During a budget session last week, the Whitesboro City Council continued discussions about how the city could continue to fund not only ongoing capital improvement projects but also city functions.
“We’ve got a little hurdle to get over, but we are going to make it,” Mayor Jeff Butts told the group.
ZacFinance President Doug Martella said the decision about issuing debt would likely be the biggest talking point of the meeting, so he wanted to start there.
“As we can kinda feel, the cash is getting low,” he said after explaining that the cash flow issue came up because the city paid more than anticipated for the three projects that were financed with the $ 7.3 million bond issued last year and the city decided to fund the difference with cash. The three projects, Butts said, were water, sewer and street improvements.
Martella said if the city doesn’t go out for more debt it will probably be “in a world of hurt” as far as cashflow is concerned.
He reminded the group that they are anticipating going out for an approximately $3.5 million certificate of obligation (CO) this fall. At a previous meeting, city staff had said this money would be used to reimburse the city for cash it paid for those projects. Martella said that it is possible, but the city could only count on getting reimbursed for expenses paid in the last 60 days. He said there are expenses that the city can get reimbursed for within those criteria, but there are also additional expenses still outstanding for those projects and the funds from the CO will be used to pay for the remainder of those projects as they are completed.
Alderman Ben Edwards, Alderman David Bertino and City Administrator Phil Harris were the most outspoken as the council worked through this issue with Edwards repeatedly asking just how the city arrived at its current position where a bond issue is critical and whether the city can get the bonds it needs.
Edwards asked why the city didn’t just put the projects on hold once they saw they couldn’t get bonds to back them immediately. He also asked who decided to use cash to keep the projects going. He then asked what the plan was for recouping the cash that had been put into the projects.
Harris said he didn’t think anyone at that time could have anticipated the impact of the Attorney General’s reaction to the plan to raise property taxes. He said there were just abnormal circumstances coming from the state and no one anticipated it would go the way it did.
“My counsel was I felt like it was the right thing to do,” Harris said about using the cash to keep the projects progressing.
Alderman Su Welch said they had no idea that the city being on the Attorney General’s list would keep them from getting financing for the projects.
Bertino also pointed out that the city had already started the projects when they ran into the issue with the Attorney General’s office and the consequences of those issues.
“We came on with the idea that we’re going to go with this and then when this is clarified, and it was, we will be able to go out for a bond,” Bertino said. He also added that the city could go to a bank and get a loan but the CO at four percent interest is a better deal. He agreed with Harris that the way everything unfolded, the council could not have foreseen what the Attorney General was going to do. He also added, as another reason for going ahead with cash, the fact that the costs for the projects were not going down over time. They were continually going up.
Edwards also asked if part of the $3.5 million the city anticipates getting from the sale of bonds is going to finish the projects underway, and another part is to help reimburse the city for cash already spent and another part is reserved for new projects, when will the city be able to rebuild its cash reserves?
“This doesn’t solve the issue of not having cash reserves,” he said. He also wanted to know how much would be left over with the $3.5 million in bonds once the three projects and fees were paid. Martella said it would be around $1 million.
Budget discussions will continue.
Source: Freepik.com