Title
Adopt a Resolution authorizing the issuance of a Grant Anticipation Note in the name of the Mission Union Elementary School District and providing for the administration of related funds.
Report
RECOMMENDATION:
It is recommended that the Board of Supervisors:
Adopt a Resolution authorizing the issuance of a Grant Anticipation Note in the name of the Mission Union Elementary School District and providing for the administration of related funds.
SUMMARY:
Grant Anticipation Notes (“GAN”) are statutorily defined short-term debt instruments generally issued by local public agencies to borrow funds against the expected future receipt of a specific grant. In the case of a school district, a GAN cannot be issued directly by the school district but must first be authorized by the County Board of Supervisors on the district’s adoption of a resolution requesting authority to enter into a loan agreement with a third-party lender.
The Mission Union Elementary School District (“District”) is a small, rural school district based in Soledad serving K-8 students. The District has obtained approval from the State Water Resources Control Board for funds (“Grant”) to use towards water system improvements (“Project”).
To fund the Project pending receipt of the Grant, the District desires to enter into a “Grant Anticipation Note/Loan Agreement” (“Loan Agreement”) with Rural Community Assistance Corporation (“Lender”). The County will not be a party to the Loan Agreement and will not take on the risk of lending or repaying any funds.
On August 10, 2026, Mission Union Elementary School District (“District”) adopted a “Resolution Requesting the County of Monterey Board of Supervisors to Issue a Grant Anticipation Note in the Name of the Mission Union Elementary School District in the Principal Amount of Not to Exceed $930,468 for the Purpose of Finalizing Water System Improvements and Authorizing Proceedings Relating to the Issuance and Sale of such Note” (“District Resolution”).
Adoption of the District Resolution triggered the obligation of the County to authorize issuance of a GAN in the name of the District assuming compliance with state law.
DISCUSSION:
Issuance of a GAN allows a local public agency to borrow funds against an anticipated grant to “be used and expended by the local agency solely for the purpose for which the grant or loan is to be received.” Gov. Code § 53859.02.
Government Code section 53859.03 states that a GAN “shall be issued pursuant to a resolution authorizing the issuance thereof, adopted by the legislative body of the local agency, except that the note or notes of a school or community college district shall be issued in the name of the school or community college district by the board of supervisors of the county whose county superintendent of which has jurisdiction over the school or community college district, as soon as possible following receipt of a resolution of the governing board of the school or community college district requesting the borrowing.” (Emphasis added.) Accordingly, a local school district must request the authorization of the County to access this borrowing authority, and the County is obligated to timely authorize the borrowing if compliant with state law.
By passing the District Resolution, the District seeks authorization from the County to issue a GAN in the form of the Loan Agreement with the third-party Lender to access funds for water system improvements while waiting to receive the Grant.
Because the timing and amounts of the proposed borrowing are consistent with statutory guidelines, and because the District can demonstrate that it properly seeks to borrow against committed grant funds for use in completing work consistent with the purpose of the Grant, the County is obligated to authorize the District to issue the GAN.
While the County will not be a party to the Loan Agreement and will not be obligated lend money or repay the Lender in the event of the District’s default, the Resolution further provides for coordination between the District and County concerning the handling of loan proceeds and grant funds consistent with state law.
OTHER AGENCY INVOLVEMENT:
The Offices of the Auditor-Controller and Treasurer-Tax Collector have reviewed and approved the proposed Resolution.
FINANCING:
Approving the Resolution authorizing issuance of the GAN will have no fiscal impact on the County of Monterey. The County will not undertake the risk of borrowing or repaying funds pursuant to the GAN.
BOARD OF SUPERVISORS STRATEGIC PLAN GOALS:
Approving the Resolution authorizing issuance of a GAN in the name of the District will fulfill the County’s obligations under state law, while enabling the District to access funding needed to build and sustain critical infrastructure.
____ Well-Being and Quality of Life
X Sustainable Infrastructure for the Present and Future
____ Safe and Resilient Communities
____ Diverse and Thriving Economy
X Administrative
Link to the Strategic Plan:
<https://www.countyofmonterey.gov/home/showdocument?id=139569>
Prepared by: Samuel Beiderwell, Deputy County Counsel, x5702
Approved by: Kelly Donlon, Chief Assistant County Counsel, x5045
Attachments:
1. Draft Board Resolution
2. District Resolution
3. Form of Note