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Select Board reviews town line-of-credit scenario; treasurer outlines interest and tax‑exempt complications
Summary
Town finance staff described the town’s line-of-credit scenario used to cover shortfalls, noted $2,000,000 as a working example for liquidity needs and estimated monthly interest, and said tax-exempt rates may not apply without a robust cash-flow projection.
Town finance staff told the Select Board that the town maintains a line of credit as a short-term liquidity tool and described how a $2,000,000 draw would translate into monthly interest costs.
"If you did have to hit on it, $2,000,000 would be about $13,000 a month, just an interest," a finance spokesperson estimated, explaining the line-of-credit facility is intended to bridge temporary cash shortfalls until tax collections arrive. Staff said the town has avoided drawing on the line frequently in recent fiscal years due to prudent cash management.
The treasurer noted a complication with acquiring tax-exempt borrowing rates: because the town has not needed to borrow in four years, the law firm advising the town said the town may not qualify for the more favorable tax-exempt interest on a short-term draw without a formal cash-flow projection or an attorney’s opinion to structure a tax-exempt portion. "Our current law firm, because we haven't had to use it in 4 years, says that we don't qualify for a tax exempt rate because we can't project a cash flow shortage," staff said. Staff described pursuing counsel and alternative structuring to reduce borrowing costs where possible.
Board members had no immediate questions about the policy itself and asked staff to provide final figures when the board revisits the borrowing policy or considers a specific draw. No borrowing action was taken at the meeting.
