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Sewer bills not immediately affected by fire truck purchase

August 25, 2013
By KATIE SCHWENDEMAN - Staff Writer , Salem News

COLUMBIANA - The city is going to borrow from the sewer fund to pay for a new fire truck, and over the next two years, that borrowing will not affect sewer bills.

City Council passed an emergency resolution Saturday morning approving the borrowing of $200,000 from the fund for the fire levy fund. It will be paid back with interest by 2015 and will cost the city $1,400 in interest those two years.

The only council member opposed was Bryan Blakeman.

A clause was included in the resolution that sewer bills will not be affected by the borrowing through 2015, the same year the current fire levy expires.

The auditor of state's office has approved the borrowing, according to City Manager Lance Willard and Municipal Attorney Daniel Blasdell.

Auditor Dave Yost identified this type of borrowing as interfund loans, or advances, in the state's legal compliance auditing document and said a "reasonable interest charge is permissible" for doing so and the borrowing must be approved by a formal resolution.

"In order to advance cash from one fund to another, there must be statutory authority to use the money in the fund advancing the cash for the same purpose for which the fund receiving the cash was established," the document stated.

The truck's total cost is $585,432 and the fire levy fund already has enough for the $385,432 down payment.

The city was originally going to lease the remainder through Community Leasing Partners, but opted to look elsewhere after Blasdell said he didn't approve of the contract language.

Blasdell said what he didn't agree with in the contract, and the other similar contract, is a new practice by lenders to protect their interest payments from taxation, and that could potentially be a liability to the city.

On Saturday he read aloud from an email sent to Willard from Huntington Bank Leasing Agent Jill Murphy in which she said the tax option could be removed to take the risk away from the city, but that would mean an attorney would need to be hired resulting in additional costs.

Council began looking at borrowing from the sewer fund because it was the least costly option for financing the $200,000.

Leasing through Huntington or another entity would be about $9,000 plus interest, with that interest at a higher rate than the interest paid to the sewer fund, according to Willard and Finance Director Mike Harold.

Interest on the borrowing from the sewer fund was set in the resolution at .35 percent for each year.

"We all know the interest rate is lower in the sewer fund," Councilman James King said.

He suggested they borrow only half of the $200,000.

"If we took $100,000 from the sewer fund and did a lease for $100,000 we could pay that $100,000 in 12 months, not 24 months," he said, noting that by cutting the cost in half the interest would also be lower.

The leasing portion would be paid back the following year, he added.

Blakeman liked that option, but Mayor David Spatholt and Councilman Dick McBane pointed out it would drag the financing out even longer and the truck is already waiting to be delivered.

To go with King's suggestion council would need to draft a different resolution, enter into a contract with a leasing entity and schedule another meeting to approve everything, McBane said.

Fire Chief Rick Garrity said the company is awaiting payment after the truck is delivered.

King then hesitantly approved borrowing the full $200,000 from the sewer fund.

"I'm going to vote the way I'm going to vote only because of our fire department, not because of this ordinance. We dropped the ball. We did things too late that we should have done much earlier," he said.

kschwendeman@mojonews.com

 
 

 

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