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Board approves $10 million grant-anticipation note to smooth cash flow for capital projects
Summary
The Board of Finance unanimously approved authorizing staff to pursue a $10 million grant-anticipation note (GAN) to bridge timing gaps between project spending and grant reimbursements for multiple capital projects, with officials saying proceeds will be tied to committed grant awards.
The City of Burlington Board of Finance voted May 19 to authorize pursuing a grant-anticipation note (GAN) of up to $10 million to manage seasonal cash-flow challenges and bridge reimbursement timing for capital projects tied to committed grant funds.
Finance staff described the GAN as a short-term borrowing vehicle Burlington would draw on only as needed; interest costs would accrue only on drawn amounts. City staff said they calculated the $10 million request conservatively after inventorying roughly $33.23 million in anticipated committed grant funding across 13 projects, with the largest shares tied to the Champlain Parkway and other capital work. The $10 million figure, staff said, is a buffer intended to reduce the risk that reimbursement delays would force the city into hasty decisions.
Former Councilor Sharon Buscher asked what would happen if anticipated grant funds did not materialize. Finance staff said proceeds would be used only for expenditures tied to committed grant funds and that the city diversified grant sources to limit risk. Staff also noted that the cost of having the GAN available is largely issuance and closing fees; interest would be incurred when draws are made and would be repaid upon reimbursement.
Officials said an RFP for the GAN has not yet been issued, so exact interest rates are unknown; historically, municipal short-term borrowing for this purpose has been priced competitively. Staff discussed likely respondents including regional banks used by the city. Councilors asked how the GAN would appear in city financial statements; staff said unpaid draws at fiscal year-end would appear on the general fund balance sheet similar to other short-term obligations and would be zero if fully paid within the year.
The board approved a motion waiving the reading and approving the attached revenue issue authorizing the GAN; the motion carried unanimously.
