How broke can a broke town go?
The Mammoth Town Council on Thursday found out. In a special meeting that followed a closed-door session, the council unanimously approved a $4.4 million loan from itself, payable to itself.
It was a nifty piece of financial juggling.
Under the terms of a resolution, the town will “borrow” the money from its Vehicle Replacement Fund, and place it in the General Fund.
“The Town full intends to work with its creditors, employees and other interested parties, including Mammoth Lakes Land Acquisition, toward a comprehensive debt restructuring plan,” said assistant town manager Marianna Marysheva-Martinez in a report to the council.
“This would help address the town’s existing fiscal challenges in a sustainable, long-term manner while offering a payment of the town’s legal obligations that the town can afford.”
As of March 2012, a $0.7 million General Fund shortfall was projected for fiscal year 2011-12, and a $2.2 million shortfall for fiscal year 2012-13.
In addition, the negative balances in the Development Impact Fee (DIF) funds further exacerbate the Town’s worsening position.
As of June 30, 2011, these so-called “negatives” totaled $1,409,207. The negatives were created years ago, when the General Fund paid for essential capital projects intended to be funded by DIF fees.
These expenses have not yet been reimbursed to the General Fund, because the DIF fee collection has been slow due to the weak economy and a lack of construction.
To help stimulate the local economy, the Town Council recently voted to temporarily suspend the collection of DIF fees, and the council is further researching whether to eliminate DIF fees altogether, increasing the need to eliminate the long-standing negative balances in the DIF funds with available non-restricted cash.
The use of the loan against itself would be used as follows:
1) To pre-fund potential estimated fees of professional firms engaged to assist with the MLLA settlement process:
Fuibright & Jaworski: Legal advice: $2,000,000
Klee, Tuchin, Bogdanoff & Stern LLP: Legal consultation fees of $200,000
BBK: Legal advice and support: $35,000
FTI: Financial advice, financial analyses and projections, certain studies and related assessments: $680,000
NHA Advisors: Financing advice: $7,500
2) To set aside partial funds for the Neutral Evaluation (i.e. Mediation Process: $44,500. (Actual mediation expenses are anticipated to be as high as $150,000.)
3) To cover negative balances in the Mammoth’s Development Impact Fee (DIF) Funds:
Administration fund: $189,400
Law Enforcement fund: $452,036
Storm Drains fund: $609,612
Circulation fund: $158,159
The terms of the loan are for 11 years at zero percent interest. That would mean the town would be liable (to itself) for $397,837 a year, beginning next Jan. 1.