Buffalo, N.Y., is planning a major increase in capital spending for its school system after recovering more than $11 million in state education aid, city officials say.

Under the plan, Buffalo would increase its bonding for school infrastructure needs during the next four years to $80 million from $20 million. The money will be used to repair existing schools and build new facilities.

The city will begin issuing the securities sometime next year. In recent years, the city had issued about $5 million annually in bonds for school infrastructure.

City Comptroller Joel Giambra said the city will probably issue the bonds on a negotiated basis and select senior managers from its current team of underwriters.

The proposal, which has received tentative approval from Buffalo's school board, is based on a plan to leverage a chunk of state education aid owed to the city.

Since 1979, the school board has failed to recoup money it was owed by the state for school construction projects, Giambra said. The city built the projects, which qualified for state reimbursement, but the board did not apply for the state grants.

"The board of education had dropped the ball," Giambra said. School officials interviewed did not dispute Giambra's story.

"We erred in not filing appropriately over the last several years," said school board president Donald Van Every. "But this financing mechanism will create a boon for us."

City officials as well as the city's financial adviser say the bonding proposal will copy the structure of revolving loan sales, where state and federal government aid is pooled in a trust fund, and the municipality then "leverages" the money to increase its capital financing.

In Buffalo, the city plans on using $8 million of the $11.5 million in recovered state aid for the fund. About $3.5 million will help pay for an increase in teachers' salaries. The city is also hoping to obtain additional federal aid to increase its bonding capacity.

In March, state Comptroller H. Carl McCall finished the state's first audit of the Buffalo schools since 1975. Last Monday, McCall confirmed that the city would receive the $11.5 million in retroactive state aid.

"Basically, it's one of those classical good news, bad news scenarios," Giambra said. "We got a lemon and we're making lemonade."

The comptroller said he hopes the city will get a portion of the $11.5 million in this state fiscal year, which ends March 31, but the city will probably have to wait until next April.

The school board's budget and audit committee discussed the financing program on Wednesday and the full board should vote on the matter sometime in November, the board's Van Every said.

"I don't think the board will have any trouble embracing the comptroller's plan," Van Every said.

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