Editor's note: The following is a press release issued by Plainfield School District 202.
The District 202 Board of Education at its January 28, 2013 regular meeting approved selling $17 million in tax anticipation warrants to meet cash flow needs for operating expenses until taxes are received this summer.
Tax anticipation warrants are short-term loans. Governments typically use them to bridge the gap between the first installment of property taxes received in September, and the second installment which doesn’t arrive until June.
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The bond sale is expected to cost the district about $76,000 in interest and fees.
District 202 has a long history of strong, conservative fiscal management, and had not had to borrow money to meet operating expenses until the last several years, the district said.
TAWs are common practice, especially in school districts throughout the state. The situation is caused largely by the timing of the tax cycle and exacerbated by the ongoing delays with state funding.
“I compare tax anticipation warrants to borrowing against a credit card to give yourself a short-term loan until your paycheck comes,” said Angela Smith, Assistant Superintendent of Business and Operations.
“It is not the ideal way to do business, but it is what we have to do because of the timing involved in getting our tax revenues and the state not paying its bills in a more timely fashion,” Smith said.
District 202 has earned the top rating for bond sales thanks to its work to improve its financial condition, said Steve Larson, one of the district’s financial advisors.
Conversely, school districts statewide suffer from the state’s shaky financial status, Larson said. “We invented the term ‘the Illinois penalty’ for this effect.”