WASHINGTON -- The Richmond Unified School District's representative in the California legislature is pushing to get legislation passed this month that would enable the district to start repaying its defaulted certificates of participation, state officials said.
Two bills introduced by state Assemblyman Tom Bates, whose district includes some of the Richmond schools, would provide an infusion of funds to the financially strapped school district.
The district could use this money to resume paying $1.4 million of yearly principal and interest payments on the $9.8 million certificates, which went into default a year ago. But neither bill requires the district to honor the lease obligation, according to the assemblyman's press assistant, Rachel Richman.
One bill would authorize the school district to pay off its $29 million of outstanding loans from the state by selling some surplus property to California and using the proceeds to retire the loans. The other Bates bill would make the district eligible for federal voluntary integration funding, she said.
The assemblyman's initiatives come at a time when the school district and the state have been gearing up for a court battle over their claim that the defaulted lease issue was unconstitutional because it created debt without the required approval of voters.
A hearing in the case before the California Superior Court of Contra Costa County is scheduled for Aug. 14. State and district officials have said that their principal strategy is to persuade the court to invalidate the issue on legal grounds, freeing the district from any responsibility to repay it.
But if that effort fails, they said, the Bates legislation would give the district the financial wherewithal to settle the case and work out a repayment schedule with the issue's trustee, U.S. Trust Co. of New York.
"The state and the trustee want to play out this legal strategy first," said Frank Calton, one of the district's five school board members. But if that does not work, he said, "the most promising route would be the legislative solution."
Michael E. Hersher, deputy general counsel of the state education department, said the department supports the surplus property bill as a way to help the district pay off the state loans and thereby create room in its operating budget to address other long-term debts.
According to the district's financial statements, be retiring the state loans, the bill would free up between $4 million and $5 million of funds the district has committed in its budget each year to repay the loans.
That appears to provide more than enough money to start repaying the 10-year certificates, which were issued in 1988, as well as another long-term debt that the district abandoned last year -- a lease with principal and interest payments of $5.6 million extended by IBM Corp. for office equipment.
Unlike the certificate holders, IBM so far has not sued for payment or moved to repossess the equipment tied to the lease, Mr. Calton said.
Mr. Bates is pushing for enactment of the surplus property bill by the end of this month, when the legislature is scheduled to adjourn, Ms. Richman said. The bill is supported by parents and businesses in the Richmond district and so far has not run up against any opposition in the legislature, she said.
On Wednesday, it was approved by the Senate's education committee, which noted that it was needed to cure the district's "legendary" financial woes, she said. But it still must clear three other committees and both houses in the three weeks left in the session. It may go before the Senate's appropriations committee on Monday, she said.
"Time is the obstacle," Ms. Richman said, noting that the bill must "compete for everybody's attention" with the state's critical budget negotiations as well as a deluge of other and-of-the-session legislation.
Because little time remains, "we're not holding our breath" in anticipation that the bill will pass this year. But if it does not, she added, Mr. Bates will start pushing it again when the next session begins in January.
Mr. Hersher agreed that "nobody is betting the family farm" that the bailout bill will pass before adjournment and added that Gov. Pete Wilson has not yet indicated whether he would sign it.
While Bill Honig, the state's superintendent of public instruction, supports the bill, Ms. Richman said, that is not enough to ensure its enactment. He is elected independently of the governor, she said, and they have often been "at political odds."
