Herald Journal, April 12, 2004
HLWW looking to take out cash flow loan
By Lynda Jensen
A low-interest loan is being considered by Howard Lake-Waverly-Winsted to address low cash flow, caused by the state holding over its payments.
The net cost to the school will be zero, Supt. George Ladd commented, since the interest on the loan could be paid for by investments made with the money, he said.
The school board heard from financial advisor Kent Johnson of PMA of Albertville during its meeting last Monday.
At issue is state funding received by HLWW which is being held back more and more often, Johnson said. The reason for this is so the state can solve its own budget shortfall, which does not appear to be getting better.
Three years ago, about 10 percent of payments were held back, he said.
Today this figure has grown to 20 percent, or about $1,388,325 for the school district in 2004, which will be held over until 2005.
“The state manipulates numbers to make it appear that it’s not hurting schools, but it is,” Johnson said.
The figures are growing each year, causing districts to have problems paying their staff and making other bills that can’t wait, he said.
The loan would be borrowed against what the state owes HLWW and could be invested to cover the cost of interest, Johnson said.
“There really is no cost,” Supt. George Ladd commented. “The interest covers the amount (of interest).”
Currently, HLWW has about $704,000 in the bank, which is near the amount recommended by its auditor as a reserve and also what the board wishes to keep on hand. This amount isn’t enough to offset the growing dollars being withheld.
HLWW’s reserve has been chewed down by several factors over the past few years, such as state cuts and skyrocketing fuel and insurance costs, among other issues that have sent many other school districts to the polls looking for operating referendums to pass.
To solve the cash flow problem, HLWW should consider borrowing between $1.4 million and $1.9 million to help with cash flow, Johnson advised.
The board will discuss the issue further in the future.
The board noted that the district will be in debt within two years.
“Riley (Hoheisel) said that we’d need an operating levy in one year and it’s been two,” Ladd said, speaking of the former superintendent.
The district should present possible cuts to district residents if the operating levy doesn’t pass, Doering said.
“We must inform voters of what will be cut,” Board Member Charles Weber said.
In addition, the board is expecting to hear about roof repair costs next month, which could amount to a substantial expense toward operating costs.
‘Plan the plan’
Upon the insistence of Board Member Al Doering, the board also started a long-range schedule to plan its next steps for the fall if a possible land purchase for a new school would be on the ballot along with plans for an operating referendum.
The board shied away from this before because it lacked specific numbers for state revenue, which is usually known by about June, and does not know exact costs associated with the portable classrooms, which will add to the operating expense of the district.
“We almost have to plan the plan,” Doering observed, saying that despite the lack of having hard numbers, the board should go ahead and make comprehensive plans regardless.
As a result, Chairman John Lideen set the following schedule:
• The board will get information from the budget committee related to next year’s budget and how that will relate to operating needs
• The board will research architects and hopefully choose one by April 19.
• It will then discuss numbers, since the portable figures should be available by that time.
• The board may add the possibility of land or a future building, which will be taken up at the Monday, May 17 meeting.
At this time, the board will make the final decision on an operating levy. They should have enough information on land and the total picture by then, Lideen noted.
Weber noted there is no time to do a building bond, even if the board wants to.