District 113A Approves Sale of $1.8M in Tax Anticipation Warrants to District 210

will once again issue tax anticipation warrants to in order to meet its financial obligations for the second half of the 2011-2012 school year.

District 113A board members unanimously approved the sale of $1.8 million in TAWs—the smallest amount to date—during their monthly business meeting Dec. 20. The warrants will be issued to District 210 on Jan. 27, 2012, at an interest rate of 2.04 percent, according to Bob Lewis, an advisor from PMA Financial Network.

Although the high school has yet to formally approve the agreement, Lewis said District 210 Superintendent Sandra Doebert indicated the investment would be approved by the school board during its Jan. 9 business meeting.

During last week's meeting, Lewis informed District 113A board members that PMA contacted 22 institutions about purchasing TAWs. Of those contacted, 10 failed to respond and 10 declined outright.

According to Lewis, the institutions that declined cited the district's poor credit rating and negative publicity.

Representatives from two institutions, US Bank and Hinsdale Bank and Trust (Wintrust), said they would be interested in the TAWs so long as they had the opportunity to provide banking services to District 113A, Lewis said.

Both institutions were ultimately ruled out since District 113A is currently in the process of moving its accounts to Chase, he said.

"The positive news coming out of the situation is that there was much more interest than (there was) for the other TAWs," Lewis said. "The banks we talked to indicated that (District 113A) has turned a corner financially."

Two other school districts also expressed interest in the TAWs should District 210 decline. Lewis, however, recommended that District 113A stick with the local high school, since they've already worked out two agreements this year.

District 113A has been reliant on short-term borrowing to pay its bills since depleting its cash reserves in June 2009. Late last year, however, the district was confronted for the first time to pay its bills in January.

On the advice of legal and financial advisers, Ricker and then Board President Lisa Wright approached District 210 about a possible loan. Both boards , marking the first time that two Illinois school districts had completed an intergovernmental sale and purchase of TAWs.

In June, the District 210 Board of Education to purchase another $5 million in TAWs from District 113A, which again was unable to secure the loan through a bank, according to advisers from PMA Financial.

Under the agreement, the debt was scheduled to be retired by Jan. 31, 2012, with an interest rate of 2.23 percent. However, because District 113A must initiate the next round of borrowing by Jan. 27, the current TAWs will be retired four days early.

During the school board's Nov. 15 meeting, District 113A Business Manager Barbara Germany said PMA's projections for borrowing were significantly less than what was estimated several months ago. When the district adopted the 2011-2012 budget in September, financial advisors said the district would need to issue about $2.5 million in TAWs in February, as well as another $1.8 million in November.

At the time, advisors said District 113A would likely eliminate the need for short-term borrowing by January 2013. However, current information indicates that the fund balances are improving, and that the district could only need one more round of TAWs, Germany said.

"The possibility exists, based on information (that we have now), that we may not have to go back out again (for more TAWs) in November," she said.

According to Lewis, the need to borrow will depend on the distribution of Cook County property taxes. He said PMA will be monitor cash flow projections closely next year before making any recommendations to district officials.