Attorneys outline consequences if Newport-area schools default on loan obligations

Posted Jan. 29, 2013, at 10:44 p.m.
Last modified Jan. 30, 2013, at 7:19 a.m.

NEWPORT, Maine — Two attorneys laid out the dire consequences Tuesday night of what might be ahead for RSU 19 if the district is not able to obtain a $2.9 million loan.

Bill Stockmeyer and Dick Spencer, attorneys for Drummond Woodsum of Portland, advised RSU 19’s budget and finance committee of the district’s options if a $2.9 million stabilization loan is shot down by voters for a third time.

Because of serious errors in previous budgets — including the fact that member towns were not billed for their obligations to the school district — RSU 19 has a $3.6 million shortfall this school year. The district already has cut $1.6 million from the budget for this school year.

RSU 19 has a $1.5 million revenue anticipation note with Androscoggin Bank that has not been repaid. If that is not repaid by June 28, the bank likely would sue the school district, said Stockmeyer.

“They would need and expect to be paid in full on that date, unless there was a new consensual loan obligation with that bank or another bank to pay that off,” said Stockmeyer. However, any new loan would have to be approved by taxpayers, he added.

Spencer said there are some drastic measures that could be taken.

“According to the Maine statute, in the event of a default of a general obligation [loan], the lender to the district can actually get the sheriff to go out and seize property of the residents [until the loan is paid off],” Spencer told the budget and finance board. “That would be a terrible thing.”

“We shouldn’t get to that point,” said Spencer. “We need to persuade voters that this is very, very serious.”

Both attorneys also advised the district to seek out a legislative effort to amend what the emergency financial board could do. Right now, the emergency financial board can take over a municipality in the event of a bankruptcy. They advised the district to ask for it to be expanded to include school districts.

Stockmeyer and Spencer both recommended that RSU 19 attempt to bring a third stabilization loan to the voters of the eight member towns.

The loan amount was disputed among members of the budget and finance committee. Three figures — $1.5 million, $2.5 million and $2.9 million — will be recommended to the RSU 19 board of directors during Wednesday night’s meeting at 7 p.m. at the high school.

Superintendent Greg Potter proposed a timeline for what he called the third and final loan attempt. After Wednesday’s board meeting, the board will meet again on Feb. 12. On Feb. 25, the loan will be presented during a regional public meeting at the high school at 6 p.m. The loan would go to a referendum vote on March 7.

In the event the loan is shot down once again, Potter proposed an 18-day districtwide shutdown beginning on March 15 and lasting until April 15.

April vacation for students would be canceled and school would resume on April 16. The final day of school would be on July 3, barring any further snow days.

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