Trinity Area School Board unanimously approved the adoption of an $825,000 debt ordinance Thursday.
The proceeds from the issuance will be used for debt payments on existing debt due in May and November.
David Roussos, director of fiscal services, said the move was necessary because the school district ended the 2012-13 school year with a deficit that placed the school district finances in “a challenging position.”
As of June 30, 2013, the school district was $2,094,778 over budget, in addition to budgeted deficit of $937,626, which resulted in total net change in the fund balance of $3,032,404.
“We finished the previous year with expenditures in excess of revenue of over $3 million, which has depleted our fund balance from what was $3.9 million to just over $900,000, putting the district in a challenging position financially, certainly in the long term, but more specifically in the short term,” said Roussos.
The adoption of the debt ordinance, coupled with a memorandum of understanding the district recently reached with the Trinity Area teachers’ union, which calls for the district to recognize certain salaries and benefits next year, will enable the district to finish the current school year in the black.
Said board member Kerrin McIlvaine, “I hate it, I can’t stand it. It upsets me to no end, but it is necessary and we’re in a position where I don’t think we have any other choice.”
McIlvaine noted that Moody’s Investors Service downgraded the general obligation rating of Trinity from A2 to A1.
That downgrade could make it more expensive for the district to borrow funds since it likely will have to pay a higher interest rate.
According to the Moody’s report, which director France Eates read aloud at Thursday’s agenda meeting, Moody’s believes the district’s financial position “will remain challenged in the near term due to its nearly depleted reserve levels, ongoing expenditure demands and limited revenue-raising flexibility under Pennsylvania Act 1, and high reliance on state aid.”
Further, the report states, over the last three fiscal years, 2011-13, the district significantly reduced its general fund reserve levels through a combination of one-time capital expenditure, a failure to increase the millage rate and large unanticipated personnel expenditures.
“My hope is that the public will be patient with us as we try to rectify this situation. It is not going to be quick, it is not going to be easy, and it’s going to take a period of time,” said Eates. “There’s nobody sitting up here that’s happy about this, but our choices are really limited.”
Bob Armur, of financial services firm Janney Montgomery Scott LLC, said state aid had an impact on the district’s financial woes and said the school district must consider increasing taxes. He also lauded the board for its efforts to address the problem.
“I would like to tell you, I’ve been around for 40 years, and I commend you on your truthfulness and forthrightness with the public. It’s going to take a couple of years for you to get back on your feet,” said Armur. The biggest thing a district can do is raise taxes to show its ‘want’ to make things better. I’ve been involved with a lot of districts before who won’t do it, but expenses don’t go down, unfortunately, and state aid doesn’t go up. State aid is hurting you more than anything.”