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School District, running out of cash, needs a bridge loan


The Indian River County School District will run out of cash around mid-October, according to Chief Financial Officer Carter Morrison.

To tide itself over, the School District will issue a Tax Anticipation Note that will provide funds until cash from property tax collections starts flowing into the district’s bank account in November.

The problem with the procedure is that it carries high costs in interest and fees, consuming money that could be used for educational purposes if the district managed its budget such that it did not have to borrow funds to make it through the fiscal year.

Superintendent Mark Rendell assured the School Board it’s “not uncommon” for school districts to issue Tax Anticipation Notes. “It’s a side effect of how we’re funded [with tax dollars arriving in November]. It’s not that we’re doing things improperly,” he said.

But two school board members weren’t convinced.

“Why do we run out of money when we pass a balanced budget?” board member Charles Searcy asked at a July 26 budget workshop.

“A cash-flow deficit is different,” Morrison answered vaguely.

In business classes, board member Shawn Frost said, “we were taught all management is a matter of timing.” He asked why the district, knowing it has a seasonal cash flow problem, doesn’t build up reserves to get through the whole year without short-term borrowing.

The last tax anticipation note the district issued in 2013 cost taxpayers approximately $100,000 in interest, issuance fees and “miscellaneous” costs, and the current note is likely to waste a similar amount. Morrison has included $100,000 in next year’s budget to pay for what is essentially a one-year bond issue over which voters do not get any say.

According to the Municipal Securities Rulemaking Board website, Indian River County School District is among the heaviest issuers of Tax Anticipation Notes in Florida, indicating relatively poor cash management. It ranks seventh in use of the notes among 67 school districts in the state.

Most of the other high users are large districts with between 67,000 and 355,000 students, compared to Indian River County School District’s 17,400 students, making it by far the smallest heavy note user.

In the past 30 years, 24 Florida school districts have issued notes, while 43 have never used this financing device.