1986-08-26 - Laserfiche WebLink

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Council Meeting Minutes August 26, 1986 r Council Business, continued Sinda stated that perhaps the Board had not had an opportunity to look at the fact that the Closed Bond Fund dollars now earn interest which the city can use in any way it sees fit; if we start using the Fund, we lose interest which will have to be replaced by taxes; Sinda further stated our financial advisors advise us that if we want to keep our bond rating, which we would like to raise, we need more reserves. The reserves we do have include our Closed Bond Fund. If, in fact, our bond rating can be raised, every time we sell bonds it costs the city less to finance them and if we can keep our bond rating and not have it reduced, we save. In summary, Sinda stated we do have the closed bond fund that is part of the reserve and that needs to be taken into consideration when council makes its decision. I Benke asked, in terms of the inter-fund loan, would we not also charge flat interest to that loan and that interest would be a cost of the litigation settlement that we would hopefully ulti- mately recover so that, in effect, the primary impact would be in the reserve levels for cash flow and for the reserves for a bond rating; Egan responded affirmatively. Poston added that the Financial Policy Advisory Board did recom- mend that this is the only circumstance, an isolated circum- stance, where it would propose that the rates not cover those costs and basically it was due to the proximity of the settlement and the expectation of a settlement in the city's favor; however, for future similar occurences the Board does recommend that the utility services be consided enterprise funds, which they are, and that the cost of those services be recovered through rates. Poston further stated that the Board will shortly be bringing to the council the results of a study on the use of the closed bond fund. Benke asked if the Board was suggesting the council leave the current system in place, given the proximity of the settlement and any future similar problems the city go one-hundred percent user or enterprise paid; Poston stated there is a cash problem right now in the water service fund and, in order to remedy that, the Board is suggesting that that be remedied through an inter- fund loan from the closed bond fund. 1 Egan stated the Advisory Board report suggests the city pull from rates for contamination litigation costs and debt costs; at minimum, the Board states the city needs to address the cash deficiency. Schmidt stated the city will undoubtedly recover the interest it has been paying on these bonds as well as the water rates, and asked what will be the equitable way to put that money into some other fund, recognizing that people have been paying for it as we went along; what are we going to do with the money at the point it actually materializes. Page Three