NY Mills School Board approves sale of $2.4 million in aid certificates
The New York Mills School Board approved the sale of $2.4 million in aid anticipation certificates to the Piper Jaffray & Company at Monday's board meeting.
Hired by the district as an independent financial advisor, Jodie Zesbaugh from Ehlers and Associates presented the final sale report to the board. After it was voted and approved she took the signatures from the board members present to make the sale final. The closing date of the sale will be August 11, 2011.
According to Zesbaugh, many districts around the state are borrowing funds this year, some for the first time. An aid anticipation certificate is a financial tool that is used by school districts to maintain cash flows for necessary and current expenses. School districts borrow money against what they anticipate to receive from the state in the future.
The recently passed state budget gives schools 60 percent of promised state aid now, and delays the other 40 percent for the next fiscal year. This aid payment shift means school districts need to find ways to cover the difference, and aid anticipation certificates is one way to do this.
As outlined in the sales report, five companies presented closed bids, with interest rates ranging from .4464 percent to 1.2526 percent. Piper Jaffray & Company from Minneapolis had the lowest bid of .4464 percent, which, compared with the highest bid, would save the district $21,000 in interest.
The interest rate of .4464 percent is lower than the rate the district received last year (.6519 percent).
The net interest that the NY Mills School will be responsible for paying back is $11,656. Superintendent Todd Cameron told the board that the school could possibly regain the interest through smart investing.
Though all board members approved the sale of the certificate, member Josie Hendrickx said she would like to see the district "living within its means, instead of borrowing."
Hendrickx said that it is in the best interest of the school to plan ahead and look into how the school would be sitting if the state aid that is deferred were not paid.
Aid anticipation certificates are considered general obligations of the school district, which means if state aid is not sufficient to repay the certificates in full, the district is expected to levy additional taxes to repay the debt.
The next regular board meeting is scheduled for Monday, Aug. 22 at 6 p.m.