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Board approves moving $4 million of bond proceeds into short-term CDs; business manager outlines Constellation drawdown and cyber-charter exposure
Summary
The Southmoreland School District board approved moving $4,000,000 of recently issued bond proceeds from a money-market account into two short-term certificates of deposit, while business manager Pamela Mondock described the Constellation project draw schedule, arbitrage limits and a continuing cyber-charter payment shortfall.
The Southmoreland School District Board of School Directors on Sept. 16 approved moving $4,000,000 from a money-market account into two certificates of deposit — $2,750,000 in a three-month CD at 4.15% and $1,250,000 in a six-month CD at 4%.
Business Manager and Transportation Director Pamela Mondock told the board she asked to invest only money that would not be needed during the short-term period and said the district’s arbitrage rate is 3.7706%. She said the proposed investments would likely earn about $40,000 for the district and that she would work with PFM consultant Zach Willard to ensure the district stays within arbitrage rules and meets federal spend-down requirements tied to the bond proceeds.
The board vote ratified a transfer described in the agenda as “moving $4,000,000 of our funds from the money market account to 2 certificate of deposits” and was taken after discussion; a roll-call tally was not read into the record.
Why it matters: The board is using short-term, interest-bearing instruments to try to recoup some income on bond proceeds earmarked for the Constellation facilities project while monitoring federal arbitrage limits that could require repaying interest if averages exceed allowable rates.
Details and context: Mondock said the district borrowed roughly $16.5 million overall for the project and that $4,000,000 of proceeds would not be needed immediately. She referenced backup exhibits showing projected Constellation drawdown payments (including an itemized spreadsheet with an expected September payment around $4,811,227) and said the district is on track to meet federal spend-down benchmarks (10% at six months, 45% at 12 months, 75% at 18 months). Mondock said she had consulted PNC’s Alicia Henry, PFM’s Zach Willard and bond counsel Anthony Ditka to confirm the investments were permissible with restrictions.
Board members asked whether investing at roughly the same rate the district pays on the bond was effectively a wash; Mondock replied she limited the investment to funds not needed for near-term payments and that the short-term CDs should earn incremental interest that would otherwise sit idle. She acknowledged earnings could be lower than projected if market conditions change and said she would keep sufficient cash available to cover Constellation draw requests.
The finance discussion also included the district’s continuing exposure to cyber-charter payments. Mondock said the district recorded a variance between 2023–24 and 2024–25 cyber-charter payments and that reconciliation billings had increased the district’s reported payments. She said an assigned fund balance set aside for cyber overages has been used and that the final audit could reduce the currently reported overage; the district’s audit and SEFA were not complete at the time of the meeting.
What the board approved (formal action): The board approved transferring $4,000,000 from the money-market account to the two specified CDs as presented on the agenda.
What’s next: Mondock said she will work with PFM to calculate average rates for arbitrage reporting and return with any required reporting or adjustments. The district will continue to monitor monthly draw schedules from Constellation and the audit adjustments that affect the cyber-charter exposure.
