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<br />A major concern for the district is "bridging the gap" or responsibly covering the expense of <br />providing the service (instructional days and maintaining class size) until the projected revenue <br />is received. The "bridging" strategies include a limited, but still substantial, risk until it is <br />determined that projected City tax revenue is matched by realized revenue from the tax. <br /> <br /> <br />3.Will 4J lay off any teachers, impose instructional furlough days or increase class size in <br />FY12 if a local income tax is referred to the voters in November, either at $12 or $24 million <br />as per the assumptions above? <br /> <br />Yes. <br /> <br />4J Board Meeting on February 9: <br /> <br />In addition to the responses provided by 4J in writing, the board discussed the income tax <br />proposal at their meeting on February 9. At that meeting, the board discussed the possibility of <br />three "bridging" ideas: using reserves, issuing tax and revenue anticipation notes repaid from <br />income tax receipts, and/or scheduling furlough days towards the end of the year. Regardless of <br />the bridging method chosen, the District will have to prepare their FY12 budget assuming that <br />there are no income tax revenues available. Layoff notices will have to go out in March. This is <br />not unusual in school district budgeting, especially since the legislature doesn't set school <br />funding until May. If the state funding and a potential May ballot measure provide good <br />financial news, the District can make adjustments to their FY12 budget at that point, before it is <br />adopted by the end of June. <br /> <br />Much of the remainder of the discussion revolved around the risks inherent in using any kind of <br />bridging strategy designed to minimize the impact of planned FY12 budget reductions. Aside <br />from the obvious financial risk that taxes won't come in as anticipated, there were other areas of <br />risk that were discussed that stem in part from council decisions. Some of the points raised were: <br /> <br /> <br /> <br />Whatever conditions the council puts on the use of funds could impact the district's <br />ability to use borrowing for bridging. <br /> <br /> <br /> <br />What happens if the termination clause comes into effect because the state solves the <br />school funding issue or the review panel recommends that the City no longer give the <br />districts the dollars? Will the district still be able to use tax proceeds to pay off any cash <br />flow borrowing that has been implemented? <br /> <br /> <br /> <br />What happens if someone sues over the use of the tax, as occurred with the school levy a <br />few years ago? Who pays for those legal costs? <br /> <br /> <br /> <br />There was a concern about how the tax measure would be "grossed up" to take into <br />account evasion, avoidance, pension exclusion and administration, and the risks inherent <br />in that calculation being incorrect. <br /> <br />There was discussion around "risk sharing" for legal challenges and revenue shortfalls in the <br />event that actual revenues come in less than anticipated. City staff responded that the City would <br />basically be acting as a conduit for the districts in this measure, and wouldn't be bearing any of <br />the risks from legal actions or revenue shortfalls. The City would be reimbursed for any costs, <br />including legal costs, for the tax. The risk of revenue shortfalls would be borne by the districts. <br /> \\Cesrv500\cc support\CMO\2011 Council Agendas\M110214\S1102144.doc <br /> <br />