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CFO outlines interest environment and federal rules on using cash then reimbursing with bonds
Summary
CFO Dawn Enright told the committee the city currently earns roughly 3% on investments and could face about 4% borrowing costs on newly sold bonds; she reviewed federal rules that allow carrying projects on cash for about 18 months before reimbursing with bond proceeds and described reporting and arbitrage constraints.
The committee pressed staff on market rates, carrying projects with cash and federal reimbursement rules; CFO Dawn Enright provided the committee with the current financial context and regulatory constraints.
"Right about now, I think we're we're getting about 3% on our investments," Enright said, describing available yields on the city's short-term holdings. She added that if bonds were sold today borrowing rates are averaging around 4%.
Enright explained federal guidance allows the city to use on-hand cash to carry projects for about 18 months and then reimburse expenditures with bond proceeds; after sale there are additional rules and reporting requirements (including arbitrage reporting and a requirement to utilize proceeds within a further period). She and Director Cummings said the city uses these mechanisms to smooth borrowing and to avoid abrupt increases to the budget and tax rate, but they emphasized staff will provide more detailed schedules to show which obligations will fall off the horizon as new debt is layered in.
