Reserve funds, utility money to pay for City Hall move

April 1, 2011

By Tim Pfarr

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The City Council voted 6-1 at its March 15 meeting to pay for this year’s $250,000 City Hall move with money from its cumulative reserve fund and surface water management fund.

The reserves will take the biggest hit, funding $225,000, and the surface water management fund will cover the remaining $25,000.

The $250,000 will cover remodeling costs in the new building and all moving expenses.

That was one of two funding structures city staff proposed when the City Council voted in February to move City Hall from the Newport Manufacturing building, 13020 Newcastle Way, to the Newcastle Professional Center, 12835 Newcastle Way.

The city’s cumulative reserve fund has $1.5 million for capital purchases or unforeseen operating costs, although the city has never drawn money from the fund to pay for capital purchases, according to city code. Use of the reserves requires a two-thirds majority vote by the City Council.

The surface water management fund typically pays for maintenance of and repairs to the city’s surface water system, which includes drainage ponds. However, the fund is also used to cover overhead costs and salaries for employees who work on surface water projects.

City Manager Rob Wyman said that is the only fund — other than the general fund — that funds staff salaries and overhead, so it can bear some of the cost of the move.

Property owners in the city pay annual fees that supply the surface water management fund.

The alternative payment method city staff presented called for the $225,000 to be taken from the city’s Real Estate Excise Tax fund instead of the cumulative reserve.

Excise taxes from home sales provide REET funds. They are typically used for transportation projects, such as road maintenance and sidewalk construction. If the city had used that money to pay for the move, the REET fund would run out of money in 2013, according to the city’s projections.

However, even without using the using the REET fund to pay for the move, the fund is expected to dry up in 2014, according to those projections.

Members of the council spoke in favor of using the reserve funds to pay for the move, as it would not impact the city’s ability to complete capital projects.

“It’s got to come out of somewhere. It’s not going to come out of thin air,” Councilman Rich Crispo said about the money needed to fund the move. “I don’t want to see things — from an infrastructure standpoint — suffer because of what we’re doing.”

Councilwoman Carol Simpson agreed.

“I don’t want to see our REET funds go away,” she said.

Deputy Mayor Steve Buri said he viewed the use of the reserve funds to essentially be borrowing, as the city can replenish the reserves in coming years.

Councilman Bill Erxleben represented the only dissenting vote. He said the city needs to be disciplined and keep from using its reserves, which would help the city maintain a positive net worth.

“The expense trajectory that we’re on indicates that we’re not going to have much to pay back,” he said about replenishing the reserve funds. “As we spend this money down, we’re going to get to the point where we don’t have a positive net worth.”

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