TERRE HAUTE —
The Terre Haute City Council on Thursday night authorized city officials to borrow a little more than $5 million to meet a temporary cash-flow shortfall.
The nine-member council unanimously approved a special ordinance authorizing the short-term loan, known as a tax anticipation warrant, after about 30 minutes of discussion and questions at the council’s May regular meeting.
The loan for $5.02 million, which has not yet been obtained, will help the city cover expenses until it receives property tax revenue it is owed from the state at the end of June, said Leslie Ellis, city controller.
More than 80 cities, towns, school districts and other taxing entities across Indiana are facing the need for similar loans, said Gerald Malone, an accountant with H.J. Umbaugh & Associates in Indianapolis, which was hired to help the city through the loan process.
“It’s the result of the property tax caps” and a drop in income tax revenue due to the slow economy, Malone told the council. “Cash reserves are starting to dwindle. Terre Haute is not unique in that regard.”
At the urging of Councilman Neil Garrison, D-5th, the council changed the ordinance to shorten the term of the loan. Originally, the ordinance stated the loan would be repaid with interest by the end of next year. Garrison’s amendment changed that to the end of 2012.
“I think if we shorten that [term], the taxpayers will have to pay less for the cost of the interest,” Garrison said in calling for the amendment. His amendment passed without opposition.
Last week it was estimated the city would need to pay several hundred thousand dollars in interest for the loan; however, that was an estimated based on a possible 5-percent interest rate, Malone noted. The actual interest rate is much more likely to be 1 or 2 percent, and the actual total interest paid is likely to be less than $100,000, he said.
In addition, there will be about $15,000 in accounting and legal fees associated with the loan, Malone said.
Councilman Norm Loudermilk, D-3rd, said the revenue shortfall is the result of property tax caps passed in Indianapolis and do not mean the city is “broke” or spending more than it takes in. Bennett agreed, saying the Indiana Department of Local Government Finance would not allow the city to spend more than it brings in.
“I just wish that we could enact an ordinance to require state legislators to come to local government to see what they’ve done to us by enacting this pathetic tax bill that does nothing more than shift the burden and put more harm to those local people that are trying to provide services,” Loudermilk said.
Reporter Arthur Foulkes can be reached at (812) 231-4232 or arthur.foulkes@tribstar.com.
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