Lindsay delays debt payments and closes budget deficit
City Council agrees to delay debt payments laid out last year to close coming year budget deficit, create general fund reserve
By Paul Myers @PaulM_SGN
LINDSAY – The City of Lindsay expected to make some serious headway on their debt payments last October.
After passing resolution 17-44 Lindsay was ready to start attacking a 43-year plan to pay off just over $7 million worth of debt this December. Unfortunately, due to an increase in CalPERS Unfunded Liabilities from fiscal year 2017-2018 and fiscal year 2018-2019 of more than $100,000, and lower than expected revenue growth the City cannot balance their general fund while making their first debt payment of $206,000.
“Even with Measure O money coming in there are not sufficient revenues to close the structural deficit within the general fund if we make this payment as well this year,” Bret Harmon, Lindsay finance director said at the Lindsay City Council meeting on May 8.
Instead the City plans on postponing debt payments for five years in order to build a general fund reserve. According to Harmon auditors reviewing last year’s budget indicated they did not have a problem delaying debt payments. And the Council can request payments be accelerated if possible per Resolution 17-44.
Presented last year Resolution 17-44 recognized the $2,060,100 borrowed by the general fund from the Community Development Block Grant, Economic Development Block Grant and HOME funds collectively, and is intended to be paid off over 10 years at $206,000 per year. Those payments were intended to start this year.
The resolution recognized as well the $6,244,000 borrowed by the general fund from the street improvement, transportation, water, sewer, refuse, capital improvements and storm drain funds collectively, and is intended to be paid off over 30 years. Those payments were to begin only after the full repayment of the $2,060,000 loan and were projected to start on Dec. 30, 2028.
And lastly the resolution recognized the $612,000 borrowed by the wellness center from the general fund intended to be paid back over 7 years at $88,000 per year and were intended to start on July 20, 2045. All advances were assigned a 0.754% interest rate.
Harmon noted fiscal year 2018-2019 general fund revenue is expected to be higher than this year’s $5 million because of Measure O. Last June city residents passed their full one percent sales tax increase projected to bring the City roughly $900,000 in general fund revenue. However the City was not able to take full advantage of the increase until several months into the new fiscal year that started on July 1. Now, entering into fiscal year 2018-2019, the City will have a full year of increased general fund sales tax revenue.
Harmon noted, during Oct. 10, 2017’s council meeting payments on debt service will change the amount of money the general fund and wellness center can spend in future years.
“Repayment costs will reduce the spending capacity of the general fund and wellness [center], which will necessitate organizational and operational adjustments,” according to the staff report adjoined to the resolution presented by Harmon.