Thoughts on the cost of Lisa's 7,000,000 loan

Here is an email I and the other board members received.

Subject: Issue with Short Term Anticipation Note authorization for this evening

As a LPS taxpayer, I have some concerns concerning the upcoming discussion /approval for issuing short term anticipation notes for the district:

- I feel the recent Observer article indicating that some of all of the borrowing costs will be recovered through investment income. It should be assumed that only a portion of the $7 million borrowed will be available for investment purposes during the borrowing period (if that is not true,there would be no need to borrow in the first place). The Board should ask fora fair estimate of the net borrowing costs before approving this transaction.

- A fair estimate can be prepared by analyzing current borrowing and investment costs utilizing the weekly and monthly cash flow estimates the district is required to submit no later than Friday of this week(according to the MMBA website). However, this document is missing from the agenda packet distributed for this item. Given the critical nature of the decision and the short notice of getting the needed approval, I would like the Board to ask why that document is not included, at least in its preliminary form.

- I would have prepared an estimate to include with this communication, but I received no response from the Finance Director to my request for an explanation of the statement attributed to her in the Observer.

- If we can assume net borrowing costs will be 2% ($140,000), I would ask that the Board insist on making other cuts to absorb this amount. The last Budget estimate I could find on the LPS website estimates that other cost increases for 2008-2009 will be $960,000. That estimate does not appear to include the costs of this borrowing.

Thank You,
-- John C. Whaley, CFA, AIF
Actium LLC