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Pontiac school district gets another $10M state loan

Chad Livengood
Detroit News Lansing Bureau

Lansing — A state panel on Wednesday approved another $10 million emergency loan for the Pontiac School District to help the school system make payroll and pay vendors — 14 months after the cash-strapped district borrowed $10 million to stay afloat.

The Local Emergency Financial Assistance Loan Board also approved a $1.4 million loan for the Benton Harbor school district, which has twice borrowed a total of $4 million from an emergency loan fund for financially distressed school districts.

Kelley Williams, superintendent of Pontiac schools, said the 4,396-student district is making progress reducing its operating deficit, which fell from $50.4 million in the 2013 fiscal year to $35.9 million this year.

The Pontiac school district is under state supervision after a financial emergency was declared two years ago.

“We have been making huge progress on the academic side as well as the financial side,” Williams told the three-member loan board. “We are finally seeing our deficit decrease — 24 percent within the first year — as well as a reduction of $3 million this year.”

Approximately $2.4 million of the loan would be used to pay Pontiac school employees, with the rest going toward “critical vendors,” according to a Treasury Department memo.

The 20-year loan carries a 2.7 percent interest rate and the first five years are interest-only payments.

In May 2014, the board approved a $10 million emergency loan that was interest-free for two years.

Pontiac’s $20 million in emergency loans is the statutory maximum for a school district, said Paul Connors, a legislative liaison at the Department of Treasury.

State Budget Director John Roberts, one of the loan board members, asked Williams whether the district had considered the implications of maxing out its borrowing capacity.

“Is there any concern on your end that there would be nothing to come back to later? Is there anything in the future that you see as a risk?” Roberts asked.

Williams said the loan is part of the district’s longer-term financial and operating plan.

“We have thought through this strategically,” she said. “Our team has worked diligently to ensure that we have a future as a district and planned out how the finances will pan out.”

Gov. Rick Snyder signed legislation earlier this month boosting the funding from $50 million to $70 million after the loan fund nearly ran out of available funds to loan out to distressed school districts.

The loan fund is available to all school districts, except Detroit Public Schools, which lawmakers exempted.

clivengood@detroitnews.com

(517) 371-3660

Twitter.com/ChadLivengood