Agenda Text
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Requesting the appropriation of $996,947 from the Unreserved Fund Balance ("Free Cash") Account to the Debt Service - Interest on Notes-BAN Account in order to pay interest on notes due on June 7, 2019.
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Official Text
To the Honorable City Council:
I respectfully request an appropriation of $996,947 from the Unreserved Fund Balance ("Free Cash")Account to the Debt Service - Interest on Notes -BAN account for the purpose of paying interest on notes due on June 7, 2019.
The City anticipated using a portion of the $1,556,116 in BAN Premium Income from the BAN sale of May 31, 2018 plus the total appropriation of $2,590,634 in the Interest on Notes - BAN Account to meet the payment of $3,586,580 BAN Interest due on June 7, 2019. The expectation was that this was allowable under the Municipal Modernization Act which allows Bond Premium income to be expensed for principal and interest payments or a net-down of the principal of a bond authorization. Unfortunately, due to a glitch and an oversight in the law, the State Department of Revenue has ruled that municipalities may not use BAN premium income to pay down BAN Interest costs.
Corrective legislation, Senate Bill 1184, has been filed by Senator Cindy Friedman. Senate Bill 1184 would allow municipalities to apply BAN Interest premium income to the payment of BAN Interest. Senate Bill 1184 is currently locked in the Committee on Municipalities and Regional Government. We cannot be assured of passage by June 30, 2019, hence the need to appropriate free cash to make our obligated debt payments.
Upon passage of Senate Bill 1184, the City could net down a future appropriation of BAN Interest with the BAN Premium Income. By law, the City cannot close the BAN Premium Income to the General Fund. Thus, the income can be held in reserve to be applied to a future appropriation.
My staff will be available to address any questions you may have. Thank you for your consideration of this item.
Respectfully Submitted,
Joseph A. Curtatone, Mayor