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Benton Harbor officials to seek short-term loan as cash flow tightens
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Summary
Acting City Manager Oscar Warren told the Personal Finance Committee the city is preparing to borrow $1 million to cover a cash shortfall driven by unexpected water-plant and legal bills; Treasury would intercept state shared revenue and the resolution must be in place by May 18 to access funds by early July.
Acting City Manager Oscar Warren told the Benton Harbor Personal Finance Committee that the city plans to borrow $1,000,000 to smooth a cash shortfall caused by unanticipated legal bills and emergency water-plant expenses.
"What we're looking at doing is borrowing 1000000 dollars," Warren said, describing a package to be handled through the municipal finance authority that would be amortized and secured, in part, by intercepting state shared revenue.
Why it matters: Warren said several unexpected obligations—including costs tied to court-ordered water-plant work, enforcement fines, and cleanup bills—have eroded available cash. He described a 24-month projection the administration says is needed to stabilize operations and pay down those obligations.
Council questions focused on size and terms. Commissioner Clark Griffin asked whether the paper cited a $1.7 million figure; Warren said $1.7 million was an amount previously discussed but $1 million is the minimum he believes will carry the city through the near term. Commissioners asked about interest and repayment mechanics; Warren said interest could be as high as about 6% in current markets and that Treasury would intercept a portion of the city's bi-monthly state shared revenue and hold it in escrow to pay loan obligations.
Warren set a procedural deadline: the city needs a finalized budget and an approving resolution by May 18 for the financing to close and produce usable funds by the first week of July. He said the package is being prepared with the municipal finance authority, bond counsel and the city's financial adviser and that the loan structure could include partial amortization so monthly interest payments would also reduce principal over time.
Budget context: Finance staff outlined near-term receipts expected to help cash flow—bi-monthly state revenue-sharing, a Local Community Stabilization Act payment in May and a delinquent-tax revolving fund reimbursement in June—but said those receipts alone would not cover immediate obligations. Warren and staff said borrowing was the only viable alternative to avoid missed vendor payments or payroll disruptions.
Next steps: The administration will prepare materials for the full commission, including the required resolution and budget package. Warren said Treasury provided short-term assistance during planning and that the municipal finance authority is packaging lender options; the commission must decide whether to place the resolution on the full-body agenda before the May 18 deadline.
