10/25/08

Plain Dealer

Thomas Ott

The collapse of the credit markets threatens to further slow a Cleveland schools construction program that is already up to 20 months behind schedule.

One piece of the program – construction of an additional West Side high school – faces a different kind of roadblock. The state, which pays two-thirds of the building campaign costs, says it may be cheaper to renovate and expand an existing school.

The high school is supposed to be in the next leg of a construction and renovation blitz that the district started in 2002. Also proposed for that phase are three more new high schools and seven new elementary schools.

Local money must be in place before the state releases its funds, said Rick Savors, spokesman for the Ohio School Facilities Commission. But district officials canceled the sale of $70 million in notes for the projects last month after advisers warned that skittish investors would drive up interest rates or decline to bid.

“We’re not going to panic,” Chief Financial Officer James Fortlage said. “We’re monitoring the markets. We’ll go forward when the timing is right.”

Because of the credit crunch, state and local governments across the country are having trouble raising capital, the Government Finance Officers Association said in its October newsletter.

Attracting bidders is not impossible, it just takes precise timing, said Mike Sharb, a public-finance lawyer with Squire Sanders & Dempsey in Cleveland. The market’s mood swings daily, he said.

“Things are getting done,” Sharb said. “But people are picking their spots a lot more carefully.”

Cleveland school officials will weigh alternatives, including negotiating a no-bid deal with investors, Fortlage said. Going without bids would require school board approval.

Portage County worked a no-bid sale to an Arizona company last month after getting no nibbles on $8.3 million in notes for construction projects and refinancing debt. The county will pay 3 percent interest, up from 1.8 percent to 2.2 percent in better times, Auditor Janet Esposito said. Costs will increase by about $80,000.

Daniel Burns, the Cleveland schools’ chief operating officer, believes he can easily overcome the state commission’s opposition to the West Side high school. The school is supposed to relieve overcrowding that persists on the West Side, even as students abandon East Side schools.

Burns said he will argue that it would be too expensive to renovate Lincoln-West High School, one of two buildings suggested by the state. The other choice, Martin Luther King Jr., is illogical because it is on the East Side, Burns said.