From: "Rick Spradling" <R

Debt Service Survey

Rick Spradling

13 January 2004

________________________________________________________________

From: "Rick Spradling" <R.Spradling@ais.at>

To: "'Head-Net'" <headnet@news.uronramp.net>

Subject: Debt service as a percent of budget

Date: Tue, 13 Jan 2004 15:20:31 +0100

Colleagues:

Thanks to those of you who responded. I discovered that at least three

sources (SACS, ECIS, and ISM) have the rule of thumb that debt service

(i.e., annual loan repayment) should not exceed 10% of annual revenues.

An alternate, and equally correct, answer is that IF you have clear

separation of capital and operating budgets, then the debt service is

whatever your capital revenue stream will bear, after allowing for other

possible on-going uses of capital income. In other words, if your school has

a large annual capital assessment, that will generate revenue to support

debt service of a greater amount than an identical school with only a

new-student capital assessment. So in this way, the answer varies from

school to school. And it is predicated on schools that genuinely do not co-mingle funds.

The 10% guideline is most useful for schools who do not clearly separate funds, or those who still wish to use an aggregate budget total (or those with boards who can't resist dipping into capital to keep down tuition). Either way, the 10% yardstick is probably a good one for maximum annual debt service.

Of course, my favorite response was from an unnamed wag who said, "borrow to the max, then look for another job!"

Thanks again to all of you.

Rick

======================================

Richard L. Spradling, Ph.D., Director

American International School

(PK-13, 800 students)

Salmannsdorfer Strasse 47

Vienna 1190, Austria

Tel: +43-1-40132-216

Fax: +43-1-40132-5

Website: www.ais.at

From: "Jones, Gareth" <gjones@isparis.edu>

"'AISH Net'" <aishnet@ties.k12.mn.us>

Subject: RE: Debt service query

Date: Mon, 12 Jan 2004 10:05:20 +0100

The previous ECIS/NEASC accreditation document (6th edition) had a standard

which read:

Total servicing of long-term debt, including both interest and principal

payments, is 10% or less of the revenue from student tuitions. Parents are

informed of the percentage of tuition allocated for debt-service.

Gareth Jones, Headmaster

International School of Paris

'Where the world goes to school'

Tel: +33 1 42 24 09 54

Fax: +33 1 45 27 15 93 www.isparis.edu

-----Original Message-----

From: Rick Spradling [mailto:R.Spradling@ais.at]

Sent: 12 January 2004 09:18

To: 'AISH Net'

Subject: Debt service query