Board-approved $8M credit line gives Iowa City CSD a cash-flow bridge

The Iowa City Community School District's board of directors recently approved an $8 million loan to avoid cash flow issues and make payroll before state funding arrives in October. The loan was unanimously approved in a special virtual meeting Thursday, Sept. 3. Director Mitch Lingo was not present. The $8 million from Hills Bank and Trust is active on Friday, Sept. 11, and matures June 1, 2027. The anticipatory warrant is a special loan given to school districts, and is not additional debt. Rather, it is permission to borrow if needed and functions like a line of credit. The district will withdraw what they need and repay it when state aid and property tax payments arrive later. ICCSD's budget shortfall was uncovered in January when the board of directors was asked to retroactively approve a $10 million interfund loan to pay salaries, a move that outpaced the district's projections and exposed years of inaccurate spending and revenue tracking. The district responded by pledging to make $7.5 million in spending cuts for FY27. The loan has an interest rate of seven percent, but the district would pay interest only on money it borrows; an estimated $8 million for 30 days would cost roughly $40,000 in interest. The anticipatory warrant is a 'low-cost option that provides maximum cash flow flexibility and stable liquidity.' Susanne Gerlach of PFM Financial Advisors told the board of directors on Tuesday, Aug. 11, that September and March are the district's biggest "cash-flow pressure points" because they occur just before large revenue payments arrive. 'I consider this sort of a bridge between some of the decisions that will be coming to sort of shore up the general fund,' Gerlach said. 'This is sort of the bridge to get the liquidity we need until the expenditures are really sort of right-sized for where we are today with revenue.'