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School board gets TAN, just in case
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The Effingham County Board of Education approved a recommendation to accept a TAN loan for $5 million from Bank of America at a meeting Wednesday afternoon as a buffer against slow tax revenues and potential state budget cuts.

This Tax Anticipation Note will be available on an “as-needed” basis, and will have to be paid back by the end of the year. Any portion of the $5 million can be taken out at any time during the year, unlike a traditional TAN, which allots the entire sum immediately.

“We felt like we needed a cushion in case we needed it to survive,” Superintendent Randy Shearouse said.

There is no guarantee that the BOE will use the $5 million. However, the fees attached to the TAN total an estimated $25,000. This includes $7,500

in legal fees and a non-use fee of $17,500 from Bank of America.

But there are no closing fees and no interest collected unless the TAN is used. But if the BOE decides they do not need to use the $5 million reserve credit, then they must pay Bank of America the non-use fee.

If they use any of the credit, they will not have to pay the non-use fee and will begin paying interest on the amount withdrawn.

Bank of America has stipulated that the interest rate peg to the London Interbank Offered Rate (LIBOR), which is based on the rates that banks use to borrow unsecured funds from other banks in the London wholesale interbank market. This is a sliding rate that changes approximately every 30 days, and as of Wednesday’s meeting, was 1.23 percent.

Some board members were concerned with the amount of the TAN and the timing of the decision. While $5 million is a lot of money, the BOE budget is about $83 million. Board members believed that having the option of a $5 million reserve would help them to adjust to potential cuts from the state and lower-than-expected property tax revenue.

Property tax bills came out later than usual last year and are due by the end of this month.

“I think $5 million is reasonable because we are not that far behind right now, but we might as well do enough to cover ourselves,” BOE Chairman Lamar Allen said.

Some BOE members were also hesitant to make such a financial commitment before the governor’s speech on the Jan. 15.

“We know it’s not going to be good, but we hope it’s not real bad either,” said Allen.

However, the bid from Bank of America would have expired the same day as the speech. If they had not approved the TAN before then, they would have to begin the bidding process again.

All in all, board members thought it was better to have the TAN and not need it than to need it and not have it.

“All we’re trying to do is pay our monthly costs,” Allen said.