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Board OKs $1.9 million ‘bridge loan’ agreement for 2014-15 fiscal year

By Bill ShortFlag City Logo

The Millington Board of Mayor and Aldermen and the Millington School Board each approved a $1.9 million “bridge loan” agreement last week for the school system’s initial operating costs.
The city board took the action on June 16, when its “adjourned” June 9 regular monthly meeting was “reconvened.” A motion offered by Alderman Thomas McGhee and seconded by Alderman Hank Hawkins was passed by six affirmative votes, with Alderman Frankie Dakin absent.
The school board approved the agreement last Thursday during a special called meeting. A motion offered by Cody Childress and seconded by Don Holsinger was passed by four affirmative votes, with board members Jennifer Carroll, “C. J.” Haley and Louise Kennon absent.
The agreement states that, to operate during the 2014-15 fiscal year that begins on July 1, the municipal school district will receive revenue from “multiple sources” that include required local funding from the city.
But it acknowledges that, in the “first several months” of operation, that revenue will be “insufficient” for the district to meet its monthly expenditures.
The agreement states that it will be necessary to authorize the issuance and sale of “revenue anticipation notes” and to lend the district the funds received from that sale, with the expectation that the district will receive state and county revenues during the fiscal year.
During its June 9 meeting, the Board of Mayor and Aldermen adopted a resolution that allows the city to issue and sell up to $3.5 million in interest-bearing revenue anticipation notes with approval by the Tennessee Comptroller’s Office.
At a June 11 special called meeting, the school board voted to accept a $1.9 million “short-term loan” from the city and to repay it with “all applicable interest and costs” after the district has received “additional revenues” from state and county sources.
The agreement states that the district will repay 50 percent of the loan on March 1, 2015, then 25 percent on April 1 and the final 25 percent on May 15.
The district will reimburse the city the amount of interest that the latter is charged for the revenue anticipation notes. But the district will receive a “credit” for any interest that the city earns through investment of the funds acquired from the notes.
By Jan. 31, 2015, the district will reimburse the city for all costs it incurs in issuing the notes.
But the city will use its “best efforts” to limit accrual of those costs to the “maximum extent possible.”
If the district does not meet the loan repayment schedule within 10 calendar days after the city sends it written notice of the default, the “entire outstanding principal balance of the indebtedness,” along with all unpaid interest accrued and other costs associated with the notes, will immediately become due and can be collected.
Each month, the district will submit a cash-flow report to the city, with the first report due on July 1. And the city will give the district a monthly statement of the “outstanding principal balance” of the loan, accrued interest and other associated costs, with the first statement due on Aug. 1.
The district and the city agree that the loan is a “separate transaction” between the parties and will not increase the amount of the city’s local funding to the school board for the district’s operating expenses.
The agreement cannot be “amended, enlarged, modified or altered” except in writing and signed by all the parties to it.
If a dispute arises between the parties that is not resolved by “routine meetings or communications,” they will seek its resolution “in good faith” by participating in “non-binding mediation” as soon as it is feasible.
If any provision of the agreement is held to be “invalid, unlawful or unenforceable” under present or future laws, that provision will be “fully severable” from it. The other provisions of the agreement will remain “in full force and effect.”

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