IBM plays Santa, alters debt-deal worth millions

You could say IBM was in the Christmas spirit Wednesday when it granted the West Contra Costa school district a reprieve: it gets 8 years to repay a $5 million debt rather than the already agreed to 4-year loan.

You may recall that earlier this year four California state legislators threw their support behind West Contra Costa School District by pleading with IBM to release the district from the debt. Assemblywoman Loni Hancock, D-Berkeley; Assemblyman Mark DeSaulnier, D-Concord; state Senate President Pro Tem Don Perata, D-Oakland; and Sen. Tom Torlakson, D-Antioch, sent a letter to IBM CEO Samuel Palmisano requesting that the computer-industry giant write off the 15-year-old debt as a charitable contribution.

At the time Layer 8 readers voted 873-124 that Big Blue should not forgive the debt which 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 the district and IBM negotiated a long-term settlement that said the school district would pay the first of four $1.25 million installments beginning in 2008. Payments were deferred until then because 2008 was the year the district was scheduled to finish making state loan repayments under its previous loan plan, according to the Contra Costa newspaper story.

Reports this past April said IBM executives expect the district to pay the amount in full under the agreed-upon pay schedule. A letter from IBM Chief Financial Officer Mark Loughridge to district Superintendent Bruce Harter called the repayment plan “generous” on the part of IBM because the company is not charging interest. IBM has not commented on the situation since then.

An Associated Press report said after months of negotiations a new agreement came forth: 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 told the AP.

Join the Network World communities on Facebook and LinkedIn to comment on topics that are top of mind.

Copyright © 2007 IDG Communications, Inc.

IT Salary Survey: The results are in