Mayor Michael Cinquanti said the inter-fund loans are a more efficient and economical option to provide the seed money for the capital projects that will be fully reimbursed by grants or state aid.
“Now we won’t have to pay interest rates on short rate [Bond Anticipation Note] borrowing or delay projects, which is also causing pricing to go up,” Cinquanti said.
The Common Council authorized the short-term inter-fund loans temporarily advancing cash from the general and water funds to four capital project accounts.
The inter-fund loans include:
- $521,785 from the water fund for the recently completed lead service line replacement project
- $470,826.25 from the general fund for this year’s road repaving project
- $32,500 from the general fund for the planned recreation center and the contracted feasibility study
- $11,105.27 from the general fund for the expenses related to the city-owned playground at William Barkley Elementary School
“Each and every one of those is guaranteed [to be] reimbursed for that full amount,” Cinquanti said.
While timing will vary depending on the funding source, City Controller Louise Biron noted each of the internal cash advances will be short-term, with the funds to be repaid when the reimbursements are received.
Local governments are allowed to temporarily advance money from one fund to another through inter-fund loans under state General Municipal law. Funds must be repaid by the end of the fiscal year in which the internal lending took place.
“We’re required to transfer the cash back,” Biron said.
Officials are confident the city has the needed cash on hand and proper controls to facilitate the loans.
“It will be reimbursed. We won’t make any kind of risky loans to ourselves,” Cinquanti said.
Council members indicated the city’s roughly $8 million accumulated budget deficit would have precluded the option just a few years ago. The deficit was eliminated and replaced with a $3.6 million budget surplus in 2022.
“We’re definitely moving in the right direction financially,” 3rd Ward Alderwoman Irene Collins said. “It’s something very nice to see that we don’t have to go out to bond to take care of certain things in the city.”
In the past, Collins argued for stricter control and monitoring of the city’s finances. Now, she is comfortable with the inter-fund loans, saying that financial management and record keeping have been improved by Cinquanti and Biron along with their staff.
The city will save the “significant” cost of issuing bonds, Collins added.
Cinquanti previously said he would like the city to shift towards a “pay-as-you-go” strategy for planned capital expenses as finances continue to improve. Inter-fund loans for smaller, short-term expenses will likely be considered more in the future.
“If we have the cash available to do something like this, I think it’s a good way to go,” Collins said.