The Re-1 school board Tuesday night heard about a program through which the district could borrow money at zero percent interest while waiting for property taxes to roll in each year.
Chief Financial Officer Melissa Brunner told the board about the state treasurers program that would allow the district to borrow about $2.6 million in early 2013 to help continue to pay for expenses while waiting for the funds from property taxes.
RBC Capital Markets in Denver is the manager of the program, which 22 Colorado school districts used in 2011-12.
Brunner explained that the resolution she was recommending the board approve would give the Re-1 school district a cushion while waiting for annual property-tax receipts to become available, usually beginning in April.
She explained that school district funds are often depleted one to two months before the funds from property taxes become available, and added that she knew the district had not taken advantage of this program in the 15 years she has worked for the Re-1.
Board member Beth Howell wanted to know if it was possible that the district might not be able to repay the loan, and what would happen in that situation.
Brunner said safeguards are in place, and the district would not be allowed to borrow more money than it has in assessed property tax valuations.
Board member Pete Montaño wanted to know who would have the authority to borrow the money, and suggested it should have to be approved by the board president to prevent any surprises.
Board President Tim Lanier questioned why there was a need to have something like this in place now.
Brunner explained when she joined the Re-1 business office several years ago, school districts received two-thirds of their funds from the state with the other one-third coming from property taxes. Since then, that ratio has flip-flopped, with property taxes making up the bulk of the money districts now receive.
While Re-1 would be eligible for a $2.6 million loan, Brunner said needing that amount would be the worst-case scenario.
I really dont believe we would need to borrow $2.6 million. During a break in the meeting, Brunner said it was more likely the district would have to borrow between $1 to $1.5 million.
Montaño said his fear is that the district would find a way to tap into this funding source if it knew it was available.
Brunner explained the district would be monitored month by month and the program would make sure the Re-1 uses every dime it has before allowing the district to borrow.
Outgoing interim superintendent Mary Rubadeau, whose last day with Re-1 was June 13, said this lending program is a strategy that is used across the state.
I would venture that at least half the school districts in the state take advantage of this, she said before the board approved the resolution 4-0.
Incoming Superintendent Alex Carter said school districts have always borrowed, but that borrowing was done from themselves, and mentioned school districts in Durango and Aspen have been involved in this lending program for years.
We know the (property tax) money is coming in May, he said.
Lanier said he thought a month-by-month update on the Re-1 finances to the board would be a wise move.
Board members Diane Fox, Brian Demby, and Jack Schuenemeyer did not attend the meeting.
Reach Michael Maresh at michaelm@cortezjournal.com