Newport council approves two refunding notes to shore up city finances

Newport City Council voted on Nov. 3 to borrow $1.3 million for the general fund and $874,000 for the sewer fund to reduce short-term borrowing and address accumulated deficits.

Mayor (name not stated) told the council the recommended borrowing is smaller than the amounts voters previously authorized, explaining the $1.3 million general-fund note is $500,000 less than the ballot authorization and the sewer note is about $126,000 less than the amount on the citys due-to-others line as of June 30, 2025. "If we borrow the $1.3 (million), my assumption is we're done with this conversation," the mayor said, adding staff and consultants had confidence that the city could manage cash flow for the remainder of the fiscal year.

Why it matters: auditors and staff had flagged worsening cash-flow indicators during the FY2025 audit and subsequent work. KBS auditors reported a jump in delinquent taxes from $398,000 to $623,000 and recommended improving collections and grant-billing timing. Chip Stearns and staff had also proposed accounting and reporting changes designed to make interfund balances and reserves more transparent.

Council action and implementation: The council adopted separate motions for each loan and approved the related resolutions, loan commitments, tax-filing forms and other documents. Both motions passed on voice votes with no recorded opposition; the mayor and treasurer were authorized to sign. Councilmembers then signed the final documents on the record.

How the loans will be used: According to city staff, proceeds from the notes will be applied to outstanding short-term borrowings (the citys tax-anticipation line of credit), immediately reducing the amount drawn on that facility. The mayor said current planning assumes the secured amounts will allow the city to meet cash-flow needs through the fiscal year without returning to voters for additional borrowing.

Context and caveats: The mayor and auditors emphasized that the loans are a limited, one-time response to an identified shortfall. The mayor attributed the general-fund deficit in part to a multi-year budgeting error and interfund cash-use that masked structural gaps. Council members asked about bank covenants and the total debt picture; staff said a comprehensive debt schedule is being prepared and can be provided to the council on request.

Next steps: Staff will finalize closing paperwork with the lender, apply proceeds to the tax-anticipation borrowing, and circulate an updated overall debt schedule. The council will receive monthly financial reports under the proposed new chart-of-accounts layout to monitor interfund balances and cash flow.