Bainbridge Council loans itself $600K from water fund, reopens 2010 budget

A reluctant City Council Wednesday authorized a $600,000 loan from the city’s water fund to help pay bills charged to the general fund, with the caveat that it is now time to start making budget cuts to ensure the city isn’t painted into such a corner again.

“These are anticipated, planned expenses that we can’t meet,” said Mayor Bob Scales. “What happens if we have unintended expenses, a crisis, a flood, something we haven’t budgeted for?”

Scales proposed, and the council agreed, that staff, administration and council hold two half-day meetings to review the 2010 budget in an attempt to cut expenses.

The council will hold court on Feb. 3 and 10 from 1 to 4 p.m., prior to its regular meetings, to hash out the budget.

Finance Director Elray Konkel said policy decided by the previous council indicated that it would like to end the year with $2.5 million in reserves. If the city can avoid unexpected expenses, he said, cash flow balances at the end of the year project to approximately $1.8 million.

Konkel guessed the council may attempt to cut anywhere from $500,000 all the way up to $2 million, a figure Scales suggested at the council’s last study session.

The need for an interfund loan came after nearly $1 million from grant money and property sales were not received when expected.

The city planned to use those funds to cover an annual insurance payment and other bills during this difficult financial season.

A portion of those funds will be employed to repay the interfund loan, Konkel said.

Konkel didn’t forsee any other large one-time expenses before property tax receipts arrive in April.

The council questioned the need for such a loan, but interim City Manager Lee Walton told the council that no other option existed.

“We have to do this to avoid going into an overcharge situation,” he said.

Walton added that a situation in which the city relies on non-recurring revenue to cover routine expenses cannot be repeated.

“The city needs to start taking action to make sure this doesn’t happen again,” Walton said. “We cannot depend on continuous sale of property to get us by. I think it’s a warning. We have to look at the long-term situation.”

Konkel said the need to borrow from other funds to make ends meet is not unique to Bainbridge.

“Everyone’s doing this,” he said. “They’re all borrowing from other funds until those property tax receipts come in April.”

Konkel set a deadline of May 31 by which to repay the interfund loan.

At the meeting, no one made suggestions as to what could be cut, but the discussion was so heavy on the council’s collective mind that it took a fair amount of discussion to decide to extend the contract for Deputy Manager Stan McNutt, who has been instrumental in building and implementing a Governance Manual to guide protocol for the council.

Instead of increasing his contract until April 30, the original date listed on the agenda, the council decided to extend him until March 31, when the body can then re-examine the contract.

The necessity of the interfund loan reinforced to the council the perilous nature of city finances. Several councilors said the city is heading to a financial emergency room, so to speak.

“The first step is to stop the bleeding,” said Councilor Barry Peters. “Then we have to treat the underlying cause of the problem.”

Councilor Kim Brackett continued the analogy, saying that it was time to start taking some risks to fix the budget crunch.

“I think we’ve run out of bandages and gauze,” she said. “It’s time to move from the emergency room into the surgical suite.”

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