Council approves year‑end budget transfers after debate over unspent bond proceeds

El Paso City Council approved a bundle of year‑end budget transfers Wednesday that reallocated investment earnings and program balances to address capital shortfalls and operational needs, but only after a heated debate and an amendment that removed a proposed $3.6 million transfer of unspent 2021 bond proceeds.

City finance staff presented a package that used $9.9 million of investment interest generated from ARPA and internal capital investments to replenish several funds and cover obligations. The transfers included replenishing the ballpark capital repair fund, adding one‑time support to Animal Services operations, funding economic development reimbursement requests, and adding limited funding for information technology and facilities repairs.

A separate block of $3.6 million came from unspent certificates of obligation originally issued for the Railroad Drive reconstruction project; staff proposed moving that balance into the city’s debt service fund rather than letting the proceeds sit while the federally funded construction schedule pushes the project into later years.

Councilmember uncertainty about tax‑exempt bond yield rules produced the most contentious discussion. City staff explained a technical IRS “yield restriction” and post‑issuance compliance rules applied to the 2021 bond issue; because more than three years had passed on those proceeds, the city faced an increased risk that future arbitrage calculations would require a rebate payment to the IRS or — in an extreme case — could cause interest to be taxable. CFO‑level staff told council the arbitrage compliance specialist identified roughly $2.8 million in yield restriction exposure in the current calculation.

After several council members requested more time to review the legal and technical consequences, a motion to remove the $3.6 million transfer from the package passed. Council then approved the remaining transfers unanimously.

The package that did pass included: infusion of investment interest to replenish ballpark capital repairs (approximately $2.4 million), $2.3 million to address a deficit in Animal Services operations, economic development obligations of about $2.3 million tied to incentive reimbursements, and roughly $2 million to information technology needs (data‑center equipment, phone migration and limited computer replacement). Staff also consolidated about $1.9 million of prior curb‑cut/ADA on‑demand budget allocations into a single capital fund and shifted the project lead to the Capital Improvement Department to accelerate execution.

City staff said the action will not tap general‑fund revenue: the approved transfers rely on restricted investment earnings and program balances. Staff also pledged to return to council with more information about the 2021 bond arbitrage exposure and to explore alternatives for the $3.6 million of unspent bond proceeds removed from this vote.

Vote: Council approved the amended transfers package unanimously with one amendment removing the $3.6 million CO transfer for additional review.