R-III schools borrowing $2.4M to offset state withholding

By: 
Derrick Forsythe
Staff Writer

The financial impact from COVID-19 has been felt by schools across the state, and Warren County R-III is no exception.

The school district faced budget concerns even prior to the pandemic, which has further complicated matters with limited revenue coming from the state government.

In response, the R-III school board voted 7-0 during its monthly meeting last Thursday to approve $2.4 million in borrowing, in the form of a short-term advance called a “tax anticipation note.” The loan has a 1-percent interest rate that will cost $9,066.67 over the life of the note.

“Since a good chunk of the district’s revenue comes at the end of the year, if you’re below 15 to 20 percent, you may run into cash flow difficulty,” said Superintendent Dr. Gregg Klinginsmith. “Due to withholdings from the state, cash flow has been a little lower than anticipated at this time of year. Due to that, we needed to borrow a little bit to get to the end of the year to be able to pay all of our bills and make payroll and normal operating expenses.”

Representatives from L.J. Hart and Company, which is providing the service free of charge, were on hand at the board meeting to explain the details of the loan, which has a closing date of Oct. 15.

“We worked through L.J. Hart to find lenders for us and they manage the process,” said Klinginsmith. “They coordinate everything with all the paperwork and sales of the bonds. They really handle all of it for us and hep us out tremendously. We really appreciate their help and they’re a good resource for the district.”

The tax anticipation note has two lenders, First State Community Bank and The Missouri Bank. The loan has a payback date of March 2021, but Klinginsmith said the district intends to pay it off earlier to save on interest.

“We’ve had a lot of money withheld in June and July, and every month since, due to COVID-19 withholdings,” said Klinginsmith. “Our fund balances were already low and the withholdings are making us spend all that down.”

Klinginsmith said estimates for the school district’s revenue would potentially put R-III short by $2.2 million at the end of January without the assistance of the tax anticipation note.

“It’s always best to not have to borrow money, and it’s not the situation we want to be in,” said Klinginsmith. “We want to make strides to avoid being in that situation, but this is our current reality right now.”

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