Mehlville school board OKs short-term borrowing up to $7 million


For the second year in a row, the Mehlville School District will borrow money from Midwest BankCentre to help address short-term cash-flow needs.

The Board of Education unanimously approved a resolution Oct. 20 authorizing the district to borrow up to $7 million from the bank to offset a brief cash shortage caused by a traditional lapse in tax revenues.

On Aug. 27, the board gave district officials the go-ahead to participate 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.

At the time, however, Chief Financial Officer Noel Knobloch speculated that the MSBA’s program might not be the most cost-effective option for the district. He told the board last week that his suspicions were correct.

Knobloch said the district would pay lower borrowing costs by issuing tax-anticipation notes with Midwest BankCentre than it would by participating in the MSBA program.

The district sought loans with Midwest BankCentre last year when it learned that the advanced funding program was unavailable due to problems in the financial markets.

The resolution approved by the board last week authorizes the district to borrow up to $1.5 million for its general fund and $5.5 million for its teachers’ fund. The interest rate on both notes, which are tax-exempt, will be fixed at 2.6 percent, with a Jan. 31, 2010, maturity date.

Knobloch initially planned to ask the board for permission to borrow $5 million, but “recent cash-flow projections” led him to revise the resolution.

“The one that I’m asking you to approve is $7 million because of some recent cash-flow projections that I’ve done. I feel we need to go up a little bit more,” he told the board. “And I’ve also got a reserve in case the state funding doesn’t come in as anticipated and our taxes don’t come in like they have in the past few years, and another emergency $3 million loan if we would need it to get through December when we get to our lowest cash balances.

“The county government in the past has distributed taxes in late November and early December, and the bills don’t go out until the first part of November this year. So the receipts that we’re going to get will be delayed by about a month, and that costs us about $2.5 million just in timing, but it does stretch our cash a little bit more.”

Knobloch said if the district needed the additional emergency $3 million loan, the board could consider the matter at its Nov. 19 regular meeting.