RES 2009-04 INTERFUND LOANRESOLUTION NO. 2009-0
RESOLUTION of the City Council of the City of Bainbridge
Island, Washington, providing for short term borrowing from the
Winslow water Fund of the Consolidated waterworks Utility to
the General Fund for 2009.
WHEREAS, the City of Bainbridge Island, Washington (the "City") intends to manage it fiscal
matters in a prudent manner; and
WHEREAS, the City has by Resolution 2008-14 sought to "establish conditions for the use of
debt and to create procedures and policies that minimize the City's debt service and issuance
costs, retain the highest practical credit rating, and maintain full and complete financial
disclosure and reporting"; and
WHEREAS, the City has also by Resolution 200 8-14 pertaining to "Purposes and Uses of Debt"
established Policy 1 - Short-term Borrowing which states; "Except for MDs and similar
situations, the use ofshort-term borrowing, such as bond anticipation notes (BANS) and tax-
exempt commercial paper will be undertaken only if the transaction costs plus interest of the debt
are less than the cost of an interfund loan, or available cash is insufficient to meet working
capital requirements"; and
WHEREAS, the City has reviewed its current financial position and its cash flow analysis for
the fiscal year of 2009 and has determined that it would be prudent for the General Fund to
engage in short-term borrowing in 2009 of an amount not to exceed $600,000 from the Winslow
Water Fund within the Consolidated Waterworks Utility of the City, with a scheduled repayment
date of December 15, 2009, in order to ensure an adequate and more stable level of available
cash to compensate for the wide monthly variations in receipts of property tax, grant
reimbursements and other revenue sources, and to ensure that the General Fund has adequate
cash on hand to pay expenses in the lower -revenue months of 2009; and
WHEREAS, the 2008 GAAP BARS Manual, Volume 1, part 3, chapter 4, page 1, states that
"the legislature body of a municipality must, by ordinance or resolution, approve all interfund
loans, and provide in the authorization a planned schedule of repayment of the loan principal a5
well as setting a reasonable rate of interest (based on the external rate available to the
municipality) to be paid to the lending fund"; and
WHEREAS, the City has determined that the combination of transaction costs plus interest for
the City to issue commercial paper or a rate to a third party will exceed the costs to the General
Fund of an interfund loan, primarily because an interfund. loan entails no third -party transaction
costs; and
HACITY EXCHAN E -SOL UTIoNS12009 REsoLUTION 12009-04 SHO T TERM-INTERFUND-LOAN-APPROVED-021109.DOC
WHEREAS, the City has approved recommendations for improving cash flow in its tax
supported funds and to return its cash balances to a level which will support operations and
budgetary reserves; and
WHEREAS, the use of an interf nd loan allows considerably greater flexibility and timeliness
than commercial l paper or a note to a third -party leader, and thereby permits the City to reduce
the interest cost to the General Fund by controlling the draws and prepayments from month to
month to ensure that the interest-bearing balance is not substantially in excess of that month's
requirements; and
WHEREAS, the City Council finds that it has exercised due regard for the maintenance and
operation expense of the Water System and finds that the Winslow Nater Fund revenues and
cash balances are expected to be more than sufficient to meet all of the needs ofthe: Winslow
Water Fund and will have funds available to male the interfund loan authorized herein; and
WHEREAS, the Winslow Water Fund of the Consolidated Waterworks Utility will be benefited
by the interest rates of the interfund loan; now therefore
E IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BAINBRIDGE
ISLAND, WASHINGTON, AS FOLLOWS:
Section 1. Authorization of Loan. The City's Director ofFinance is authorized arfd directed,
on and after February 15, 2009, and from month to month thereafter until December 15, 2009, to
cause the City's General Fund to borrow cash from the Water Fund of the Consolidated
Waterworks Utility in one or more draws, where the outstanding principal amount of the loan
shall at no time exceed $600,000, and which may y vary as determined by the said Director based
on the Director's analysis of the easy needs of the General Fund from time to time between
February 15, 2009 and the scheduled final repayment date in Seeton 2.
Section 2. Scheduled Repayment. The Director of Finance shall cause any and all ofitstanding
balance of the said interfund loan to be repaid to the Water Fund by the General Fund n (and in
no event later than) December 15, 2009, arra this interfund lending authorization shall terminate
on that date.
Section 3. Interest Payable to Water Fuad. Each draw shall bear interest at the interest rate
set forth in this section 3, which shall accrue from the date ofthat Draw and be adjusted monthly.
Interest shall be computed monthly on the amounts outstanding on the basis of a 360 -clay year
for the actual number of days. Each Loan draw shall bear interest at an annual rate equal to 2
basis points, plus the higher of the montbly net earnings rate for the preceding calendar month on
investments in either the Washington State Local Govermnent Investment Pool, or b the
Kitsap County Local Government Investment Fool. The City Council finds that the fixing of the
interest rate set forth herein is reasonable and in the best interest ofthe City, its ratepayers and its
taxpayers.
HACITEXCHANGE, \ E L.UTI NS\ 00 1 E LU TI I 1 0 } SI T T I 1 I TE FL ID LOAN PF VED 0211 .DO
Section 4. No Fees or Prepayment Penalties. Prepayments shall be permissible in the
discretion oft ' ireet r of Finance, and there shall be no fees or prepaymentpenalties on inter -
fund loans and, subject to the $600,000 Overall principal limit on Outstanding balance as stated in
Section l , there shall be no advance notice required for any additional interfund draw Or
prepayment.
Section 5. Monthly Reporting to City Council. The Director Of Finance shall report monthly
to the Council's Finance and Personnel Committee, from March through December 2009, the
inter -fund loan reporting information shown on Exhibit A to this Resolution.
Section 6. Effective Date. This resolution shall be in full force and effect from and after its
approval by the City Council until the gate stated in Section 2.
PASSED by the City Council this l Vh clay of February, 2009.
APPROVED by the Mayor this 17 th day of February, 2009,
OPP" C.J 0
COO,
Darlene Kordonowy, Mayor
ATTEST:
IAU'Utll� �Q5,,�oiL
Rosalind D. Lassoff, CMC, City Clerk
FILED WITH THE CITY CLERK: February 4, 2009
PASSED BY THE CITY COUNCIL: February 11, 2009
RESOLUTION NO. 2009-04
HACITY EXCHA GEMSOL TI N 1 10 E LUTI I 1 0 - 4_ HT TERM -I TE FUND -L 3 _ PPI D-021109.DOC
i
Sample Forms of Reports to City Council Finance and Personnel Committ
ReMrtofffiterfund Loan Draws and Revayments
Date Draws Repayments Loan
Princi a Balance
(Not to X600,000)
2/ /09 ,.a
12/15/09
Monthly Retort of Irate
$o
Exhibit
Date Month-end Avg. PA.. al InterestIT Interest Date of
Balance Balan Rate -> ount Tnt. Paymt.
For Mon qDh�.Manth � r Month To Lender
2/28/09
3/31/09
4/30/09
5/31/09
6/30/09
7/31/09
8/31/09
9/30/02,
10/ N
1 � U
12/3110
lir VFgsInN - INTERFU D LOAN BZM 2=1