News Column

Should 'Legacy' fund be used as city's safety net?

June 17, 2014

By Kevin Leininger, The News-Sentinel (Fort Wayne, Ind.)



June 17--Smaller-than-expected cash reserves have caused city Controller Pat Roller to suggest using loans from the "Legacy" fund to meet unexpected expenses -- a $5 million request she considers prudent but at least one City Council member believes is inconsistent with the account's purpose.

"We had projected a reserve of about $7 million in 2014, but it looks like it will be about $4.4 million now," said Roller, who added that revenues are about $3 million less than anticipated and that about $2 million was required to keep street clear of heavier-than-normal snowfall last winter.

Under the ordinance to be introduced Tuesday, council would establish the revolving loan fund and authorize Roller to borrow money without interest in order to "continue to provide governmental services without interruption due to the delays in the receipt of funds or decreases in the amount of funds to the city (and to) provide flexibility."

The loans would have to be repaid within the program's five-year lifespan unless they are forgiven by council. Roller would also be required to give council a report every three months on the status of any loans.

"It would be like a rainy day fund. I would only draw on it as needed, and would work to repay any loans as quickly as possible. My goal would be not to use it, but it would be there if I need it," Roller said, adding that she would like to establish a cash reserve of at least $10 million -- a goal made more difficult by state-imposed property tax caps.

Being able to borrow the money would allow the city to pay unanticipated expenses quickly, since bills submitted to council for approval can takes weeks to process.

Allen County government, in fact, has borrowed from its rainy day fund on at least three occasions. Earlier this year, for example, it borrowed $10.5 million to weather a temporary cash-flow shortage and in 2012 used $1.15 million from the account to buy trucks for the highway department, which is repaying the loan.

But Councilman Tom Smith, R-1st, said he reluctant to change the way Legacy money is used until new guidelines are established, which could occur as soon as next month. Currently, spending from the $70 million fund created through the sale of the old City Light electric utility must be approved by six of the nine council members in ways that are deemed "transformative."

"It could be used in times of emergency or drastic (budget) shortfalls, but it was never intended as a 'backstop' for daily operations," Smith said. "All appropriations (from Legacy) should be approved by council. I see Legacy as a true community treasure. If we approve these 'one-offs,' they'll keep coming."

Roller said she would not use the loan pool to pay daily expenses such as salaries, but to meet unanticipated bills. The program could save the expense of borrowing from outside sources, she said.

Also Tuesday, council will be asked to allow Legacy funds to provide the required backing for the $30 million infrastructure bond council approved in February. The $3 million in Legacy funds would not be spent under normal circumstances, Roller said, and would make more bond money available for street repair and other uses.

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(c)2014 The News-Sentinel (Fort Wayne, Ind.)

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Source: News-Sentinel (Fort Wayne, IN)


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