Interest payments eat into revenue

GARDEN CITY, Mich. — Garden City Public Schools will pay hundreds of thousands of dollars in interest this year as it borrows up to $10 million to smooth cash flow, according to the Garden City Observer.

The district will borrow $8 million through the Michigan Municipal Bond Authority and has opened a $2 million line of credit with J.P. Morgan Chase, the Observer reported. It will have to pay interest on the full amount of the state loan but only on the amount actually used through the Chase loan, the report said.

The district will repay the money with future state aid payments. Board President Patrick McNally said that the district paid $450,000 in interest for its last state loan, an amount he said should be spent on things like textbooks or teachers, according to the Observer.

"Because of our credit rating, the lenders are not up to lending us money," board Treasurer John Thackaberry said, the Observer reported. "The state has put us in a situation where Garden City has to spend money allocated for education to pay bills. Now we have to use the bond authority because the state doesn't fund us in a timely manner."

Garden City is one of 42 public school districts operating under a two-year deficit elimination plan, according to information at the Michigan Department of Education website.

Garden City Observer, "GC district borrows to cover expenses," July 15, 2010

Michigan Department of Education, "Michigan Public Schools with Deficits."

Michigan Education Digest, "Ypsilanti adopts deficit budget," July 2, 2009