By Mike Genet
The city of Independence will set up a special $25 million pot for COVID-19 city services relief, using the water and electric utility reserve funds to shore up holes in the general fund during the pandemic.
A City Council majority Monday approved the interfund loan, and a majority also turned down a recommendation from the Public Utilities Advisory Board to use Independence Power & Light reserve funds to give a rebate to electric ratepayers. Some council members suggested a better, more-targeted approach would be to supplement the city’s ratepayer assistance fund soon.
“We are running low in the general fund, and these are major public health things that need to be shored up,” Council Member Scott Roberson said, as the general fund covers a wide range of city services. “We for sure do not want to have to run in the red, lay off workers and jeopardize services.”
Council Member Mike Huff gave the lone dissenting vote to the $25 million fund, claiming that it violated the City Charter and that the utilities are not a lending institution for the city.
“We have not exhausted all the alternatives,” he said. “I think it’s the easy way out.”
Similarly, with a proposal earlier in the meeting to dip into reserves for a rebate to electric ratepayers, Huff argued that some of the reserves should be sent back into the community during this difficult time. IPL has about $22 million in reserve funds, he said.
“It’s time to give them some relief,” Huff said. “It needs to be put out there.”
Others said the fund is in line with the charter and, given the circumstances, is a sound move.
The loan would be paid back from the general fund with greater interest than if those funds were invested in the private sector. Walker said the City Charter allows an interfund loan if there’s a business purpose – in this case, greater return of investment. The city used a similar approach with the Parks and Recreation funds a few years ago borrowing from the Water Department to pay for the Uptown Market.
“As far as a business decision as described in charter, it’s a great business decision,” Roberson said. “There’s not time to go through the bond process; there’s not time to go through an RFP (request for proposal) process. That would take a couple months.”
Council Member John Perkins said city leaders have done a commendable job finding the best solution on short notice and added his disappointment with Huff’s “grandstanding.”
Just like people deal with sudden misfortunes in life, Perkins said, every city has been dealt a blow by the coronavirus, and “We’ve got to shore it up to move forward.”
Last week, City Manager Zach Walker told the council’s Audit and Finance Committee (Roberson, Perkins and Karen DeLuccie) that staff projects a loss of sales tax revenue of anywhere from 6 to 16 percent, and perhaps more, depending on how long emergency measures last and when the economy starts to recover. Already before the pandemic, he was looking at approximately a $500,000 budget deficit that would bring the city’s reserve fund down to $6 million – less than half’s ideal long-term target. Walker said he’s planning to draw down to about 5 percent before dipping into the $25 million fund.
In the most optimistic scenario Walker laid out, with the virus peaking in late April in Missouri and tapering off before the local economy starts to recover in the summer, the city would lose about 6 percent in sales tax. That doesn’t appear likely, though, he said.
Under the second scenario, with a mid-May peak and tapering off in June before recovery later in the summer, the city will lose about 16 percent of sales tax revenue and the general fund balance would be depleted without any changes.
In the third scenario, with a fall recovery, the city would have an additional 5 percent sales tax loss in the 2020-21 budget cycle on top of the earlier 16 percent.
Roberson said he hoped federal emergency recovery dollars could help the city repay the interfund loan in a year or two. He and Perkins also said they believe some of the expected $480,000 in community development block grant funds from the recent federal stimulus could be used toward ratepayer assistance.
DeLuccie said the PUAB recommendation was too vague and added that she doesn’t know how much in “excess funds” IPL has, as the charter allows for a “reasonable accumulation of surplus.”
Mayor Eileen Weir said she didn’t think an across-the-board rebate is needed right now, but the city should continue to examine possible ratepayer help.
Weir closed Monday’s meeting, which was conducted virtually via GoToMeeting with simultaneous video feeds, by echoing several council member compliments to city staff for their work during the pandemic.
“It’s an incredibly fast-changing situation, and every day we’re out there making decisions for the community,” Weir said. “We need to stay diligent; these next couple weeks are going to be critical.”