From the Washington County Insider. The short story is that due to an error by city employees, the city borrowed $1.5 million more than they needed this year. The same city employees want to just stash the money to use next year, thus reducing borrowing next year. The problem is that the city taxpayers will be paying interest on that loan as it sits in a bank account somewhere doing nothing. Alderman Randy Koehler asks all the right questions:
During the Monday, March 15 meeting Dist. 4 alderman Randy Koehler asked if the council borrows about $1.5 million over the project cost in 2021, is there a way to make sure the council borrows less next year? He also asked, “We’re just going to sit on that $1.4 million for a year and do nothing with it? That doesn’t make any sense to me. And if we don’t need it why are we borrowing it,” asked Koehler.
The representative from Ehlers Public Finance Advisors said “the City could earn interest on the $1.4 million. You also have the ability to lock in at the day of sale at a fixed rate for the life of the debt at a low interest rate environment for not only this year’s projects but a portion of next year’s projects.”
Koehler responded. “You said we have the ability to earn interest but we’re also going to be paying interest on money for a year that we’re just going to leave sit there. I would like us to scale this back by $1.4 million and just borrow the $4.1 million that we need to do the projects this year. That way we’re not tying the hands of the council next year and we’re also not saying we have an extra $1.5 million and then next year we borrow the same… we can’t determine how that will go next year. I want to scale this back and borrow just what we need.”
A clarification was made that the money borrowed would have to be spent on roads.
City engineer Max Marechal was asked if the money could be used in 2021 on other road projects. Marechal indicated contractors are already booked through the end of the year.
During a separate interview Phil Cosson from Ehlers indicated the interest for a year on the extra $1.5 million would cost the City $20,000. The interest received on the borrowing would be “nominal,” according to Cosson. Questioned what the dollar figure on “nominal” is he said “less than $1,000.”