TCSS approves $18M tax note
The Troup County School System approved a resolution Monday night to borrow $18 million by way of two tax anticipation notes, or TAN.
The resolution passed by the board said it is in the best interest of the school district to borrow money to pay current expenses for the calendar year 2020 in anticipation of taxes coming later in the year. Those taxes are SPLOST dollars expected to be returned this year with the finished construction of the athletic facility at Troup High School and the facility scheduled to be finished at LaGrange High School.
During a special-called meeting Monday, board of education attorney John Taylor said there are only three ways a school district can borrow money. One way is through general obligation bonds, which must be approved by voters and are only paid back by property owners. The second is through SPLOST, where the money is borrowed upfront and then the dollars generated by SPLOST repays the bond. The third is through a TAN, which is borrowing against tax dollars the district plans to receive in the fall.
Taylor said the first phase of the TAN, worth $10 million, will come in on Feb. 7 with an interest rate of 1.69 percent. The second phase, worth $8 million, is slated for June 30. The note is required to be paid back by Dec. 31, according to the resolution.
Interim Chief Financial Officer Don Miller said the school system used some of its reserves to get the two SPLOST projects — the athletic facilities — done as quickly as possible. He said loaning the district’s reserves instead of waiting for SPLOST dollars to recoup allowed both facilities to be built at the same time.
Miller said if the district had gone out and sold bonds for the SPLOST, it would have cost the district more money.
“We would have had to sell $20 million in bonds for SPLOST, and we would have ended up paying 3 and a half to 4 percent in interest, plus the underwriting fees,” he said.
By using the reserve funds on the front end and borrowing the money with a TAN later, the district received 1.69 percent and 1.81 percent interest rates. Last year, the district also utilized a TAN during the construction of the facilities with a 2.19 percent interest rate.
“Because we loaned the reserve to build these facilities on a quicker basis, now the cash flow on the general ledger side went negative, so we used the tax anticipate note to fill the gap until those tax receipts come back,” he said.
Miller said the other option would have been for a facility to be completed at one school before the other facility could begin construction.
School districts in Georgia need about $10 to 15 million in reserves not to have to borrow, Miller said. He said the district gets most of its tax dollars — about $40 million — in November. Then it begins to eat into that at about $3 or $4 million each month. He said by the time the district gets to its next tax payout, it’ll have the $15 million back in reserves and won’t have to do another TAN because the SPLOST dollars will come back to the school system.
Miller said the school system has about a 45-day operating reserve as of Monday.