$35M internal debt still looms
VICTORVILLE — Nearly three
years after the San Bernardino County Grand Jury ripped the city’s inter-fund
borrowing to deal with serious cash flow issues, the City Council approved a
revised policy meant to align with the grand jury’s recommendations.
“The purpose of this policy
is to improve the accountability of cash being borrowed between funds intended
for meeting cash flow needs for the City and all of its affiliated agencies,”
stated the revised policy, adopted April 7.
It will supersede a policy
adopted in May 2011, a little more than a year before the grand jury report was
released.
The new guidelines, which are
applicable for loans or advances greater than a year, require financial
analyses, planning and monitoring to determine, among other things, a fund’s
ability to pay obligations, while also creating repayment schedules and
targeted payment amounts.
After establishing an
inter-fund or inter-agency loan or advance, the city’s attorney will prepare a
promissory note including the purpose for the loan or advance; identification
of both the lending and borrowing fund(s); the loan or advance amount; the
maturity date; the applicable interest rate; financial plan for repayment; and
the borrowing fund’s right to make full repayment at any time without penalty.
The promissory note will then
need to go before the City Council for approval.
During the Council meeting
last Tuesday, City Manager Doug Robertson said the reason the policy hadn’t
been revised until now was because “we were told by the City Council not to
engage in any additional inter-fund borrowing, or any loans for that matter
...”
The grand jury report in June
2012 said the city’s cash flow issues had resulted in some $69.7 million in
inter-fund borrowing and contended that the city had been slow to adopt a
policy governing inter-fund loans, then ultimately adopted a flawed one.
The report also said the city
for years had neglected to document much of the borrowing, resulting in
financial statements that were misleading.
In March 2013, the City
Council voted to use part of its $54 million court settlement with an
engineering firm over the failed Foxborough power plant to pay off their
internal debts in a move city officials lauded as a major step toward financial
recovery.
Yet, one inter-fund loan
remains — $35.58 million that the Victorville Water District in May 2009
advanced to the Wastewater Enterprise Fund “to cover certain design,
construction management and construction related costs associated with the
(Southern California Logistics Airport) Wastewater Treatment Facility,”
according to a city staff report submitted last week by Robertson and Finance
Manager Pat Rosenberg.
The Council last week
approved extending the term of that loan through May 17, 2019. The water
district intends within three years to find adequate financing to repay the
loan, according to the city staff report.
April
12, 2015
Victorville
Daily Press
By Shea Johnson, Staff Writer
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