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HomeMy WebLinkAboutR-2018-028 Affirmation and Approval of Three Interfund LoansRESOLUTION NO. R-2018-028 A RESOLUTION affirming and approving three interfund loans made under Chapter 3 123 of the Yakima Municipal Code WHEREAS, three interfund loans were authorized and executed by the Director of Finance and Budget as allowed under Chapter 3 123 of the Yakima Municipal Code, and WHEREAS, internal borrowing was determined in each instance to be more efficient than external borrowing at the time of the need; and WHEREAS, the following interfund loans are outstanding as of this date on March 31, 2016 the Public Safety Communications fund borrowed $300,000 and on June 30, 2016 it borrowed another $150,000 from the Equipment Replacement Fund, interest is being charged and paid monthly according to the provisions of the Municipal Code, a principal payment is scheduled and budgeted to be paid in 2018, this interfund borrowing was included up to $720,000 in the 2016 Adopted Budget to supplement the cash flow requirements of the move to the new Communications Center in 2015, and, the loan will be fully repaid within five years of the borrowing date — March 31, 2021, and WHEREAS, on January 1, 2017 the Fire Capital Fund borrowed $640,000 and on September 1 it borrowed another $460,000 from the General Fund, interest is not charged since the General Fund is the primary source of funding for the Fire Capital Fund; this loan was to pay for two new fire apparatus that were budgeted and ordered in 2016, and delivered in 2017; it was anticipated that borrowing would be done through the LOCAL program, but the interfund loan allows more flexibility, and, this loan, if not refinanced externally, will be fully repaid within five years of the borrowing date — January 1, 2022, and WHEREAS, on December 31, 2017, the Millsite/LIFT Fund borrowed $500,000 from the REET 1 Fund, interest is being charged and paid monthly at the rate of the Local Government Investment Pool (LGIP) on the date of borrowing, 1 28%, the loan was necessary in order to meet project milestones and to provide the local match required by the Local Infrastructure Financing Tool (LIFT) program for 2017 when a donation of right of way did not occur by the end of the year as expected, the loan will be repaid from bond proceeds when the Millsite project bonds are issued, and, the debt issuance for the project is expected to occur in 2019, and WHEREAS, is it now desirable that these loans be affirmed and approved by the City Council of the City of Yakima, now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: The following interfund loans that were authorized by the Director of Finance and Budget are affirmed and approved $450,000 from the Equipment Replacement Fund to the Public Safety Communications Fund, $1,100,000 from the General Fund to the Fire Capital Fund, $500,000 from REET1 to the Millsite/LIFT Fund Each loan shall be fully repaid no later than five years from the borrowing date ADOPTED BY THE CITY COUNCIL this 20th day of March, 2018 ATTEST Kat Coffe Sony laar Tee, City Clerk BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT 1 Item No. 6.G. For Meeting of: March 20, 2018 ITEM TITLE: Resolution affirming and approving three interfund loans made under Chapter 3.123 of the Yakima Municipal Code SUBMITTED BY: Tara Lewis, Financial Services Manager SUMMARY EXPLANATION: Early in 2013, in response to a recommendation from the Municipal Research and Services Corporation (MRSC), the City adopted an Ordinance authorizing the Director of Finance and Budget to administer an interfund loan program. This program is codified in Chapter 3.123 of the Yakima Municipal Code. The rationale behind this recommendation was that due to the inconsistent timing of cash flows into and out of any given City fund, a fund might end up in a negative position rather suddenly and without time to request Council action to restore cash in the fund. Since then, interfund loans have been reported to Council on the quarterly Treasury Report, but specific resolutions to authorize each loan have not been requested. During the last audit of the City's financial records, the State Auditor's Office took issue with there being no formal action by Council on these loans and recommended that the City alter its policy accordingly. While the changes to the Code are under study and will be brought to Council for consideration and adoption at a future date, we believe it is important to ask Council to affirm the loans made under the current Code in order to satisfy the concerns raised by the State Auditor's Office. The Resolution included with this Agenda Item that would affirm and approve each of the three interfund borrowings that have occurred and remain outstanding. Also attached for reference is the I nterfund Borrowing Report that was included in the 4th Quarter 2017 Treasury Report as part of the March 6, 2018 business agenda. 1) An interfund loan was made from the Equipment Rental and Replacement Fund to the Public Safety Communications Fund to cover the costs of moving the Communications Center to its new facility. The move occurred in 2015 and the Fund became short of cash due to those additional obligations in 2016. The loan was dated March 31, 2016. Thus far, interest only has been paid on this loan. A principal payment is budgeted to take place in 2018. 2) An interfund loan was made from the General Fund to the Fire Capital Fund. Originally this loan was made from the Equipment Rental and Replacement Fund to cover a cash shortage caused by the down payment made on two new fire apparatus that were being constructed in 2016. The loan was repaid by the General Fund on January 1, 2017 and then an additional draw 2 was made when the apparatus were delivered in August 2017 and final payment was due. By borrowing from the General Fund, Fire Capital will not have to pay interest on the loan. Fire Capital is fully supported by the General Fund; therefore, charging interest is not warranted. 3) An interfund loan was made from the Real Estate Excise Tax #1 (REET 1) Fund to the Millsite/LI FT Fund at the end of 2017. It had been anticipated that a donation of right-of-way from the site's property owners would be made in 2017. When that did not occur it became necessary for the Millsite/LIFT Fund to quickly access another source of local funding. The loan was made in anticipation of the issuance of debt in 2019 at which time the interfund loan will be fully repaid. Monthly interest is being charged at the rate of the LGI P which is what REET 1 funds would otherwise earn. ITEM BUDGETED: NA STRATEGIC PRIORITY: Public Trust and Accountability APPROVED FOR SUBMITTAL: City Manager STAFF RECOMMENDATION: Adopt resolution BOARD/COMMITTEE RECOMMENDATION: ATTACHM ENTS: Description Upload Date D resolution 3/14/2018 0 4th Quarter 2017 Treasury Report - Interfund Loans 3/10/2018 Type Coyer Memo Backup Material City of Yakima Interfund Borrowing December 31, 2017 Description Original Balance Beginning Balance Issued Retired Ending Balance Investment Held by: Local Improvement District Bonds/Notes Fund 151 - Public Safety Communications Fund 332 - Fire Capital Fund 323 - Millsite Project $ 1,432,509 $ 144,902 $ 450,000 450,000 $ 10,393 $ 134,509 Equipment Rental Reserve 450,000 Equipment Rental Reserve 640,000 640,000 460,000 1,100,000 General Fund 500,000 500,000 REET Fund 151 - Public Safety Communications - Interfund Loan The Public Safety Communications Fund borrowed from the Equipment Replacement and Reserve Fund to provide working capital while they recover from the excess cash outflow caused by the move to the new Communications Center last year. The fund has been currently paying interest only on the debt while their cash balance recovers. There is a principal payment budgeted for 2018. Fund 332 - Fire Capital The Fire Capital fund borrowed $640,000 cash at the end of 2016 from Equipment Rental to finance the down payment on two fire apparatus that were under construction. The Fire Department took delivery of the apparatus and final payment was made in August 2017. Although an external financing through the LOCAL program had been anticipated, it was determined at that time that the flexibility of an Interfund loan was preferred and it was thus executed according to City policy. This first loan was refinanced through the General Fund in January and a second loan of $460,000 was executed to make the final payment in August. No interest is being charged on this loan since Fire Capital is normally funded entirely by the General Fund. Fund 323 - Millsite (LIFT) The Millsite project borrowed $500,000 from REET until such time as official financing can be secured. At that time the loan from REET will be repaid. A Statement of Official Intent for the reimbursement has been executed to meet bond requirements. Page 1 of 1 Yakima.9951.1.TSO_I nterfund_Report.xlsx