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Issuance of a $935,000 short term general obligation note with the State Trust Loan Fund for the purpose of cash financing capital projects
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Submitted by:
John Ruggini
Department:
Finance
A. Issue
As part of the 2024 Operating Budget, $935,000 of tax revenue will be set aside to cash finance capital projects. In order to comply with levy limit statutes, a short term loan is necessary.
B. Background/Options
Due to a portion of the hospital campus becoming taxable, the City included an additional $935,000 of property tax levy to cash finance capital projects. $800,000 is to cash finance projects that would have otherwise been debt financed and $135,000 was for additional projects where there was financing gap. However, if this tax revenue is transferred to the Capital Projects Fund it will negatively affect the City's additional levy capacity that is being held in reserve. To avoid this issue, a short-term loan with must be placed by the end of the year and then repaid after a significant amount or property tax revenue has been collected . In this way, the property tax revenue is transferred to the Debt Service Fund and loan proceeds are deposited in the Capital Projects Fund.
As in the prior year, I recommend borrowing from the State Trust Loan Fund, a State of Wisconsin program. Similar to a bond, the loan will be considered a general obligation of the City of Wauwatosa. The interest rate is 5.75% and it will be a 2-year term but the City has the option for a penalty-free prepayment. There is also no legal counsel required. The 2022 loan was paid off in August 2023.
C. Strategic Plan (Area of Focus)
Priority Area Three: Infrastructure
D. Fiscal Impact
The City will incur interest costs estimated at $27,000. These have been accounted for in the Capital Projects Fund in the 2023 Budget. However the budget assumed a private bank loan placement. Since the loan is technicality a 2-year loan (not short term) it will have to be acc...
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