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City ready to pay off two fire stations
(by Sue Reid - September 30, 2010)
City ready to pay off two fire stations
By SUE REID
Solon City Council's finance committee took the initial step last week toward paying off one of the city's debts.
The committee approved an ordinance authorizing a transfer from the general fund to pay off bond-anticipation notes that are due in November in the amount of $4.7 million.
"We believe paying off our debt while we can is good planning for the future," Finance Director William Weber said.
The bond-anticipation notes are a combination of debts for the Solon Community Center and Fire Stations Nos. 2 and 3. By paying off the notes, both fire stations will be paid for in their entirety, Mr. Weber said. There will still be about $3 million remaining on the community center in the form of bonds, he said. The community center cost $19 million.
Mr. Weber said there is a lot of other debt the city has, with the largest amount being the sewer-revenue debt for upgrades to the sewage-treatment plant on Cochran Road. That amounts to about $22 million.
"That is being paid with sewer-user revenue over a period of 20 years," he said. That is different from the $4.7 million in bond-anticipation notes, which is referred to as a general obligation debt and is being repaid with tax revenue.
Also as part of the ordinance, the committee approved a tax rate resolution, which was the result of the 2011 tax budget that was approved in July. The tax-rate resolution included a shift in millage, which will increase amounts in the city's general fund and reduce the bond-retirement fund.
The only change is that the bond-retirement fund will be reduced and the general-fund millage will be increased by a half a mill, Mr. Weber said. The reason behind this is that, because the bond-anticipation notes are being paid off by the end of this year, "we won't need the additional revenue for the millage from the bond retirement fund in 2011 to pay debt service, so we can make the shift," Mr. Weber said.
"If the note is paid off in November, then we can make the shift of 0.5 mills from the bond-retirement fund to the general fund in 2011 because we won't need that tax revenue it generates for paying down the notes."
The debt of the bond anticipation notes was rolled over each year with a pay down of about $1 million annually, Mr. Weber said.
The 0.5 mill equated to around $550,000 to $600,000 each year, Mr. Weber said, and the city has been combining it with either extra income tax or interest revenue to make the $1 million annual pay down.
Mr. Weber said that, paying off notes will free 0.5 mill, or close to $600,000, in future years to be used in the general fund to help with the income tax shortfall or to subsidize the capital improvement funds.
Mr. Weber said that the primary purpose of this legislation is to establish the allocation of inside millage among different funds for the 2011 budget year.
The property tax rate resolution is certified to the Cuyahoga County budget commission. Solon's inside millage, which is without a vote of the people, will continue to be 3.3 mills, Mr. Weber said.
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