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IBM cuts Calif. school district a break on $5M debt still unpaid from 1993

December 13, 2007

A San Francisco Bay-area school district that pressed IBM Corp. to rip up an old $5 million debt didn’t get its wish, but the technology company has agreed to let the repayment be stretched out over eight years instead of four.

The debt dates back to 1989, when educators with the Richmond Unified School District bought computers and software from IBM but paid only a fraction of the bill. The district, now called West Contra Costa Unified, was in financial disarray and barely averted bankruptcy.

In 1993, IBM and the school district reached an agreement that rounded the debt down to an even $5 million and let the schools repay it in four annual installments of $1.25 million, without interest. IBM also let the district first repay a $28.5 million loan to the state of California. That repayment schedule ran through this year, so IBM was due to start getting its money in 2008.

This spring, however, district administrator Bruce Harter asked the technology company for another break. The 31,000-student district faces lower revenues because of declining enrollment, and said that if IBM would consider the old debt forgiven as a charitable contribution, the money would be a sizable help – enough to cover the salaries of 20 teachers.

After IBM wrote back contending that the original deal was quite generous, Harter got several California state legislators to plead with IBM in June.

Finally, months of negotiations yielded a new agreement: The school district will now repay IBM $625,000 annually for eight years, still without interest. The district’s board approved the deal Wednesday night.

”We think this is the best thing for IBM and for the school district,” IBM spokeswoman Trink Guarino said. A West Contra Costa schools spokesman did not immediately return messages seeking comment.

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