New London council gives final approval for $1.1 million bond
New London - The City Council on Wednesday evening issued its final approval for the bonding of $1.1 million to bolster the city's feeble fund balance.
"I believe that this is the best step forward for New London," Councilor Erica Richardson said. "It will put us, financially, in a better place. It will provide the stability we need to move forward and that is the goal of everyone, to move this city forward."
Richardson, Council President Wade A. Hyslop, and Councilors Anthony Nolan and Efrain Dominguez voted in favor of the bonding. Councilor Michael J. Tranchida cast the lone vote in opposition.
Councilors Martin T. Olsen and Michael Passero were absent from Wednesday's meeting, but both had voted against the bonding in previous votes.
By bonding the $1.1 million, the city will be able to replace money it took from its fund balance going back about a decade, when capital projects such as roadway improvements ran over budget.
At the heart of the city's fiscal dilemma is its withering fund balance, the account that can act almost as overdraft protection for the city's general fund. The fund balance should be equal to two months of operating expenses, or $13 million, according to Mark Chapman, an independent financial consultant who works with the city.
Additionally, a city ordinance mandates that the fund balance be at least 8 percent of the city's budgeted expenditures.
The bonding that the council approved Wednesday will nearly double the city's fund balance to $2.5 million, according to Finance Director Jeff Smith.
"This money is not going to be spent. It is going to sit in the account in order for our bond rating to stay at a decent level," Nolan said. "The funds are going to be there so that we have better liquidity."
Without a healthy fund balance, the city is susceptible to cash flow problems, as happened last week when the city had to request that the state expedite payment of educational cost sharing funds in order to meet its $1.7 million biweekly payroll.
The $1.1 million bond issue was the final step in a fund balance replacement plan proposed by the city administration.
In early April, the City Council sanctioned the bonding of $4.4 million to account for state grant funding the city has never collected, and to pay for vehicle purchases made last year that were originally going to be paid from the general fund.
In addition to approving a total of $5.5 million in bonding, the council adopted resolutions that require it to budget at least $250,000 in each upcoming fiscal year for fund balance replacement and mandates that proceeds from the sale of city-owned real estate must go into the fund balance until it reaches the 8 percent level mandated by ordinance.
The budget for next fiscal year, of which the City Council approved a first reading on Monday, includes $500,000 to go directly into the fund balance.
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