Santa Monica College has joined several other school districts in a business venture that will allow the college to borrow $500,000 to modernize its computer system.
The college is entering a cooperative program in which three community college districts and nine unified school districts will issue joint certificates of participation-- similar to tax-exempt bonds--to raise a total of $15 million for special projects.
The joint venture is being coordinated by the Los Angeles County Office of Education, which set up the co-op and will issue the certificates this fall.
It will be the first time that such a venture has been tried in the county, said Deborah L. Simons, assistant director of regional business services of the county Office of Education.
"This concept allows school districts to act together in a cost-effective way," she said.
The districts save money by pooling resources for insurance, paper work, legal advice and other matters related to the issuing of certificates, Simons said. In addition, each district benefits by having the county Office of Education pull the venture together, rather than committing its own staff, she said.
The so-called certificate of participation issue has been used successfully by school districts in Ventura County and elsewhere, Simons said. Municipal governments, especially small ones, have used such programs for years to finance projects they could not support alone.
Investors generally consider the certificates a good buy because they offer steady, tax-exempt interest income.
The purchaser of the certificates earns interest until the money is repaid through a bank, which acts as a trustee for each of the districts' projects. The trustee holds all rights to equipment purchased or projects built in case a district defaults on the principal.
Each district has submitted a proposal for its projects and the amount of money needed.
The $500,000 that the Santa Monica College plans to borrow must be repaid over the next five years. "What we are buying is a bigger computer to do admission records, financial aid, the scheduling of classes," said Tom Donner, Santa Monica College's business manager.
The Santa Monica College Board of Trustees approved the $500,000 purchase from Data General Corp. of Massachusetts before it joined the venture on Aug. 11.
Donner said the joint venture agreement was the same as a lease purchase agreement. "Instead of buying the equipment, we lease it for a few years and then at the end of the lease the equipment is ours," he said. "Basically, it is a way of saving money."
He said the college would have had to pay 9% interest on a loan if it had purchased the equipment outside the venture agreement. But under the agreement the college will be charged an interest rate of about 6%, he said.
The Los Angeles County superintendent of schools put together the cooperative program with the help of the Los Angeles County treasurer and tax collector, First Interstate Public Finance Co. and the law firm of Buchalter, Nemer, Fields, Chrystie & Younger.
In addition to Santa Monica College, the districts taking part in the venture are Bassett Unified School District, Bellflower Unified School District, Castaic Union School District, El Camino Community College District, Glendale Community College District, Hawthorne School District, Newhall School District, South Bay Union High School District, Sulphur Springs Union School District and William S. Hart Union High School District.
Glendale Community College, for example, plans to borrow $1.4 million to build parking lots and tennis courts and purchase a computerized library system. Bellflower Unified School District has submitted a request for $650,000 for computers, portable classrooms, fencing, bleachers and other items.
The $1.4 million that Glendale College plans to borrow must be repaid over the next 10 years. The bulk of the money will be used to build three parking lots, which are scheduled to be completed by next summer. The lots will provide 300 new spaces, about 150 of which will be for students. The rest will be reserved for college employees, said Jean Larson, the district's business manager.
"This won't solve the parking problem, but it will alleviate it some," she said.
The rest of the borrowed money will be used to demolish three tennis courts and build six new ones, and to have the library's card catalogue and reference material computerized.
The college Board of Trustees' unanimous vote last week to enter the venture came after pressure by faculty and students for the board to add parking on a campus where 6,000 day students and 5,000 night students compete for about 1,200 spaces in city-owned lots.