News in Depth
City Management Says $2.8+ Million Owed By Airport To City Gen'l Fund Will Be Repaid...With Interest...Already Scheduled In Recently Adopted 3-Yr. Financial Strategic Plan
(April 8, 2003) -- After LBReport.com reported that a City Auditor document showing LB Airport owes LB taxpayers $2.8+ million had been placed on the City Council's "consent calendar" (for routine approval without discussion), Councilmembers Rob Webb and Val Lerch pulled the item for discussion.
This elicited a verbal report from Acting City Manager Gerald Miller and Assistant City Auditor J.C. Squires ...with assurances that the sum accrued is destined to be repaid to city taxpayers, with interest, in fiscal years '04-'05-'06 as part of city management's 3-year budget plan recently OK'd by the Council.
In requesting an explanation, Councilman Lerch asked, "What is the interest rate [city taxpayers will receive for the loan]? What time did we decide it was going to be a long-term liability to this city, and why aren't they [LB Airport] paying it back as they use it? When is it due?...And when did we vote to delay payment?"
We provide transcript excerpts of salient portions below. (Our transcript is unofficial, prepared by us; not all speakers or their statements are indicated.)
Acting City Manager Miller: ...I asked basically the same questions [that Councilman Lerch has asked] of staff, and my understanding is that in the 1990s, when the Airport wasn't very busy, that Airport revenues dropped considerably, and in fact they were not able to even pay for a basic level of fire service, which is a requirement obviously of the Airport...We simply could not afford to pay for that through the Airport Enterprise Fund because there was not sufficient activity at the Airport to generate the revenue needed to be able to pay that cost
By action of the Council, and I don't know if it was specifically a resolution or if it was an action embedded in a budget, but the Council did agree with that approach and in fact agreed to a repayment schedule.
The Airport is current. In fiscal year 2000, the Airport paid $200,000. In fiscal year '02, the Airport will pay, has already booked, $675,000. They are not paying this current year because they are in a cash flow situation, but they are fully paying the cost of the fire service. So they are paying the fire service cost, but they're not paying the debt service in '03, but they are paying in '04, '05, '06, and in fact the payments for '04-'05-'06 have been discussed as part of the 3-year financial strategic plan. There is a section that references this, and we've been very up front about that with regard to the 3-year plan.
And so at the end of fiscal year '06, the Airport would have repaid the General Fund with interest an amount of $3.3 million.
And again, this was not something that city management at the time felt was discretionary. We have an Airport. We have to provide a fire service in support of it.
Asst City Auditor Squires: Councilman Lerch, I can confirm what the City Manager has said we have proven in our test work. I will add also that the interest rate that has been negotiated will be the Pool Rate for each of the years going back to 1993, so the exact amount of interest earned by the General Fund during that time period is the interest rate that will be charged the Airport...