The FY 2013 budget includes $1.8M for the debt service on the inter-fund loans. The current inter-fund repayment terms are 25 years and an interest rate of 3.245% - 3.9%. The FY 2014 draft GF budget includes $3.0M for repayment of inter-fund loans. This is an increase from the $1.8M in the FY 2013 GF budget because it assumes an accelerated payment plan for the water-sewer portion through a lease financing mechanism.
Two possible alternatives exist related to the interfund loans and the additional funding needed for the public safety and health insurance issues discussed above. 1. There is the alternative of forgiving all or a portion of the inter-fund loans. 2. There is the alternative of continuing the $1.8M in annual debt service payments on the inter-fund loans and forgoing the accelerated repayment plan for the water-sewer portion of the inter-fund loan. This alternative would make $1.2M in GF ongoing funds available.
Both alternatives of this option result in a rate impact for the city’s water/sewer operations and sanitation/landfill operations. The rate updates that the Water Services and Public Works Departments completed in preparation for the FY 2014 budget assume repayment of the interfund loans. If the inter-fund loan is not repaid, rate increases will be sooner and of a greater magnitude in order to cover operating and capital costs for future years.