By Stephen Floyd
The Silver Falls School District (SFSD) has applied for a $3.8 million loan to help address a $1.3 million cash shortfall, with most of the funds expected to be invested to offset financing costs.
During a special meeting April 11 of the SFSD Board, officials voted unanimously to pursue a tax anticipation note (TAN), which borrows against property taxes expected in November.
The $3.8 million was the maximum the district could borrow, representing 5 percent of its annual budget of $76 million for this school year.
The loan must be paid in full Dec. 31, along with an estimated $92,476 in interest and $71,864 for the cost of issuing the loan.
The actual interest rate will not be known until the loan is issued in late May, said Finance Director Kim Doud. Based on current market trends, interest was estimated at roughly 4.15 percent.
Because not all of the loan will be needed to cover the cash shortfall, the district anticipates investing roughly $2.5 million in high-yield accounts, said Doud. If invested at a rate of 5.2 percent, interest could be roughly $103,765, potentially reducing total loan expenses to $60,575.
Board members said they wished the TAN was not necessary but said it is the most viable option to make June payroll.
“Saying ‘no’ to [the TAN] means people don’t get paid, can’t pay to get food on the table, puts us in a more dire situation, so it makes no sense to shoot this thing down,” said Board Member Josh Ort.
Board member Derrick Foxworth Jr. said it was important to remember the TAN was not a solution to the district’s budget challenges, but “one critical piece to an overall strategy.”
Chair Jennifer Traeger said the district’s goal is to not need another TAN in the future, and that avoiding another loan will require deliberate financial planning. This includes a potential $8.8 million reduction in next year’s budget, which the board was advised to pursue by the Oregon Association of School Business Officials (OASBO).
The board began discussing a possible TAN Feb. 26 after being informed of a likely budget deficit following the results of an annual audit that concluded last winter.
During a budget update April 8 by OASBO, the board was told a years-long pattern of overspending and lax financial oversight has led to the cash shortfall and a $4 million deficit in this year’s budget. The update also included future cash shortfall projections in October and again in February of 2025 onward if current revenues and expenditures do not change.
Doud said April 11 the TAN could potentially help cover these future shortfalls if necessary, but that the goal is to spend as little of the loan as possible to generate more interest. She said it would be better to avoid future shortfalls by creating and sticking to a balanced budget.
