It’s summer, and like spilled water evaporating off hot asphalt, Macon’s cash flow is drying up.
The dip in revenue that happens this time of year is felt more acutely in Macon than in other local governments, which in many cases have more robust cash reserves.
From 2004 to 2007, Macon took out short term loans, called tax anticipation notes (TAN), so that it could pay its expenses while waiting for various income sources to kick in again.
Since then, the city has either squeaked by without having to supplement its revenue stream or has been able to temporarily borrow from its own nascent rainy day fund, about $6.1 million socked away as part of Macon’s effort to replenish its reserves.
This year, more money will be needed from somewhere. Cash-flow projections from the finance department show that Macon will be short $1.69 million by the end of August, and through mid-October it will be as much as $3 million in the hole as payroll costs and bills surpass the amount of money coming in during those weeks.
The saving grace will be a check for about $5.5 million in insurance premium that is expected to be paid to the city in October.
After that, property tax payments will begin to come in.
But until then, Mayor Robert Reichert wants to draw down Macon’s cash reserves to keep up with the city’s required payments. He has asked City Council for permission to access the account as needed between Sept. 1 and Oct. 15 for that purpose. A resolution granting such access is scheduled for consideration this week by the council’s Appropriations Committee.
Finance Director Tom Barber said high interest rates of the past that might have made a TAN advantageous — the city could make money, or break even, by keeping the large chunk of cash in investments that generated more interest than the actual cost of the loan — no longer exist. In turning to the reserves, Macon is basically employing “a self-funded TAN,” Barber said.
The resolution says the money would be put back into the reserve fund by Dec. 31. Barber estimates $2 million to $3 million will be needed. If the council were to say no, he said the city would still be able to make payroll, but it would have to pay other bills late.
Council members are likely to take a close look at the request. They are sensitive to Macon’s need to further build its cash reserves. And they don’t like to give the administration too much leeway to spend money without their consent.
“I think the question is going to be how much accountability and reportability are involved in doing that,” said Tom Ellington, vice chairman of the Appropriations Committee. He said his and others’ concern is not so much the idea of dipping into reserves — it’s certainly a better alternative to taking out a TAN — but rather that the resolution provides a “blank check” to the administration. There at least needs to be language in the legislation that caps how much money can be removed, he said.
However, Councilwoman Elaine Lucas, also an Appropriations member, said the entire proposal makes her uncomfortable. She said she is concerned that several months down the road the council will be “blindsided” with information about financial transfers made without its knowledge. Macon’s financial condition is not healthy enough to be pulling money out of the reserves, she said.
Lucas said she doesn’t like a TAN either, but she suggests that officials wait a few more weeks to see what really is necessary.
“I think we should go slow on loosening the purse strings,” she said.