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HSE, Westfield among schools bypassing debt limit with legal loophole

Nov 13, 2017 by

To pay for large renovations and new construction, Hamilton County districts are using a loophole in Indiana law that allows schools to exceed their debt limits.

The workaround caused some confusion in Westfield this month when taxpayers saw a public notice about a $45 million appropriation and the potential sale of school-owned land. Questions circulated on social media: What could be sold? Was that money related to the $90 million construction referendum voters that passed in May?

The public notice was really showing the district using the legal loophole. Here’s how it works.

 A school district sets up a nonprofit building corporation, which takes on the debt needed to fund big projects instead of the district. When the nonprofit issues the bonds, the security is a lease agreement with the district. Meaning, the land, or building in need of renovation, is sold to the nonprofit and leased back to the district. Then the land or building is returned when the bonds are repaid using the district’s lease payments.

 

Source: HSE, Westfield among schools bypassing debt limit with legal loophole

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