By Jeanne Starmack
City council members who favor a plan to pay off a loan early to offset a loss in state funds were able to advance that plan.
The plan never made it onto the council floor for a vote in June because it did not have enough support. But legislation to implement it passed to a second of three readings 3-2 at council’s Wednesday meeting.
The idea is to dip into the city’s $817,000 cash reserve to pay what’s left of $760,000 the city borrowed when it went into fiscal emergency in 2004. The rest of the debt now stands at $120,000 plus $8,500 in interest, city Finance Director Sherman Miles said.
The city uses state local government funds to pay down the debt. By paying it off early, it can offset what will be a loss of between $60,000 and $90,000 in those funds next year, Miles said. He added that instead of local government funds being used to pay down the debt each month, that money, about $10,000, could go into the general fund.
But not all lawmakers are in favor of using cash reserves to pay off the debt.
Council member Bryan Tedesco said he is against doing that, arguing the reserve should be saved for emergencies. Miles contends the city has more than enough cash reserve and won’t be hurting if it uses some to pay off the debt.
Unice Smith, chief of local government services for the state auditor, has advised that the city should make sure there is no state law against paying off the loan early.
Council has asked law director Mark Kolmacic for an opinion.
Tedesco and council member Joe Mazzocca voted against the legislation. They both said they want to know for sure if paying off the loan can be done under state laws.