Financial clouds are darkening, and the storm may not be too far from letting loose on the City of Warren's financial health.
City administration presented an ominous financial picture to Warren City Council during a special meeting on Monday.
City Manager Nancy Freenock apologized to council, claiming she "hasn't done a good job (explaining) cash balance."
A discussion about the city's fund balance position ensued.
One effect on the fund balance is project work that will have to be done. In addition to $20,000 in catch basin work that council approved Monday, Freenock said the city is facing a bill of $80,000 for repaving the parking lot at the city building and rebuilding the road at the Department of Public Works building.
Last year, the city ended with an additional $750,000 in fund balance that was not expected.
"Yes, there was extra money last year, if you will, because there were a lot of things that weren't done," she said. "As of today, projected ending balance (for this year) is $1.752 million.
But a host of items already scratch away at that total.
Those items include $231,000 for paving, approximately $233,000 for implementation of the proposed parking plan, an increase in legal fees over the budgeted amount as well as DPW truck purchases of over $200,000 that council elected to pay for outright, as opposed to financing.
Freenock said city policy requires a 4 percent fund balance, which equates to $331,000. But she cautioned, "That is not enough to carry the city through operations in the summer."
In Warren County, the taxing authorities begin receiving payments in the fall.
Freenock said the Government Finance Officers Association recommends a 17 percent reserve.
"Four percent is enough to fund operations for 17 days," she said. "Seventeen percent should get us through two months."
She recommended a reserve of $1.25 million.
Without undoing council action and financing the DPW truck purchase, Freenock said a Tax Anticipation Note interim financing to cover operating expenses over the summer until taxes come in is a real possibility.
Financing the trucks is "my preference," she said. The money paid in interest for the TAN would "then stay in fund balance." The financing, she claimed, would also get the city close to a $1.2 million reserve that "would be there year after year."
"What I want you to consider," she said to council, "is having the money in the bank. This is the cash that we need to have in the account to get city operations through the months when we don't have income."
She said that the cost of the TAN's interest would be "$12,000 that you would never see again. I'm recommending we recover it ourselves."
The city "will need a tax anticipation note this year if you don't do this financing," Mayor Maurice Cashman said. "Once you bypass the financing here, you can't go back."
City staff also raised other items that complicate the financial picture looking in the future.
"You know we have three union contracts being re-negotiated," Freenock said. "Healthcare. We have other things happening that we know are going to happen in the next two years. Glade Run. The (U.S. Army) Corps of Engineers and DEP say it needs upgraded."
While she said the state Department of Environmental Protection may help with the funding for that project, preliminary intentions are to increase the right-of-way, which would in turn require taking property, potentially via eminent domain.
"(City Engineer) Doug (Sceiford) thought our exposure there could be $1 million," she said. "That's playing in the back of our mind, as well."
"We have ignored concrete and brick streets since I was a kid," added DPW Director Mike Holtz. "Some day it's going to come back. It's going to make these (paving) numbers look little."
Cashman suggested that council review the information again at its June 16 meeting.