School board approves up to $5 million in short-term borrowing

Knost removes from report presentation on solar project


A resolution authorizing short-term borrowing of up to $5 million was adopted last week by the Mehlville Board of Education.

Board members voted unanimously Oct. 12 in favor of the resolution, which allows the district to issue tax-anticipation notes with Midwest BankCentre not to exceed $5 million.

The notes carry a fixed interest rate of 3.75 percent. The moneys would benefit, and be repaid from, the district’s Teachers Fund before the end of December.

The district annually has sought authorization from the board to borrow money to address a short-term lapse in revenue that occurs until tax receipts arrive in late November or early December, according to Chief Financial Officer Noel Knobloch.

“… In your book, agenda item 5-C, there is a suggested resolution and a draft of a short-term note, which we would request that you approve so that in case we need to borrow money as we hit our low point in our cash flow near the end of November and early December before the tax revenues come in, we will have a fallback in case we need to use that,” he told the board.

“It’s my intention to try not to have to use that because we do have better cash balances this year than we had at the same time last year, but you never know exactly when that first payment’s going to be coming from the county, and with the way winter break falls and the way payrolls are paid, the last payroll in December is actually paid about the 20th of December. So we have to have the ability to tap a line of credit if it’s needed.

“Like I say, I would hope that we won’t need it and if we do, we’ll only need it for two or three weeks and it will cost us a couple-thousand dollars at most in interest costs,” Knobloch said.

Board member Rich Franz asked how much money the district would borrow.

“I won’t know until we actually see how our cash comes in and our cash goes out,” Knobloch said. “Last year we borrowed $2 million for about three weeks.”

The CFO reiterated that he hoped the district would not have to borrow any money.

Board Vice President Larry Felton later asked Knobloch how much of an operating balance the district would have to maintain to avoid short-term borrowing.

“If you have a 20-percent operating balance, you’re probably — definitely safe,” Knobloch said, noting the district’s operating balance is just shy of that amount. “A lot of it has to do with just how money comes in. We get our money from the state, but the state money for December doesn’t come in until the 21st. So we can’t count on that because payroll’s already gone.

“So the key is when we get the first check from the St. Louis County Department of Revenue, which is usually around the 10th of the month, but if that would happen to slip by a week or two, we would get a situation where we wouldn’t have cash to cover expenses,” he added.

Board member Tom Diehl’s motion to approve the resolution was seconded by Felton and unanimously approved.

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

In past years, the district participated in the Missouri School Boards’ Association’s Advance 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 Advance Funding Program was unavailable due to problems in the financial markets.

In a separate matter last week, Superintendent Eric Knost had planned to present a proposal for a 25-kilowatt solar energy project to the Board of Education during his superintendent’s report, but withdrew it shortly before the start of the meeting.

“… There were some concerns presented and I would like to think that it’s still an opportunity,” Knost told the Call last week. “It may be kind of hard for timing to hold all the pieces together. I mean there’s a lot at play here. The products involved in solar are a lot of times stock-driven prices … Prices, they fluctuate and there have been some things ever since we’ve been exploring this where if a solar company goes out of business, it affects the pricing of panels and such.

“… As we consider and further investigate some concerns that may exist, holding the whole thing together is a little difficult, (but) I do truly believe that it’s a community effort to come together and ultimately create a return-on-investment project that’s designed to save the taxpayers money,” the superintendent added.