A special agreement by state officials has helped facilitate yet another loan for the cash-strapped Penn Hills School District.

State subsidy payments for the district will be sent straight to the district’s debt-holders to cover a $20 million loan through BNY Mellon, Pennsylvania Treasurer Tim Reese announced Thursday.

The concept, known as an intercept agreement, was formed among the school district, the state Treasury, state Department of Education and BNY Mellon. The agreement helped lower the district’s interest rates and borrowing costs by prioritizing the debt repayment above all other state subsidy uses.

“Without this latest bond offering, Penn Hills School District would not be able to pay its bills and would likely have to curtail critical educational activities,” Mr. Reese said. “And, without the intercept agreement, it would be more difficult and expensive for the district to raise this money.”

State treasury spokesman Scott Sloat said the state facilitates three or four intercept agreements each year. The agreements are typically to cover capital expenses such as building repairs or new equipment, but the Penn Hills loan will help pay for everyday expenses, including teacher salaries and utilities.

State Auditor General Eugene DePasquale and a staff of auditors are investigating the district’s financial practices from July 1, 2012, through June 30, 2015. The audit is expected to last through next spring.

The state budget impasse means bondholders will not see the money until a budget is passed and subsidies are disbursed.

District spokeswoman Teresita Kolenchak declined to comment on how the district plans to manage repayments until a budget is passed, or when the first loan payment is due.

Clarece Polke: cpolke@post-gazette.com.

First Published: October 1, 2015, 2:39 p.m.