Opinion letter to Dr. Arthur L. Mallory

JOHN C. DANFORTH ATTORNEY GENERAL OFFICES OF TUE ATTORNEY GENJERAL OF ~IJI§§OURJf . JEFFER§ON CITY April 5, 1976 OPINION LETTER NO. 8 Dr. Arthur L. Mallory Commissioner of Education Department of Elementary and Secondary Education 6th Floor, Jefferson State Office Building Jefferson City, Missouri 65101 Dear Dr. Mallory: This is in response to your request for an opinion from this office as follows: "Is a board of education that has autho- rized the borrowing of funds for the use of the district under provisions of sec- tion 165.131, RSMo, required to repay the loan within the calendar year in which the loan was made? "Prior to July 1, 1974, school districts, other than urban districts, had no statu- tory authority to issue tax anticipation notes. However, the Missouri Supreme Court held in First National Bank of Stoutland v. Stoutland School District R-II {319 SQW. 2d 570) that all districts not authorized to issue tax anticipation notes could borrow money by virtue of a self-enforcing pro- vision of the Missouri Constitution. How- ever, such a loan would have to be repaid during the calendar year in which the loan was made." As stated in your opinion request, prior to .July 1, 1974, school districts, other than urban districts, had no statutory authority to Dr. Arthur L. Mallory issue tax anticipation notes. As we construe the Supreme Court deci- sion in First National Bank of Stoutland v. Stoutland School District R2, 319 S.W.2d 570 (Mo. 1956), the court's opinion held school dis- tricts had constitutional authority to borrow money in an amount not exceeding in any year the income and revenue provided for such year plus any unencumbered balances from previous years to be repaid from income and revenue provided for such year. It did not hold that the loan had to actually be repaid during the calendar year in which it was made. See State of Missouri ex rel~ Strong~ et al. v. Cribb, 273 S.W.2d 246 (Mo.Banc. Nov. 1954). Compare Grand River Tp., De Kalb County v. Cooke Sales & Service, Inc.,-267 S.W.2d 322 (Mo. Div. No. 1, Apr. 1954) and dissenting opinion Hyde, J., in State of Missouri ex rel. Strong, et al. v. Cribb, supra at 251. As heretofore stated, the legislature enacted Section 165.131, RSMo, providing for the issuing of tax anticipation notes by any school district as follows: "The board of education of any schoo1 dis- trict in this state, upon a vote of a ma- jority of the members of the board, Day bor- row funds for the use of the various ~unds of the district, including the debt S(ervice fund, and may issue negotiable notes lin evi- dence thereof, payable out of the revfenues derived from school taxes, for the pmrposes of the funds of any year in which the.; notes are issued. The notes may be issued mt any tiiue or from time to time between Jume thir- tieth and December thirty-first in an~y year. A separate note shall be issued to ev~dence the borrowing for the benefit of eacht fund, and shall bear on its face appropriabe ref- erence to or designation of the fund ~or the use of which the funds evidenced by tihe note are borrowed. The aggregate principa~ amount of the notes issued in any year for tlhe use or benefit of any fund shall not excei€d fifty percent of the amount of the school bsoard's estimate of the requirements for the ~und and of the tax required to be levied for :the pur- poses made for such year, including, !however, the amount to be derived from any inroreases in rate of levy authorized by the elmctors of the district. The notes shall be payfable in not to exceed six months from date of issue, and may bear interest at a rate not tto exceed -2- Dr. Arthur L. Mallory four percent per annum, payable at maturity. The proceeds of the notes shall be placed to the credit of the respective funds for the use and benefit of which the borrowing was made, as evidenced by the notes, and subject to the right to make transfers from and to funds as otherwise permitted by law, the proceeds of the notes shall be used and expended only in pay- ment of the expenses and obligations properly payable from the funds respectively, and in- curred or to be incurred against the funds during the year for the expenses of the year, or in payment of principal and interest on .the notes. The notes may be payable to bearer or to the order of a named payee, and may be in substantially the following form: TAX ANTICIPATION NOTE FOR FUND School District of State of Missouri No. Date of issue The School District of County, $ ___ _ County, Missouri, will pay on at the office of the Treasurer of said School District, or at the Bank in , to (bearer; or or order), the sum of with interest thereon from date of is- sue at the rate of % per annum, payable at maturity, out of funds derived from taxes for school purposes for the fund, for the school year beginning July 1, 19 , upon due and proper endorsement and presentment hereof. THE ATTEST: Clerk or Secretary" SCHOOL DISTRICT --B=Y::c:-- ------~P~r-e--s~i~d~e-n-t~- Under this. statute, tax anticipation notes may be issued at any time or from time to time between June 30 and December 31 in any year and the notes shall be payable in not to exceed six months from date of issue and payable at maturity. -3- I Dr. Arthur L. Mallory As we construe this statute, any school board may issue tax anticipation notes on July 1 and any time thereafter until Decem- ber 31 which notes shall be payable in not to exceed six months from the date of issue. ~v,er~_;u_ JOHN C. DANFORTH Attorney General -4-