County Set To Short Term Borrow $275 Million

(May 24) San Bernardino County in the upcoming 2013-14 fiscal  year will rely upon well over a quarter of a billion dollars in short term loans as part of its budgeting process.
Those short term loans, in the form of what are called tax and revenue anticipation notes, are secured against revenue the county anticipates receiving later in the fiscal year but which will not be available when the fiscal year begins in July.
This week the board of supervisors authorized the borrowing of funds for fiscal year 2013-14 and the issuance and sale of 2013-14 Tax and Revenue Anticipation Notes in an aggregate principal amount not to exceed $275,000,000.
According to a report authored by Gary McBride, the county’s chief financial officer and the county’s principal administrative analyst, Katrina Turturro, “Issuance of the tax and revenue anticipation notes (TRANS) will allow the County to meet temporary cash flow shortfalls during the year. Repayment of the notes will be made from general fund cash and revenues via a note repayment trust fund.”
Since 1981, the county has issued short-term notes in the form of TRANS to finance cash shortfalls of the county’s general fund. This is done by San Bernardino County, as well as many other local governments, to address the seasonal mismatch between the receipt of revenues and disbursements for ongoing operations. Expenditures for the general fund such as payroll costs follow a regular, even pattern throughout the year, while receipts follow a much more uneven pattern due primarily to property tax payments which are received in December and April of each year. The proceeds of the TRANS may be used for any purpose for which the county is authorized to expend money, thus allowing the county to cover temporary cash shortfalls.
The TRANS will be repaid from the county’s unrestricted cash and revenues, a portion of which is required to be deposited into a special note repayment fund. According to McBride, “The county has always met its set-aside obligation on its short-term notes and has always timely paid its principal and interest payments.”
On Tuesday, the board of supervisors authorized the issuance of tax and revenue anticipation notes in an amount not to exceed $275,000,000. The resolution authorizes the issuance of one or more series of both tax-exempt and taxable notes, allows for portions of the notes to mature at different times throughout the year, and authorizes the county to issue additional series of notes for the fiscal year at a later date if certain conditions are met.
“These options give the county the ability to offer the correct mix of notes to respond to market demand, satisfy tax requirements, and ensure that the county’s cash flow needs are met,” McBride said.  The firm of Orrick, Herring ton & Sutcliffe LLP will serve as note counsel on the bond issuances and Hawkins, Delafield and Wood LLP will serve as disclosure counsel.

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