Board OKs $10 million in short-term borrowing

District officials plan to issue ‘$5 million note to start with.’


A resolution authorizing short-term borrowing of up to $10 million was approved last week by the Mehlville Board of Education.

Board members voted unanimously Oct. 13 in favor of the resolution, which allows the district to issue a tax-anticipation note with Midwest BankCentre not to exceed $10 million.

The note carries a fixed interest rate of 2.6 percent, or 80 percent of prime, and a Jan. 31, 2011, maturity date. The moneys would benefit, and be repaid from, the district’s Teachers Fund.

The district annually has sought authorization from the board to borrow money in order to address a short-term lapse in revenue that occurs until tax receipts arrive in December.

“(Short-term borrowing) has been going on forever in school districts because we get a delayed payment on our revenue,” Superintendent Terry Noble told the Call. “We don’t get the revenue when the school year starts. The school year starts in July, and the bulk of the revenue doesn’t start coming in until December. And if you depend heavily on local revenue, then you’re really in that situation.”

The board authorized roughly $10 million in short-term borrowing from Midwest BankCentre in 2009 and in 2008.

“We could borrow as much as $12 million under our cash flow shortfall but we probably will end up borrowing somewhere between $3 million and $4 million,” Chief Financial Officer Noel Knobloch told the board last week. “But it all works on a formula basis. The bank has approved a maximum of $10 million, which is the same level we had in prior years.

“We actually are requesting a $10 million authorization, but we will issue a $5 million note to start with, and the purpose of that is to retain as much tax-qualified borrowing as we can so in the future we have some flexibility to issue as much tax-qualified borrowing for financing in the future,” Knobloch added.

“You’re only allowed to have $30 million of tax-qualified borrowing under the current regulations. So if we would issue the note for $10 million we would be knocking $10 million off of that $30 million. So we’re going to start at $5 million, and if we need to go up we can always issue a note for a smaller amount. But we’re trying to keep as much of that clear, if you will, so we have some flexibility in the upcoming months before the end of this calendar year.”

In past years, the district participated in the Missouri School Boards’ Association’s Advanced Funding Program, which was developed to help school districts that traditionally face cash flow programs in the fall quarter.

But the district has obtained loans with Midwest BankCentre since 2008, when it learned that the advanced funding program was unavailable due to problems in the financial markets.

Before the vote on the resolution last week, board member Karl Frank Jr. joked to Knobloch, “Noel, have you run this by the Mehlville fire board?”

Knobloch laughed and replied, “No I haven’t, but if he wants to call I’d be happy to discuss it with him.”

“You should really think about that in the future,” Frank said.