TRANs ease short-term cash flow woes 

School districts, county offices of education and community college districts considering participating in CSBA’s California Cash Reserve Program need to begin planning now to ensure they’ll have access to supplemental short-term funding for their general fund cash needs.

Designed to help shore up general funds if districts run short of cash while awaiting allocations of local, state and federal funds, the Cash Reserve Program helps local education agencies raise funds through the issue and sale of tax-exempt, short-term Tax Revenue Anticipation Notes or TRANs.

The Cash Reserve Program, operated by CSBA District and Financial Services in partnership with Piper Jaffray & Co. and Orrick, Herrington & Sutcliffe, sells tax revenue anticipation notes to investors on behalf of participating districts, county offices and community college districts and then deposits TRANs proceeds in an interest-bearing account. Program participants can withdraw funds for short-term “loans” during periods when they are awaiting local, state or federal funds.

To qualify, districts need to meet a number of deadlines between now and next June. It’s a straightforward but lengthy process that requires advance planning and school board approval.

“We encourage districts to evaluate their cash situations now,” said Laura Franke, vice president at Piper Jaffray & Co.

To apply, participants need to submit various budget documents, audited financial statements and other financial records to program managers between now and March 2007. Next, district and county boards need to pass a resolution adopting and signing program documents that authorize, but do not obligate, their district or county office to join the program.

In May, the program financing team reviews cash flow needs to determine the specific dollar amount of the TRANs offering. In June, participating districts approve all aspects of pricing, including the interest rates on the tax revenue anticipation notes, investment of proceeds and the final cost of issuing the notes. Participants have access to funds during fiscal 2007-08, which runs from July 2007 through June 2008.

For nearly two decades, the Cash Reserve Program has helped school and college districts and county offices bridge the gap between uncertain state revenues and ongoing expenses. Last year, 162 local educational agencies participated in the Cash Reserve Program and issued nearly $400 million in TRANs.

In 2006, the program issued the majority of all school district TRANs in California.
“Participants in the Cash Reserve Program don’t need to go through individual rating processes,” Franke said. “The finance team handles all ongoing administrative duties associated with the issue and sale of the notes.”

Rhonda Usher, business manager of the Terra Bella Union Elementary School District in Tulare County, said her district has relied on the program for more than 10 years. “The thing we like about it is that it’s so easy, once you qualify,” she said. “Usually I’m running short (on cash) by the September payroll. I call Laura (Franke of Piper Jaffray) and by 10 am the next day, the money is in our account. We start making payments back in December when we get our property tax revenues. The cost of borrowing is reasonable; we get a better rate than we could from a bank.”