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Bay City Readies $7.5 Million Bond for Streets, Sewers, Water Improvements

Commission Still Faces $1.2 Million FY 2011 Budget Deficit, Says Belleman

May 8, 2010       Leave a Comment
By: Dave Rogers

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City Manager, Robert Belleman reported the General Fund budget still remains at a $1.2 million deficit which reflects either a 10.8 percent reduction in labor costs or a reduction in force through layoff of 19 positions within the General Fund.

There is the good news, as the saying goes, and the bad news.

The City of Bay City has started the ball rolling on a $7.5 million capital improvement bond issue for street, water and sewer projects.

Meanwhile, it still faces a $1.2 million budget deficit for Fiscal Year 2011 that can only be closed, the city manager believes, by a labor cost cut of 10.8 percent or a force reduction of up to 19 general fund positions.

Since the commission authorized the bond issue last October, the City's petition to the County of Bay for a portion of its Recovery Zone Economic Development bond allocation and the county commission has allocated 88 percent of its $6.6 million to the city.

Other provisions are under consideration which could assist the City in reducing its borrowing cost under this federally authorized program.

Specifically, the American Recovery and Reinvestment Act (ARRA) of 2009 included two provisions in assisting state and local governments to sell eligible municipal bonds.

The Recovery Zone Economic Development Bond Program and the Build America Bond Program would require municipalities to issue taxable bonds and in turn receive 45 percent or 35 percent respectively in reductions of borrowing costs through a federal reimbursement program.

The County of Bay received the Recovery Zone Economic Development Bond Program allocation in the amount of $6.6 million. At its April 13 Board of Commissioners Meeting, Bay County approved and directed approximately $5.8 million of its $6.6 million allocation to the City of Bay City to be used prior to December 31, 2010.

Warren Creamer of R.W. Baird & Company, financial adviser, and Tom Colis of Miller, Canfield, bond counsel, have been evaluating the requirements of the Recovery Zone Economic Development Bond and Build America Bond Programs.

"There are certain risks associated with participating in these programs," City Manager Robert V. Belleman wrote commissioners. "Those risks include, but are not limited to, re-offering requirements to avoid IRS audits, prevailing wage, buy Made in America products, and timely filing requests for reimbursements from the federal government."

Additionally, the original projects proposed under the 2010 Capital Improvement Bond have changed. As such, the total cost of the bond has decreased. Mr. Creamer and City staff are finalizing the official statement and the dollar amounts required to undertake water, sewer and street projects.

City Manager Belleman wrote: "I hope to present to the City Commission for its approval the required resolutions authorizing the sale of these capital improvement bonds at a regularly scheduled City Commission Meeting either on May 17th or June 21st. I will provide you with more information as we finalize the required documents, resolutions, and project estimates for the proposed capital improvement 2010 bonds."

Meanwhile, Mr. Belleman reported the General Fund budget still remains at a $1.2 million deficit which reflects either a 10.8 percent reduction in labor costs or a reduction in force through layoff of 19 positions within the General Fund.

Mr. Belleman commented: "I hope several union negotiations will have come to closure by the June 21 City Commission meeting and thus allow City staff time to make the necessary adjustments within the various cost centers where those union employees may be charged for wages and benefits."


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Dave Rogers is a former editorial writer for the Bay City Times and a widely read,
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