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1 <br /> <br /> STAFF REPORT <br />DATE: February 18, 2025 <br /> <br /> <br />TO: Mayor & Council <br />FROM: Clarissa Hadler, Finance Director <br />AGENDA ITEM: Interfund Loan and Transfers for Ballfield Property Purchase <br /> <br /> <br />BACKGROUND: <br /> <br />Attached is the draft of a resolution approving an interfund loan and fund transfers to pay for the <br />recently approved land purchases for future ballfield development. The money will be used for <br />the land, as well as closing costs. <br />Fund Transfer from Park Dedication <br />This transfer is in the amount of the contribution provided by Royal Golf for the purpose of <br />ballfield development. <br />Interfund Loan from Sewer Fund <br />An interfund loan is a simple mechanism where we borrow money out of one fund to be used for <br />purposes of a different fund. In this instance, from the Sewer Fund – which will not need this <br />cash during this loan period – to the newly established Ballfield Fund. To do this, Council <br />adopts a resolution that lays out where the funds are coming from, a repayment schedule, and a <br />method for raising the revenue for that repayment. <br />Similar to how we lay out levies for each bond issuance, I recommend planning out a <br />recommended levy for the life of this interfund loan. That levy amount is then incorporated into <br />the budget and levy process each year. Which is not to say that those projected levy amounts can <br />actually be adopted at this time; it is simply a plan for future levies. These levies are only visible <br />in our levy resolution each year; not on the property tax statement. <br />While this method does spend down cash, it also provides a path and method for rebuilding that <br />cash in whatever fund it is borrowed from. This tactic provides some reassurance to the rating <br />agencies that the cash will, in fact or in theory, be replenished over time. Council should <br />recognize that any large expenditures like this might affect our bond rating, which in turn might <br />affect our interest rates. <br />The table below shows what the repayment schedule and the tax impact on a Median Value <br />Home over a 10-year period. Over a 10-year straight-line repayment, it would add <br />approximately .8 percentage points to the tax rate in the first year, and decrease over time, as tax <br />capacity grows and the loan balance decreases. For 2026, this would add $50 in property tax to <br />the median value home.