Committee advances budget fixes and a temporary $4.9 million internal loan to bridge utility cash shortfalls

The Finance and Administration committee forwarded to full council a package of budget changes and a proposed internal loan on June 16 to address several capital cost increases and short-term utility cash-flow needs.

Budget manager Janna Walker told the committee the omnibus amendment totals $9.4 million and includes emergent facility repairs, a $300,000 transfer for fiber-optic backbone undergrounding, increases to a railroad-crossing project, and a requested increase for the Sandy Cove Park riverbank restoration project. "The total budget amount is $9.4 million," Walker said, and she described the facility repairs (water heaters, HVAC, compressor) as roughly $97,000 to be paid from emergency reserves.

Finance Director Drew Boute presented a proposal to bridge utility cash shortfalls by lending internally from the non-utility capital fund to the utility capital fund. Boute said the non-utility capital fund had a cash balance of $25.64 million at the end of 2025 and that staff proposed an interfund loan "not to exceed $4.9 million at a 3.91% interest rate." He said the loan is intended as interim financing that can be repaid at any time and, if market conditions improve, rolled into a future bond issuance in 2027.

Boute explained the rationale: issuing an external bond now would incur issuance costs (underwriter, bond counsel, financial advisor, rating agency and other fees) and might be more expensive in the current rate environment. "An interfund loan is the proper course of action to take in regards to our cash flow issue," Boute said, noting the approach keeps interest paid within the city rather than to external investors.

On the Sandy Cove project, staff said a recent bid produced a sizeable overage. The transcript included an implausibly large number with extra trailing zeros; staff and the committee treated the problem as a significant but manageable overrun and linked it to the interfund loan discussion for bridging cash flow while a longer-term approach is developed.

Committee members repeatedly emphasized that approving the appropriation or the interfund loan would not by itself authorize contracts: "Doing this action doesn't approve the contract," a member summed up; the contract and any loan must be approved separately. Council members also asked staff to show which appropriation changes would be reflected in the version of the budget packet presented to the council.

The committee agreed to forward the budget amendment and the interfund loan resolution to the full council for consideration. No formal vote on either the loan or the contract approvals took place at the committee; staff said they expect to return to council with contract authority and loan documents as separate agenda bills.

Next steps: the budget amendment, project contract requests (including Sandy Cove), and the interfund loan proposal will appear on the full council agenda for formal action. Depending on market conditions staff said they intend to repay the internal loan within 12–18 months or roll it into a 2027 bond issuance.