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Mehlville to consider another loan to meet school district payroll

The Mehlville School District has received one $100,000 check from the county in property tax payments — $3.9 million less and one payment short than what typically is received in November each year.

Randy Charles, assistant superintendent for finance and the district's chief financial officer, reported to the Board of Education Nov. 17 that it will have to take out a fourth loan from Midwest BankCentre in the form of tax anticipation notes to avoid a severe cash-flow problem and to fund the district's December payroll.

Every two weeks, the district's payroll is about $2.6 million.

Board members agreed to meet Monday, Dec. 1, for a special meeting to consider applying for $3.5 million in tax anticipation notes that would be released Dec. 4. The meeting will be at 7 p.m. at the Administration Building, 3120 Lemay Ferry Road.

And on an as-needed basis, the board also will consider a fifth loan in the amount of $2 million to be released Dec. 18, which would get the district through to mid-January.

This is the first time the district ever has ever been in this situation, according to officials.

Board of Education members initially authorized taking out $3 million in tax anticipation notes. The district was able to pay back that money with a $7.5 million advanced funding program loan from the state. Once that program money ran out, the board again granted permission to Charles to apply for $500,000 in tax anticipation notes in October and also $2.25 million in notes that were released Nov. 21.

During the Nov. 17 meeting, Charles told board members he did not yet know the reason for the county's delay in tax payments.

He later told the Call he had contacted the county collector's office and discovered some answers. This year, all taxing entities in St. Louis County have to develop four separate tax rates rather than just one — real estate, personal, agricultural and commercial. Next year, other Missouri counties will experience the same changes.

The county's work has quadrupled, Charles said, because it is dealing with those four separate rates for every tax entity — causing bills to be sent out two weeks later than expected in November.

Also, the county is rewriting its computer programming system so it now can properly calculate the different levies, collect the revenue and distribute it, he said, which also is backing up the process.

Charles said the district typically receives two to four payments in December, which are much larger than the two $2 million payments it normally receives in November.

Over the course of a few months, the district takes in $52 million. The first payments in November are coming from the people who paid their taxes immediately. December and January are when most of the revenue is received, he said.

"We'll hope to get more in the neighborhood of $20 million in December," Charles said. "Well what they're telling us is, at this point, they've told us to plan for only receiving one payment in December. And that payment will be more like the payments you normally would get in November."

He said the county collector's office has told the district it will test its new program. If all goes well, the December payment could increase, he said, but the district has to be prepared for the worst-case-scenario — receiving one smaller payment.

"It is not unique to us by any means," he said. "I've spoken with people from Parkway, Rockwood — school districts that hold balances much larger than we do, higher percentages, are experiencing cash-flow problems. The reason it is such a big issue for Mehlville, Parkway, Rockwood is that we are hold-harmless school districts. This is where our revenue comes from. We get a relatively small amount of money from the state ... So we rely very heavily on these payments coming in in a timely fashion. When they don't, the only way we can pay our bills and meet payroll is to borrow money."

As a hold-harmless district, revenue the district receives from the state is frozen at the 1993 amount.

Some of the money gained from the tax anticipation notes will be used to pay for the interest that accumulated on previous notes, he said, noting the estimated interest on all the notes will reach about $30,000.

"Out of a $92 million budget, that, relatively speaking, is not a large number," he said. "But paying interest on borrowed money is the worst educational expense you can have. Because at the end of the day, you don't have anything to show for it."

In other business during the Nov. 17 meeting, A.D. McClain, assistant superintendent for human resources, gave board members a report on the district's evaluation of the nepotism and about 60 other district hiring policies, noting that administrators will submit a recommendation by February to the Board of Education regarding the nepotism policy and all other hiring policies.

He said that classified, teaching and administrative positions have been hard to fill because of the district's "stringent" nepotism policy. At a future meeting, he said he plans to compare Mehlville's nepotism policy to the nepotism policies of surrounding districts.

Board of Education members also reviewed the recently released audit for 2003. Members decided to consider accepting the audit at a later date because they wanted more time to evaluate it.

The audit, which was conducted by Mueller, Walla & Albertson of Crestwood, includes one report that did not exist until this year. The management discussion and analysis report is the result of GASB 34, a new regulation recently adopted by the Governmental Accounting Standards Board, that requires governmental entities to begin reporting their fixed assets.

"It's difficult for school districts like Mehlville to report the value of fixed assets when our accounting is done on a cash basis," Charles told the Call.

The Department of Elementary and Secondary Education advised school districts to work closely with their auditors and if the auditors are satisfied that a district has fulfilled the GASB 34 requirement, then DESE will be satisfied as well.

The management discussion and analysis essentially, he said, takes the information that already is reported in the audit and puts it into a different format that is more readable.

In a separate matter, the board selected Corporate Interiors as the furniture fixtures and equipment vendor for Oakville Elementary School. Current estimates for furniture for the school are $275,000 plus a $40,000 installation fee. The Proposition P budget estimates for furniture at Oakville Elementary indicate administrators set aside $500,000 for the project. Board members unanimously voted to approve the vendor so long as a formal bid or estimate is presented to the board by March 31.

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