From the Terre Haute Tribune Star:
The City of Terre Haute is looking to borrow $5 million to cover day-to-day operating expenses.
Leslie Ellis, city controller, told the nine-member City Council Thursday night that the city is seeking the loan to cover operating expenses for the next 18 months. The loan will be repaid using the city’s forthcoming property tax revenue, she said.
The next disbursement of property tax dollars from the state will take place at the end of June, Ellis said.
Such “tax anticipation warrants” are fairly common around Indiana, especially in the wake of statewide property tax caps, said Paige Sansone, a principal with H.J. Umbaugh & Associates, an Indianapolis-based accounting and public finance consulting firm hired by the city.
“This is strictly a timing issue,” Sansone told the council. “You will have no problem repaying this.”
If the loan is repaid by the end of 2013, the city will have paid a total of $403,000 in interest on the loan, Sansone said.
The city’s total operating deficit is $12.2 million, more than double the size of the loan being sought.
Other funding sources, such as the city’s Rainy Day Fund, will be tapped to find the rest of the money, Sansone said.
“You’re in a situation now where you need the loan,” Sansone said.
The city was required to take a similar loan of $7.5 million in 2009 to cover operating expenses, said Mayor Duke Bennett, reached after the meeting. Due to annual budget cuts over the past several years, the city does not have the necessary reserves to meet all expenses until it receives its first property tax disbursement from the state, he said.
“It’s the same stuff that every city is doing,” Bennett said.
It’s very likely the city will need to take out a similar loan again in 2014, Sansone told the council. Bennett said that loan, if necessary, will be smaller due to anticipated budget cuts and new sources of city revenue. One possible new source of revenue for the city would be a user fee on trash collection, Bennett said.
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http://tribstar.com/local/x157480509/City-may-borrow-5-million-for-expenses
