For Park Ridge residents who are unemployed, underemployed, or fully employed but still just hoping to make ends meet from week to week, the idea of borrowing money to buy or build stuff that they don’t desperately need just because interest rates are extremely low is not at the forefront of their thinking. 

Even successful businesses that appear to have weathered the current economic storm are cautious about borrowing “cheap money,” because cheap money still has to be paid back; and if there isn’t the likelihood of such borrowing producing a significant return, there’s little reason to do it. 

The reasoning employed by private individuals and private businesses, however, doesn’t seem to translate all that well to the public sector. 

Take, for instance, the Community Finance Committee (“CFC”) of the District 64 Board of Education.  This Committee is supposed to be the District’s financial brain trust – it was created several years ago when the District’s finances, even after cutting more than $12 million from the budget over a six-year period, remained so botched that the State Board of Education was considering taking over their management.  

The District avoided that embarrassment by passing a $5 million “backdoor” non-referendum working cash bond issue, and then bailed out those working cash bonds by passing the big 2007 tax increase referendum.  

At its October 14, 2010, meeting, CFC members discussed capital improvements to the District and how to fund them.  Needless to say, short and long-term bond funding was the topic of choice because “money has never been cheaper to borrow” – according to Page 2 of the minutes of that meeting. 

And who was leading the cheers for more borrowing?  

The District’s contact at its investment banker, William Blair & Co., who advised the CFC that “the District could sell up to $27 million of short-term debt without referendum” for projects to be completed within 3 years.  

That must have been the signal for School Board member Sharon Lawson to report that the Board’s Facilities Committee “is going to come back to life” to look at longer-than-3-year “needs” for capital improvements. 

In other words: Now’s the time to borrow, so let’s put the band back together and come up with some projects. 

Ms. Lawson wasn’t on the School Board back in 1996-97 when it decided to borrow and spend approximately $20 million (not including interest) to tear down what was then the newest school building in the District, Emerson Jr. High (then being leased from the District and successfully operated as the Futabakai Japanese School) and build a brand new Emerson Middle School. 

We haven’t seen any data that establishes the economic or academic ROI of that project, although we assume somebody can justify it by the academic version of the old reliable “quality of life” argument – perhaps Ald. Robert Ryan, for whom the new Emerson effectively was the valedictory of his one term as a District 64 Board member from 1993 through 1997, seeing as he headed up the District’s Long-Term Needs Advisory Committee that was instrumental in pushing for the new Emerson over the other proposed space solutions.    

If new brick and mortar really had that much inherent value, we’d expect Emerson Middle School to be consistently outperforming Lincoln Middle School, and Franklin Elementary doing the same to Roosevelt.  But we haven’t seen any data to support that kind of analysis, either here in Park Ridge or in other districts.  

And because public buildings tend to be specialized structures unsuitable for any other uses, they tend to be depreciating, rather than appreciating, assets whose value is usually only the land on which they sit. 

Which gets us back to the original point: Why is District 64’s financial brain trust thinking about a capital spending spree just because “money has never been cheaper to borrow”?

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