Receiver: Reduced bailout could force Colorado City district into bankruptcy
 
The Associated Press
Mohave Daily News
 
PHOENIX (AP) - The state-appointed receiver for the school district serving a polygamist-dominated community says the latest version of a legislative bailout bill could put the district at risk of having to file for bankruptcy.

A Senate committee on Tuesday reduced a House-approved bill's proposed loan to the 400-student Colorado City Unified School District to $181,300 from $1.3 million.

The reduced amount would be enough to cover two payments on bonds previously sold by the district to investors, but far short of the approximately $1 million needed to repay a school insurance trust that bought the district's warrants when it was short of cash and couldn't pay its teachers.

Colorado City, in extreme northwestern Arizona, and neighboring Hildale, Utah, are dominated by the Fundamentalist Church of Jesus Christ of Latter Day Saints, a sect that practices polygamy and long ago broke away from the Mormon church. After the sect's leader ordered followers to withdraw their children from the district's schools, teachers went without pay for two months in 2004.

Because of the district's financial troubles, the state Board of Education placed the district in receivership in December.

A lawyer for Receiver Peter Davis said the inability to pay the insurance trust could leave the district vulnerable because any repayment demand by the trust would have first right to the district's cash, meaning there wouldn't be any left over to pay operating costs such as teachers' salaries and utilities.

If that happens, that would put the district in a position of having to either shut down or file for bankruptcy protection, attorney Fred Rosenfeld told the Judiciary Committee. "That'd be a death sentence for the district."

Sen. Dean Martin, R-Phoenix, said he supported the reduced appropriation and would not balk at forcing the district into bankruptcy because it would put investors on notice that they should carefully scrutinize school districts' finances before buying their bonds.

"Bankruptcy may be the best thing we do," Martin said. "In the end of the day, I'm not interested in bailing out the bondholders.

Davis acknowledged the School Risk Retention Trust hadn't made any repayment demand. However, "we're in a vulnerable financial position if that were to happen," he said.
 
MohaveDailyNews.com
Originally published Tuesday, April 18, 2006
 
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