Prescott
AZ

Council Memo
2875

Adoption of Resolution No. 2020-1736 Authorizing the Funding of Solid Waste Fund Capital Needs Through Internal Loans.

Information

Department:FinanceSponsors:
Category:Resolution Adoption

Attachments

  1. Printout
  2. Resolution 2020-1736 for Internal Financing (This file has not yet been converted to a viewable format)

Document Comments

Recommended Action: MOVE to adopt Resolution No. 2020-1736

 

Body

Item Summary

 

This Resolution authorizes the Finance Director to use internal loans to fund the capital needs of the Solid Waste Enterprise Fund for FY20 through FY24 for a term of five years at a rate of 3%.  These internal loans will be paid through the Solid Waste user fees.

 

Background

 

The Solid Waste rate study, which was completed February 12, 2019, identified vehicle replacements and other capital needs that would be funded through five year capital lease financing.  Following are the amounts and year of purchase identified in the study:

              FY2020              $  1,287,000

              FY2021              942,000

              FY2022              553,500

              FY2023              674,000

              FY2024              680,000

 

The actual dollar value will vary and be identified each year during the budget process.  Current conditions would allow the City to obtain five year capital leases at around 3% interest.  Repayment of these financings were included in the rate study and the rates adopted by Council.

 

The City pools it cash from all funds for investments.  These investments are held in various term options to maximize yield.  With the current market rate environment these options range from 0.8% to 1.5%.  Since the financing identified in the rate study is relatively short, five years, it will be more financially advantageous to the City to make five year loans through an internal loan from the City’s pooled investments than to pay the higher rate to the loaning bank.

 

The City’s investment policy does allow for internal loans between funds for longer than a year if approved by Council.  The attached Resolution authorizes the Finance Director to fund the needed capital in the Solid Waste Enterprise fund through five year internal loans at a rate of 3%.  The actual amount of borrowing will be identified each year as part of the budget process.

 

Financial Impact

 

By funding these needs through an internal loan, the City will keep the higher earnings rate financing cost as opposed to the lower earning options available.  This financing will not impact the needed cash flow from the City’s investment pool.

Meeting History

Mar 10, 2020 3:00 PM  City Council Voting Meeting
draft Draft
RESULT:APPROVED [UNANIMOUS]
MOVER:Alexa Scholl, Councilwoman
SECONDER:Steve Blair, Councilman
AYES:Billie Orr, Steve Blair, Phil Goode, Cathey Rusing, Alexa Scholl, Steve Sischka
EXCUSED:Greg Mengarelli