It’s been called a city credit card. A bane to those who prefer paying as they go. And a way the city has too easily accumulated debt.
Soon, though, the banking fund might be called history.
In its last meeting of the fiscal year, the City Council Finance Committee might have saved one of its bigger decisions for last. Members asked city attorneys to draft a bill that effectively will eliminate the banking fund.
The system was created about a decade ago and was meant to borrow money outside the city to lend within, mainly for infrastructure projects.
Before that external debt was paid, council member Lori Boyer told the group, the amounts would be repaid and re-loaned internally.
But, she said, the economic positives — flexibility and cost savings from more quickly repaying debt — never really happened. There wasn’t sufficient revenue to pay items back early, which meant debt accumulated and impacted future budgets.
“The perception is it’s too easy to borrow and increase city debt,” she told the committee Tuesday.
To date, banking fund bonds have about $269 million in outstanding debt.
There’s about $105 million not yet issued, but the bill that could be introduced this week would curb that by about half.
There are still projects being completed that would need to be paid from the fund, meaning completely cutting it off now isn’t financially viable.
Outgoing council member Richard Clark said he had “a lot of opinions” on the banking fund. He was in office when it was created and has long been against the idea.
When it was pitched, he said, “no one imagined it would get this big.” Yet, it hasn’t been the size or scope of the fund that scares him the most — it’s been the ease with which it can be accessed.
Without giving names, Clark said “some people” didn’t like using cash to pay for items and instead liked debt.
Bill Gulliford’s been against the idea, too. On Tuesday, he called the system as “deferred taxation” — a way to address revenue shortfall by borrowing money. Only with this tax it has interest, too.
“Look at me, I’m a political hero because I rolled back your millage rate but I borrowed $50 million,” he said. “It’s hypocrisy to the greatest extent … future councils have to pay for this.
Boyer said in an interview she felt that many council members had an intuitive sense the banking fund was a problem. But, the extent wasn’t really known until recently when a committee reviewing capital projects dove into process and financials.
Under terms discussed Tuesday, a bill that would eliminate the system would allow somewhere around $50 million to be borrowed to pay for capital projects underway. After that, funding would have to come through means like bonding, revenue on hand or even reserves.
Taking the issue up now allows council members finishing their terms a voice, Boyer said, although the bill likely wouldn’t be taken up for a few months. That would allow the incoming council and mayor to review the issue.
Matt Schellenberg, one of the co-sponsors of the upcoming bill, said putting such a measure into place shows future mayoral administrations the strong position moving forward. A stand that budgets with large amounts of borrowing weren’t OK.
The group instead wants to cut up the credit card.
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