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May 4, 2012

City may borrow $5 million for expenses

Money for use until state disbursement arrives in late June

Arthur Foulkes The Tribune-Star

TERRE HAUTE — The City of Terre Haute is looking to borrow $5 million to cover day-to-day operating expenses.

Leslie Ellis, city controller, told the nine-member City Council Thursday night that the city is seeking the loan to cover operating expenses for the next 18 months. The loan will be repaid using the city’s forthcoming property tax revenue, she said.

The next disbursement of property tax dollars from the state will take place at the end of June, Ellis said.

Such “tax anticipation warrants” are fairly common around Indiana, especially in the wake of statewide property tax caps, said Paige Sansone, a principal with H.J. Umbaugh & Associates, an Indianapolis-based accounting and public finance consulting firm hired by the city.

“This is strictly a timing issue,” Sansone told the council. “You will have no problem repaying this.”

If the loan is repaid by the end of 2013, the city will have paid a total of $403,000 in interest on the loan, Sansone said.

The city’s total operating deficit is $12.2 million, more than double the size of the loan being sought.

Other funding sources, such as the city’s Rainy Day Fund, will be tapped to find the rest of the money, Sansone said.

“You’re in a situation now where you need the loan,” Sansone said.

The city was required to take a similar loan of $7.5 million in 2009 to cover operating expenses, said Mayor Duke Bennett, reached after the meeting. Due to annual budget cuts over the past several years, the city does not have the necessary reserves to meet all expenses until it receives its first property tax disbursement from the state, he said.

“It’s the same stuff that every city is doing,” Bennett said.

It’s very likely the city will need to take out a similar loan again in 2014, Sansone told the council. Bennett said that loan, if necessary, will be smaller due to anticipated budget cuts and new sources of city revenue. One possible new source of revenue for the city would be a user fee on trash collection, Bennett said.

n Also Thursday evening, the council discussed a resolution put forward by the city’s legal department to exclude the federal prison population when drawing new city council districts.

New districts must be drawn by the end of the year and approved by the council. Currently, about 3,200 inmates at the federal prison are counted in District 1, meaning about one-third of the district’s population is ineligible to vote.

Councilwoman Amy Auler, D-1st, stated she would like to see how excluding the prison population would affect future district boundaries. It is her district that would be most affected by removing the prison population. She also asked whether removing the prison population would affect federal funding for the city. Chou-il Lee, city attorney, said the legal department could possibly draw two sets of maps for the council to consider, however, it had hoped to have a firm decision on the prison population before drawing the maps. He also said he did not believe federal funding would not be affected by the move.

Councilman Todd Nation, D-4th, asked Lee whether the resolution needed to include language stating new districts would not remove council members from their existing districts. Lee said no such language is necessary because city officials will try to keep council members from being “drawn out” of their districts.

While the legal department is tasked with drawing the new districts, the council will have the last word on approving new district boundaries.

n The council also briefly discussed an ordinance introduced by Nation to establish a historic preservation commission in the city. Tommy Kleckner, director of the western office of the Historic Landmarks Foundation of Indiana, spoke in support of the ordinance and provided the council with a list of Hoosier cities with similar ordinances.

Arthur Foulkes can be reached at (812) 231-4232 or arthur.foulkes@tribstar.com.

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