EFM: City may borrow against future tax income again

Sunday Times Newspapers

ALLEN PARK – The city may again borrow against future tax money to pay its bills.

Faced with running out of money well before its next fiscal year July 1, Emergency Financial Manager Joyce Parker said Tuesday the city is considering a $2.7 million tax anticipation note for cash flow to help get them through the remainder of the fiscal year.

It would be the second TAN for the city, which also borrowed against future tax income to avoid running out of money last fiscal year.

Though a Plante and Moran audit in the fall predicted the city, which faces a $4 million budget shortfall, would run out of money by March, Parker said at the meeting the city had spent about 62 percent of its budget as of the end of February and had “stretched” funding by delaying payments to vendors.

“To a great extent, we’re on track,” she said. “But even with that approach, we do not anticipate having adequate funding through June 30.”

Last fiscal year, an emergency loan from the state was discussed to repay the TANs, but Parker said discussion about it this year is being delayed.

“Until we get through the first six months of the plan, we can’t know how much money the city will need,” Parker said. “And borrowing money in general, as the city continues to borrow money, it does create questions about the capacity for borrowing money.”

She said she intends to “hold off” on discussions about an emergency loan until the city’s financial picture is clearer.