DACC board considering bond issue as insurance
DANVILLE – Earlier this year, Danville Area Community College officials had to borrow money from the college's working-cash fund to keep operations going – because of not one but two late state funding payments, totaling about $2 million.
Now faced with even more uncertainty as to when this year's state payments will arrive, DACC trustees on Tuesday could take steps to ensure that the college doesn't run out of money this spring.
Trustees will hold a public hearing on a proposal to issue $1 million in bonds to boost the fund, which is at $3.4 million.
They also will vote on whether to retain Chapman and Cutler LLP of Chicago as bond counsel, and First Midstate Inc. of Bloomington as the underwriter. If approved, the firms would be authorized to move forward with the process.
The bond would require a 1-cent increase on DACC's property tax rate, bringing the rate to about 61 cents per $100 of assessed valuation, President Alice Jacobs said.
Even with the increase, Jacobs said, the tax rate would be lower than it was from fiscal years 1998-2001, when it was about 66 cents per $100 of assessed valuation. It was 62 cents per $100 of assessed valuation in FY 2006, 61 cents in 2007 and 60 cents in 2008.
In a normal year, the college borrows about $1.5 million from the fund, Jacobs said. That allows the college to cover its operational expenses while it is waiting for local property tax revenue, which comes in August.
"We're fortunate we're able to borrow from that fund for cash-flow purposes," Jacobs said, adding that keeps the college from having to take out a traditional loan from a bank and paying interest. "But this year, it was almost not enough to sustain us when the state was so slow in paying its bills. With the state's financial condition – and we've all been warned it will likely become worse – we want to enact a long-term solution to ensure the college has the funds it needs to operate."
About one-third of DACC's operating fund revenue, or $4 million, comes from the state. The state makes quarterly payments of $1 million to DACC.
Like many other local entities that receive state funding, the college is no stranger to late payments. But Jacobs said the tardiness in the 2009 fiscal year was unprecedented and forced the college to borrow heavily from the working-cash fund this summer.
"Normally, all payments are paid by June 30," Controller Debra Knight said. But by that time, which is the end of the fiscal year, she said the college still hadn't received its third and fourth payments of $1 million each.
The college received the third installment by July. And it finally received the fourth "but not until the first week of September," Knight said, adding it came in at different intervals.
And the state is behind this fiscal year, too, she said.
"We received credit hour monies for the first quarter, but we have not received equalization for the first quarter," Knight said, adding that's about $425,000. "And we also have adult education funds for the first quarter in the amount of about $46,000, which we have not received, and we don't know when they will come."
Jacobs said the college's cash flow currently isn't a problem.
"We have the benefit of the tuition the students pay," she said. "But we will have some problems in the spring, if the state doesn't come through with its payments on time."
Jacobs added that when money in the fund isn't being used, it will generate interest for the college.
Board meeting
The Danville Area Community College Board of Trustees will meet at 7 p.m. Tuesday in Vermilion Hall, Room 302, at the campus, 2000 E. Main St.
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