Hancock Place's remarkable path to fiscal health.

When Dr. Kevin Carl took the reins as superintendent of Hancock Place School District in 2011, his mandate was simple: Get the district's finances in order.

Hancock Place is in Lemay, Missouri, a diverse, multilingual community bordering the city of St. Louis. For the past 23 years, the district has operated a school-based community health clinic. All 1,300 members of its student body qualify for free or reduced-price lunches.

With a fund balance of $700,000, or just 3% of its annual operating expenditures, the district was in financial jeopardy when Dr. Carl arrived in 2011. Unable to prove its creditworthiness on its own, the district relied on the Missouri School Board Association's support to qualify for the Standard & Poor's (S&P) credit rating needed to pursue a bond issue.

"We believe in supporting our families in any way possible," said Dr. Carl. "Their struggles are real. But you can't make good, creative decisions when you don't have the necessary resources."

So, beginning on day one of his tenure, Dr. Carl set out to change the district's financial trajectory.

Hard decisions.

"The first two years were hard," he acknowledged. Salaries were frozen, and 175 employees - including 26 non-tenured teachers - received pink slips at the end of his first year.

"At that time, the district was overstaffed, following multiple years of declining enrollment," Dr. Carl explained. "Rather than drag the cuts out over multiple years, we pulled off the Band-Aid in a surgical and strategic way."

The first year of his tenure, the district also ran out of money in November. To meet expenses, it took out a tax anticipation note (TAN), a short-term loan to be repaid - with interest - with the taxes the district would receive in December and January.

It was not a good use of tax revenue, acknowledged Dr. Carl. "We needed to find better solutions to this and other financial problems," he said.

Several municipal bond underwriting companies were invited in to discuss the district's financial options. Among them was L.J. Hart, a wholly-owned subsidiary of Commerce Bank that serves school districts and government bodies throughout Missouri.

"Larry Hart was very analytical," recalled Dr. Carl. "I was asking hard questions about how to restructure our debt and manage our resources. Larry had good answers. His interest in seeing our schools succeed was clear."

The following November, when Hancock Place coffers again ran dry, the district was prepared. L.J. Hart arranged to provide a TAN with an interest rate so low it could not be matched.

"Our earlier dialogue made that possible," said Dr. Carl. "Larry wouldn't have known about this particular need if he hadn't dug down and asked. For me, it was one less stress. I knew we had found a good partner that had our back."

Then and now.

In the years since, L.J. Hart has completed 13 issues for the school district, with a total part value of more than $56 million. District taxpayers have saved more than $5.7 million in interest through 10 debt refinancings. The refinancing of two bonds in 2021 alone netted interest savings of $561,000.

"People think finance is a mechanical process, but there is a significant amount of creativity involved," said Dr. Carl. "L.J. Hart doesn't just execute bond issues. They listened to our financial story and our objectives, they looked at our debt structure, and then they came up with a plan to improve it. That takes a significant investment of time."

Sometimes, that plan called for prepaying bonds before their due dates.

"We did that a couple of times, which relieved a lot of financial pressure," Dr. Carl said.

The district reaped significant savings on lease-hold revenue bonds structured by L.J. Hart when the district came up against statutory limitations on bonding.

L.J. Hart also recommended including a five-year call feature on the school district's bond issues, rather than a more typical seven- or 10-year call.

"This allows us to refinance sooner if rates drop," Dr. Carl said. "That feature alone has saved our taxpayers a substantial amount of money."

In addition, Hancock Place no longer runs out of cash each November. Its fund balance has grown from $700,000 in 2011 to $14 million today. Since 2014, it has had its own underlying S&P credit rating, an A-, thanks to L.J. Hart's help.

What a difference a strong balance sheet makes.

Hancock Place's improved financial performance is reflected today in the district's schools. No-tax increase bond issues passed in 2021 and 2022 are currently helping to fund elementary school renovations, air conditioning upgrades, soccer field improvements and more.

"Today we have the cleanest, nicest and most up-to-date facilities in St. Louis County," said Dr. Carl.

Educational opportunities are also expanding, as evidenced by the addition of a new robotics team. District teachers have gone from having the second-lowest starting salary in St. Louis County to the second highest in the state. Average tenure is 16 years.

"I think all educators get into teaching to make a difference, and here you see and feel that difference," said Dr. Carl. "As a smaller district, we truly have a family atmosphere. The role we play in the lives of our students and their families is significant. We run a lean-and-mean operation, but not so lean that we sacrifice what's best for our kids. We feel very good about the work we have done and continue to do."

Fueling the turnaround.

Dr. Carl credits the district's remarkable turnaround to the Lemay community.

"We have a supportive and knowledgeable board of education," he said. "They empowered our leadership to make difficult recommendations. If we hadn't implemented those changes, with the staff and community's support, I don't know that we'd be where we are today."

Dr. Carl also acknowledges the essential role played by the professionals at L.J. Hart.

"When a school district is in financial disarray, it's no fun going it alone," he said. "We need partners who can help us maintain a strong financial position. L.J. Hart cares not just about the numbers, but also their impact on our schools, students and employees."

Outside financial expertise is of particular value to smaller school districts like Hancock Place, Dr. Carl said.

"Our district has a great CFO," he said. "Even so, it is helpful to have someone who can serve as a sounding board as we do our strategic planning. L.J. Hart is our financial partner. That's how I see them. They support our scholarships and our alumni events. If the local chamber of commerce has a golf tournament, they sponsor a hole. Are they getting a lot of business from Lemay? No. But they value and support our community," said Dr. Carl. "They are proud to work with us, and we are proud to work with them."

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