REDFORD, Mich. - Comerica Bank declined to open a line of credit for South Redford Schools recently, citing the district's declining fund balance, according to the Livonia Observer.
The district wants to establish a $1.5 million line of credit to cover any cash flow shortage between now and when it receives state aid in late October, according to Superintendent Linda Hicks, the Observer reported.
"They said they were happy that our fund balance is still positive, but our losses have been 15 percent of our fund balance," Susan Wright-Barnes, finance director, told the school board about Comerica's decision, according to the Observer. The district was to approach another bank soon, the report said.
The district may face a $660,000 shortfall in October because it needs to make payroll three times that month, but will not receive state aid until Oct. 20, the Observer reported. The same scenario may occur in June 2010. The district could use its fund balance to cover those costs, but does not want to deplete it further, according to the Observer.
In related financial news, Wright-Barnes said that home foreclosures will bring in additional local tax dollars this year, because banks will have to pay taxes on those properties at the non-homestead rate, which is higher than the residential rate, the Observer reported. However, those gains would likely be offset by enrollment declines as people who lose homes move out of the township, she said, according to the report.
Livonia Observer, "Banking crunch hits home for South Redford schools," Aug. 16, 2009
Mackinac Center for Public Policy, "A Michigan School Money Primer," May 30, 2007