Old, 1970s-style open classrooms, which had walls that stopped short of the ceiling and no doors, will be replaced with traditional classrooms and large hallways.

"It breaks down to just $29 per square foot, compared to about $150 for new construction," Mull said. "It was more fiscally responsible for us."

That's a recurring theme in Trenton, which does have the advantage of high per-pupil funding from the state. Trenton schools got $7,624 per student last year, a full 25 percent more per student than bordering Gibraltar Schools received. That allows Trenton to stockpile a surplus that it uses to pay for capital projects .

"We pay all our bills, see what we have left over, and that's what we use," Mull said. "It's prudent. It's conservative. It works for us."

Many suburban districts don't have Trenton's flush coffers, don't expect their growth to slow and don't know where they'll put new students.

Chippewa Valley just broke ground on another new elementary school on its north side, and it's already searching for land for a future middle school.

"In about four years we'll be going back to the community to seek additional dollars for more classrooms," said Mark Deldin, Chippewa Valley's executive director of support services. "There's no way around it."

Contact JULIE ROSS at 313-223-4534 or ross@freepress.com.

Share More …