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Benton Harbor officials detail $1.018 million revenue anticipation loan and plan to track use
Summary
City staff told the Personnel Finance Committee the city received a $1,018,004.29 revenue anticipation note on July 2, with $47,999.12 paid immediately for first-year interest and roughly $970,004 in net proceeds to cover past-due payables until property-tax revenues arrive. Finance staff said they will itemize how loan funds are spent and report back to commissioners.
Benton Harbor’s Personnel Finance Committee was told that the city received a revenue anticipation note (RAN) on July 2 to help bridge cash-flow shortfalls until property-tax and revenue-sharing dollars arrive in the fall. Finance staff reported a gross loan of $1,018,004.29, first-year interest of $47,999.12 deducted up front, and net proceeds of roughly $970,004.29.
The finance presenter said June financial reporting is still preliminary and that staff used the amended budget as a working estimate while audit entries and adjustments continue. She described the RAN as a temporary measure to pay overdue payables and carry payroll over the summer. “A lot of it is just going to pay the operational accounts payable that has been past due and to stay current because you don't start receiving any funds for your property taxes of any size until September,” the presenter said.
Commissioners pressed for clarity on whether the loan represented new discretionary money. One commissioner said, “This doesn't represent additional money over and above the budget or additional flexibility. It is part of your budget,” and staff agreed: the loan provides short-term liquidity, not permanent new revenue.
Finance staff provided accounts-receivable and collections figures: total utility accounts receivable was about $812,000 at the end of June, with roughly $347,000 more than 60 days overdue. Year-over-year tax filing and revenue comparisons cited in the meeting included individual returns up 1%, withholdings down 3%, corporate returns up about 220% (driven by timing of corporate filings), refunds down 7%, and overall revenue up about 18% compared with the prior year’s same period.
Officials said the city will track, document and report how RAN proceeds are used. “Alex and I will go through it and determine what we have in current cash to pay that and if we need to use part of the loan money to make payment,” the finance presenter said, adding that staff would list out how loan funds are used “just as if it was a grant” so the commission can see which gaps were filled.
City staff also described the loan servicer’s repayment mechanism: when the city's revenue-sharing payment arrives, roughly half will be used for principal and interest on the RAN and the remainder returned to the city after the servicer’s allocation.
Next steps: staff will compile an itemized account of how RAN funds are spent and determine the best way to communicate updates to the commission, possibly outside of a formal meeting if timing requires.
