Amendments for next week’s Council Agenda
The agenda is out for next week’s Council meeting. In addition to the FY 21 operating budget, there are several important finance matters on the agenda.
Resolution RS2020-315 would authorize $613 million of “interfund tax anticipation notes” or “TANs." This is where Metro borrows money from multiple special purpose funds in FY 21 in order to fund regular operations until other tax revenue (typically property revenue) is collected later in the fiscal year. This practice is authorized by state law as long as the money is repaid to the “lending funds” in the same fiscal year and there are written notes documenting the loan. There are several points here:
Last year, the TANs were $454 million. The fact that Metro is borrowing so much more from its special purpose funds in FY 21 is a window into how slow and low Metro expects other revenue to be.
If you are asking what are the special purpose funds I am talking about, here is a list of the “lending funds” for the $613 million — Water & Sewerage Services Fund, Education Services Special Revenue Fund, Event and Marketing Fund, CBID Event and Marketing Fund, Farmers Market Non-Bonded Capital Project Fund, General Fund Reserve Fund, General Government Self Insurance Fund, Hotel Occupancy General Fund, Hotel Tourist Promotion Fund, Information Technology Services Fund, Injured on Duty Fund, Municipal Auditorium Fund, Office of Fleet Management Fund, Government Services Special Revenue Fund, School Self Insurance Fund, Solid Waste Operations Fund, Stormwater Operations Fund, and Surplus Property Auction Fund.
There is a new feature in this year’s TANs, which would grant authority to the Mayor to sell the notes to one or more financial institutions through a negotiated sale instead of through interfund borrowing if he determines that it is in Metro’s best interest to do so. The Mayor would have the authority to approve the interest rate and maturity date for the notes.
I believe that several Council members (including me) are interested in removing the new feature. While I imagine the desire to sell the notes without Council approval is motivated by the ongoing financial crisis, I have questions about whether any mayor should have that level of flexibility with $613 million in debt.
I’m going to guess there is a subtext going on here that the Council has not heard about yet. I’m guessing that the idea of selling the TANs to an outside financial is motivated by worst-case scenario virus planning. If Metro borrows from itself now and then there is another large dip in the economy next fall or winter before property tax revenue starts coming in, Metro might be caught with no liquid assets. On the other hand, if Metro sells the TANs to an outside institution now, Metro might still be able to borrow from its “lending funds” later if things take a turn for the worse. I think the Council will want to explore the motivation behind this new TAN feature.
Resolution RS2020-316 would authorize $17 million of so-called “FEMA TANs.” Unlike regular TANs that have to be paid back in the same fiscal year, if there is a declared disaster, it is possible to obtain Comptroller approval to have TANs paid back in a future fiscal year. The administration seeks approval for $17 million of FEMA TANs. That’s fine with me. Like the last resolution though, I will likely move to amend this resolution to remove the new feature allowing the Mayor to decide to sell the notes to an outside institution without Council approval.
Resolution RS2020-318 would have the Council formally approve the receipt of $121 million in federal CARES Act money three weeks ago. For this one, I plan to move an amendment to make it crystal clear that Metro does not have the authority to spend any of this money without prior Council approval. I believe that is the administration’s intent, but the legislation as drafted leaves room for multiple interpretations. An amendment will add clarity.
Let’s talk about the Mayor’s proposed operating budget for a few minutes.
The deadline to submit the raw data for a substitute budget to the Council office was yesterday. I did that. I know from experience, though, that some of the details change while the information is being processed by the Finance Department. So I am not going to talk about the details until I know my math checks out. Also, I am undecided about whether to support the Mayor’s $1.00 rate increase (but move around some of where the money is spent) or to attempt to change the tax rate he proposed. Next week, once Finance checks out my math, I will likely share the version I submitted to Finance with a different rate to see how people feel about it.
Until then, there are two things I know for sure that I want to add to the budget. Budget Committee Vice Chair Kyonzte Toombs and I are going to put those changes in the “Amendments Package” that comes out next Monday. We won’t make a motion to add the changes to the budget ordinance yet…but we want everyone to see what they are. The two changes are:
Add language to the budget ordinance to form a group, including Council members, that will decide how to spend available federal stimulus dollars, including the $121 million already received from the CARES Act. At this point, it looks like the Council will need to provide leadership in making sure that these decisions are made quickly, inclusively, and transparently.
Add language to require the Finance Director to update the FY 21 revenue projections no later than August 15. I have checked with the Trustee’s Office and learned that the final tax levy needs to be decided by September 1 in order to get the property tax bills out in October as required by law. The idea with this change is to make sure the city has a formal mechanism to get a last minute update in August about projected revenue so that there would be time to change the tax levy if necessary to reflect any new information.
The Budget & Finance Committee, and the whole Council, is getting very busy with finance issues. I’ll do my best to continue to provide updates.