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District gets break on IBM payments

By Kimberly S. Wetzel
Contra Costa Times
12/11/2007

The bad news: The West Contra Costa Unified School District likely will have to pay for hundreds of outdated IBM computers it ordered in the 1980s and '90s.

The good news: IBM officials have agreed to let the district pay the $5 million it owes over eight years instead of four, without charging interest.

The school board will decide this week whether to approve a modification to a 1993 settlement agreement that would allow the district to pay eight annual installments of $625,000 instead of four payments of $1.25 million, as agreed upon in the original contract. The payments would begin next year and run through 2015.

"This is the best agreement we were able to come up with," Superintendent Bruce Harter said. "This is a major movement as far as I'm concerned."

The district owes IBM for computers ordered in the late 1980s by then-Superintendent Walter Marks. The district spiraled into debt shortly after and never paid for the computers. Nobody seems to know how many computers Marks ordered, their model or whether they were used. Several former district officials called them obsolete and useless.

Smaller payments spread out over a longer period would ease the financial strain the district is expected to face in the next few years.

Harter has been meeting with IBM officials since March to try to persuade the company to forgive the debt; he gained support from state legislators, who in June sent a letter to IBM on the district's behalf. Sen. Tom Torlakson, D-Antioch, on Monday praised the sides for finding a solution, but others were not happy that IBM will not allow the financially strapped district to forgo payment.

"Frankly, I'm disappointed; this is not the outcome I'd hoped for," said Assemblywoman Loni Hancock, D-Berkeley. "This will come out of the classroom for the next eight years, a generation after the problem occurred. IBM is a large and wealthy corporation that reported a $5 billion profit last year."

School board members also expressed frustration with IBM, noting that Marks made several questionable financial decisions that resulted in the district racking up $28.5 million in debt and led to a state takeover in 1991.

"Kids who were born in 1999 are the ones who have to accept the consequences a whole decade after the decisions were made," said board member Charles Ramsey, who said he will vote for the resolution Wednesday but is unhappy about it. "That's just the way it is."

On Monday, IBM spokesman Fred Clark said, "It's our belief that it's in the best interest of both the district and IBM."

He would not elaborate on how company officials arrived at their decision. IBM officials will not attend Wednesday's meeting, Clark said.

As part of the long-buried 1993 settlement agreement between IBM and the district, the district was scheduled to pay the first of four $1.25 million payments to IBM beginning next year. Payments were deferred until then because, at the time, 2008 was the year the district was scheduled to finish making state loan repayments under a previous loan plan.

Repayment of the IBM loan comes at a tough financial time for the district, which will need to cut more than $5 million from its budget next year to offset a loss of revenue from declining enrollment. The district also will lose $10 million a year beginning in June 2009, when its current parcel tax expires.

"I'm actually very disappointed," said school board member Dave Brown, who said he will not support the resolution Wednesday. "They're going to try to stick it to a cash-strapped school district. To me, it's another example of what I consider to be rampant corporate greed."

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