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Treasurer Dan Baston: past interest allocations to redevelopment fund lacked council authorization; council pauses payments
Summary
Treasurer Dan Baston told the Morgan County Council that past methods for dividing bank interest improperly allocated funds to the Eagle Valley TIFF (RDC); the council voted to pause allocations to the RDC starting in April and to develop a resolution to address possible retroactive corrections estimated at about $140,600.
Treasurer Dan Baston told the Morgan County Council at its May meeting that the county's long-standing method for allocating interest earned on bank accounts had not been properly authorized by the council and did not follow state statute. Baston said the historical practice gave selected funds, including the Eagle Valley TIFF (the RDC fund), a portion of bank interest without a formal council ordinance.
"The statute doesn't give the treasurer unilaterally the authority to decide what funds'interest is going to be allocated to," Baston said, describing his review of allocation worksheets and his change to a method that includes all county funds when calculating shares of interest earned.
Baston reviewed example calculations, reporting total interest credited in one month as $275,661 and saying the Eagle Valley TIFF received $225,981.92 in interest in 2025 under the prior approach. Using his revised allocation method, Baston said the RDC had been overpaid when compared with the statutory approach and that the overpayment for 2025 through March 2026 was roughly $140,600.
Auditor Linda (county auditor) and Baston discussed mechanics: Baston said some funds that appear on the ledger (Bank of New York funds) are pass-throughs never deposited in county bank accounts and therefore should not be counted as part of the cash-on-hand basis for allocating bank interest. He also noted that some earlier practices allocated only First Merchants Bank interest and omitted Home Bank interest, which understates total interest earned when allocating across funds.
Council members questioned how far back any recalculation should go and whether the state board of accounts could take exception. Baston said the board of accounts had not cited the county yet and that the council must decide whether to (1) follow statute going forward (allocate interest only to the general fund and the reassessment fund), (2) pause further allocations to the RDC while staff and counsel draft a resolution, and (3) whether to pursue a retroactive transfer to correct prior allocations.
After discussion the council moved to pause allocating April interest to the RDC and to proceed with a resolution that would implement statutory allocation going forward and address the reported overpayment. The motion carried on a voice vote; members said there were two abstentions and no recorded opposition. Council members asked staff to bring a proposed resolution and recalculation worksheets back for formal action and legal review.
What happens next: staff will prepare a resolution and revised allocation worksheets for council review and will consult the county attorney on whether and how to pursue any retroactive corrections. If the council approves a retroactive correction, money now recorded in other funds could be transferred into the general fund consistent with the council's final determination.
Why it matters: reallocating interest affects county revenue available for general operations and estimates used in upcoming budgets. Council members said the decision appears likely to increase general-fund resources in near-term budgets but emphasized the need for legal review before any retroactive transfers.
