Detroit, MI – On May 1, 2009, Robert C. Bobb, Emergency Financial Manager for the Detroit Public Schools, signed a contract on behalf of the District to sell $169,000,000 of state aid notes to the Michigan Municipal Bond Authority (MMBA). The notes are being issued to assist the District in managing its cash flow needs for the next several months, and will allow the District to make payrolls, pay vendors and avoid the need for requesting further advances of state aid from the Michigan Department of Education. The District is scheduled to receive the proceeds of the notes on Wednesday, May 6, 2009. The notes will bear interest at the rate of 4.75% and will mature in January, 2010.
The Detroit Public Schools Emergency Financial Manager initiated a process with the Michigan Department of Treasury and MMBA to sell and receive proceeds from a cash flow borrowing, known as the 2009A Bridge Note, through the MMBA. Mr. Bobb now intends to place funds in a “lock box” to ensure that they are available for the purposes of meeting payroll, pension fund and vendor obligations.
“While this particular action does nothing to improve our deficit standing, this is nonetheless an extremely important point in the long process of achieving fiscal stability for Detroit Public Schools. The school district’s recent inability to assure that our employees are compensated for legitimate work completed and our vendors are paid for delivery of approved goods and services, has in many cases had an escalating negative effect on our ability to move forward,” Bobb said. “As an example, the various credit holds that vendors have placed on the schools creates new problems. Even in the case of schools attempting to spend our Federal funding for educational services, principals and educators are blocked from doing so because they are in many cases working with the same vendors who have not been paid for General fund purchases.”
The district continues to work at a fast pace with the Michigan Department of Education and the Department of Treasury to implement a deficit reduction strategy and to restore fiscal stability.
Bobb expressed a great deal of appreciation to the Michigan Department of Education, Superintendent Michael Flanagan, and the Department of Treasury for their assistance in this process.
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