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Legislature could change new repayment plan for city's loan

Date: 2/2/2010

Feb. 3, 2010.

By G. Michael Dobbs

Managing Editor

SPRINGFIELD -- It's common knowledge that state officials have been looking for ways to help close gaping budget gaps and they have turned up $23 million in Springfield.

The new arrangement, though, struck between the Patrick Administration and the city is not set in stone.

Mayor Domenic Sarno announced on Wednesday the Patrick Administration has struck a new deal with the city in the repayment of its $52 million loan granted during the Romney Administration.

Under the new arrangement, described by officials as "tentative," the city would pay back $23 million of the loan at one time. It would then be allowed to pay back an additional $13 million over the length of time previously arranged and the state would forgive the remaining $11 million that is in the trust fund that generates income for the Springfield Promise Program.

During the repayment period the $13 million would be in the Promise Program Trust and would also be accruing interest for the local scholarship program.

City Solicitor Edward Pikula said the Legislature would have to approve this amendment to the previous legislation. Pikula said two other documents are affected by the new deal -- the Springfield Promise Program trust and the loan repayment agreement.

City Councilor Tim Rooke is concerned that once the Legislature is involved, the Promise Program trust funds might be fair game as well to be returned to the state coffers.

Rooke will be asking Sarno to brief the City Council on the arrangement and how it might affect the city's reserves and its bond rating.

Tom Walsh, the mayor's communication aide, explained to Reminder Publications the city made a $2.6 million payment to the state in fiscal year 2008 and another $2.6 million payment in fiscal year 2009. It has not made a payment as yet in fiscal year 2010.

There had been discussions between some members of the Legislature to force the dissolation of the Springfield Promise Program Trust, according to Walsh, and the governor's office contacted the city with the new arrangement as a way to preserve the trust. The discussions have taken place over several months.

"Based on the information that I was receiving I did not want to run the risk of having the State request payment in full on our entire loan obligation. Receiving such a request from the state would have been detrimental to the City's improved financial status," Sarno stated. "I also did not want to jeopardize the continuation of the Springfield Promise Program, which plays a vital role in helping to address poverty and social issues through education."

"Prior to reaching this agreement I wanted to confirm that the City would receive proper Chapter 70 (schools) and local aid funding for the upcoming fiscal year," Sarno added. "I am extremely thankful to Gov. Deval Patrick and Lt. Governor Tim Murray's willingness to work out this agreement with the city. I am also thankful to the Western Massachusetts legislative delegation for their lobbying efforts on behalf of Springfield."