Elmhurst D205 Faces Financial Crunch

ELMHURST, IL – A couple of months ago, Elmhurst residents got a clue that the local school district faced difficult decisions ahead.

Recently, officials gave more details.

In late May, the district's account balance fell to $4.5 million, an unusually low amount for a district with a $160 million budget.

The district has since received news that its architect identified $40 million in "health safety" projects over the next decade. Under state law, life safety work can include such things as roofs, sprinkler systems, alarms, drills and emergency communication systems.

Last week, officials celebrated the renovation of the district's preschool, known as the Madison Early Childhood Center. That was the last of the projects that voters approved as part of the 2018 referendum, which let the district borrow $168 million.

Over the next few years, the district had planned for taxpayers' debt payments for the referendum to decline. But with the life safety work, the district is considering keeping the tax rate level to cover new debt for those projects. In other words, the expected tax cut would not happen.

"We have a lot of financial challenges ahead of us, but we have options for a pathway forward," the school board's president, Athena Arvanitis, said at the district's finance committee meeting earlier this month. "They are tough options."

Every year, the district transfers $4 million to its building projects line item for summer projects. This continued while the district undertook referendum projects.

But the school board is considering earmarking $2.5 million of that money each year for life safety projects, leaving just $1.5 million for the other work.

At the finance committee meeting, members talked about the account balance's drop to $4.5 million. May is typically when the district falls to its low fund balance point – before it gets the first of two property tax infusions each year.

If the district had exhausted the $4.5 million, it would have been required to borrow short-term, which most government bodies want to avoid. An official said the district had been getting ready for such borrowing because of how close it got.

In 2020, the district's annual cash low point was $29 million, but it has fallen ever since. Part of the reason was that for the last three years, the district moved $7 million annually from its regular accounts to pay off $21 million in added costs for the referendum projects. (One of the biggest drivers for that extra expense was building a larger Field Elementary than originally planned.)

Arvanitis pushed for taking care of the life safety work. She said assuming new debt would take the edge off the new $40 million obligation.

"In the past, some of these projects were put on hold, which didn't bode well for schools that had to rebuild in the last five years and didn't bode well for education," Arvanitis said. "They were not very attractive environments for our kids. Let's be honest, it's why we had to go to a referendum."

The board is expected to decide on the district's finances in the coming months.

Left unmentioned in the discussion was the state's giving District 205 its worst financial rating last year, which local officials blamed on an accounting change.

District 205 is one of only a handful of districts among 850 statewide to get the "watch" designation. The district is far wealthier than the others on the "watch" list.

The next annual ratings are expected to be released in September.