WASHINGTON - California Gov. Pete Wilson has charged his staff with helping to resolve the Richmond Unified School District's financial problems, but a solution is unlikely to come in time to prevent next month's court clash over the district's defaulted lease issue.
The trustee of the $9.8 million certificates of participation issue, U.S. Trust Co. of New York, is scheduled today to ask the California Superior Court of Contra Costa County to rule on the central issue in the lawsult - the constitutionality of the defaulted securities, said Ronald Ryland of Sheppard, Mullin, Richter & Hampton, the trustee's attorney.
The court is likely to schedule a hearing on the matter on Dec. 4, with a decision expected shortly after that, he said.
But the earliest the governor's staff could produce a proposal aimed at helping Richmond is the beginning of next year, according to Bill Furry, an aide in the governor's child development office.
Meanwhile, in a development that could affect the lawsuit, International Business Machines Corp. has notified the superior court that the district has fallen behind on more than $1 million of payments on a $6.28 million equipment lease held by the corporation.
IBM entered into the lease with the district in 1989 to purchase personal computers and instructional software. The district stopped paying the lease when it went bankrupt in the spring of 1991 and has not budgeted any further payments, said Cecilia Moseley, an IBM spokeswoman.
While attorneys for the school district said the IBM notice could be the first step in a lawsuit similar to the investor suit, Moseley said IBM is not moving toward litigation. She said IBM hopes to reach a negotiated settlement with the district over the delinquent lease.
While talks with IBM continue, the governor's staff and various state officials have been working with the district and state Assemblyman Tom Bates in an effort to help the district. The group is crafting a bill that, if drafted and passed quickly when the Legislature reconvenes in January, could provide the beleaguered district some financial relief.
As envisioned by the administration, the bill would rewrite legislation sponsored by Bates and passed by the Legislature in August. That bill would have authorized the sale of surplus school property in exchange for immediately forgiving $28.5 million of loans the district has received from the state, Furry said.
Administration offices involved in the work group that is trying to redraft the legislation include the child development office, the governor's legislative staff, the office of local assistance, and the state department of general services, he said. The group meets from time to time to address educational concerns.
Under the Bates bill, which Wilson vetoed a month ago because he said it was too easy on the school district, the state would have been responsible for selling the surplus property. The governor wants the district to be responsible for the sale, and he wants the district to repay the state loans in full, plus interest, Furry said.
"We want to resolve" the Richmond situation, the aide said. "It's an important issue, and we still have a fiscal problem in the state that doesn't look like it's going to get any better." But the governor wants to avoid any bailout plan that would encourage other financially strapped school districts in the state to seek similar relief, he said.
"We are trying to provide an incentive for school districts to be well-managed," he said. "Other districts are in trouble as well, and we can't let them think they can just sell their property and get out of trouble, or give it to the state and their debts will be paid off."
The governor's proposal would not give Richmond immediate relief like the original Bates bill. Many believe such relief would have headed off the investor lawsuit by enabling the district to quickly negotiate a settlement through an unusual refinancing of the defaulted issue.
The governor's bill would not include a refinancing provision, Furry said. However, it would attempt to ease the district's financial crunch a bit by delaying payment on the state loans while the district arranges the property sale.
At the same time, the bill would impose some penalties on Richmond, he said. In particular, it is likely to make the district ineligible for school construction funds from the state, probably for five years, and it may make the district ineligible for deferred maintenance funds as well, he said.
According to a consultant to Bates, the bar against receiving state funds for deferred maintenance would likely hit the Richmond district particularly hard, since its financial troubles have led to huge deferred maintenance needs totaling about $150 million.
But Dion Aroner, the consultant, said the governor's willingness to give the school district some breathing room by delaying the state loan payments was a good sign. "The big problem is if the district is held to making the loan payments" while it is auctioning off the surplus property, she said.
Even with the bill's limited financial relief on the horizon, officials said the school district could not be expected to immediately begin repaying its defaulted securities or the IBM lease.
Moseley said IBM has hoped through quiet negotiations with the school district in the past year to avoid litigation and get the district to reschedule at least partial payments on the delinquent equipment lease.
At one point this year, the district offered to begin paying a token amount on the lease again - $10,000 a year for the next 10 years, she said. IBM has not responded to the offer.
IBM filed the notice of delinquency with the superior court last month only to keep its options open" while it continues negotiations, she said. Richmond superintendent Herbert Cole is scheduled to meet with IBM officials again in the next few days. Cole was not available for comment.
"Maybe we're hoping for the impossible," Moseley said, but IBM is intent on avoiding the "bad publicity" that any public move to force the district to make payment might generate.
An official close to the district, who asked not to be identified, said the district notified IBM recently that it could not continue payment, and that IBM should exercise its remedy under the lease to repossess the equipment.
Moseley denied receiving any written notice from the school district and said IBM does not intend to repossess the computers, which she said are now out of date. The software, in particular, was tailored to the Richmond schools and would have little value outside of the California district, she said.
