W-H, bank urged to resolve debt outside court; With $70 to its name, troubled district can’t pay $2.8 million loan

By Joshua Benton
Staff Writer

Page 7B

The Wilmer-Hutchins school district has $2.8 million in bank debt, $3 million more in teacher salaries it can’t pay and $70 in the bank.

That grim financial picture is why a Dallas County district judge ordered the district and Wells Fargo to find a way to settle their loan dispute without judicial intervention.

“You have a joint interest in keeping this district viable,” Judge Robert Frost said Friday. “The only hope for both sides is that you work together.”

Wilmer-Hutchins borrowed $3.3 million from Wells Fargo in March 2003, the first of several times recently the district has been unable to pay its bills without an infusion of outside cash. It missed payroll twice this school year, and district officials acknowledge they have no idea how teachers will be paid over the summer.

Unfortunately, when it came time for the bank’s loan to be repaid this spring, the district could only find about $500,000. Wells Fargo sued to collect the remaining $2.8 million it is owed.

Friday’s court hearing was to allow the bank to argue that the district should be forced to set aside that much money in a separate account. That way, the cash will be available if the bank wins its suit.

But the district doesn’t have that kind of money. Don Grimes, a Wells Fargo vice president, said Wilmer-Hutchins’ bank account has only about $70 in it – not enough to buy a high school biology textbook, much less pay its 300-plus employees over the summer.

“There are no available dollars,” said James Damm, the district’s interim superintendent, whose last day on the job will be Tuesday.

Mr. Damm said the district is due one more small infusion of state funds in a few weeks, which should allow Wilmer-Hutchins teachers to receive their June paychecks. But July and August checks are, at the moment, purely theoretical.

“It looks pretty bleak at this point,” said Joe Tave, a Wilmer-Hutchins teacher who is suing the district to be ahead of Wells Fargo in line when the district’s limited resources are divvied up.

During the hearing, Wilmer-Hutchins attorney Kevin O’Hanlon did not dispute that the district owed Wells Fargo the $2.8 million. But he argued that the district should prioritize paying electricity bills and teachers before repaying the debt.

Mr. O’Hanlon also indicated he would attempt to draw out the court’s proceedings as long as possible, which would give the district more time to come up with cash.

At one point, he insisted that a photocopy of the loan agreement was not acceptable as a court exhibit and that the original loan agreement should be transported from its home in a Minneapolis vault before the action could proceed. His objection was overruled.

Judge Frost said he would rule on the set-aside proposal on June 10, but he clearly expressed a desire that the matter could be resolved without his intervention. He ordered the parties to work with mediator Deborah Hankinson, a former Texas Supreme Court justice.

Mr. Damm said the district has made an offer for an extended repayment of the loan, but Wells Fargo has not accepted it. Even if the district and bank settle on a deal, it won’t answer the question of how Wilmer-Hutchins will pay its salaries this summer. The district will need to borrow about $3 million to meet those obligations.

In the meantime, the district is searching for money wherever it can. On the agenda for its Tuesday board meeting is a proposal to lease out several unused school buildings – including the former A.L. Morney and Mamie White elementaries – to community groups.

Meanwhile, Wilmer-Hutchins’ legal docket continued to grow longer. While waiting for Friday’s hearing to begin, Mr. Damm was served with papers notifying him of a new suit filed against him by Annie Lee, a former assistant superintendent.

Ms. Lee was interim superintendent in spurts this spring – once for a few days, once for a few hours – as part of the intramural disputes that eventually led to the school board’s ouster by state Education Commissioner Shirley Neeley.