Ogdensburg continues practice of borrowing up to $2 million annually to pay bills

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OGDENSBURG — The City Council has authorized borrowing $2 million to help with the municipality’s perennial cash flow crunch, a practice that has been ongoing for a dozen years.

The authorization of a new Tax Anticipation Note was passed unanimously by the council, but not before Councilor Shawn R. Shaver pointed out that he would like to see Ogdensburg move away from the practice.

Comptroller Timothy Johnson said that without borrowing, the city would not be able to pay its bills. He said the cash crunch is the result of a lag between when taxpayer money comes into municipal coffers and when money must be expended to meet obligations.

“Our budget starts Jan. 1 and we have to pay our payroll out, our insurances, all of our bills starting in January,” Mr. Johnson said.

As an example, he said, the city typically needs to spend as much as $650,000 a month just to meet payroll costs.

“And we don’t start getting our tax money until May,” he said.

Tuesday’s City Council action authorizes borrowing up to $2 million, but Mr. Johnson suggested it is unlikely the city will need to borrow the full amount.

“Right now we are probably looking at $1.8 million, but we always try to authorize a little more just in case,” he said.

Mr. Johnson said the money will help cover cash outlays, including payroll, water and sewer expenses and costs associated with grants the city has received.

“It’s not just the taxes, it’s the water and sewer as well. It’s all combined to pay our bills,” Mr. Johnson said.

Borrowing the money each year also comes at a cost. Mr. Johnson said the city’s slumping bond rating means it now pays more for borrowing, a rate of 4 percent last year.

Mr. Shaver, serving his first term on the council, asked how much the borrowing costs taxpayers on an annual basis.

Mr. Johnson said on $1.8 million, the cost of interest would be $72,000.

“So basically, by borrowing, we are losing $72,000 a year,” Mr. Shaver pointed out.

He also suggested the city should begin formulating a plan to move away from the annual borrowing.

“It just seems like we’re robbing Peter to pay Paul,” Mr. Shaver said. “I guess I’d like to see a plan that says we don’t have to do this. I think the county has done it in the past, but they have since kind of righted themselves.”

City Manager Sarah Purdy suggested staff could prepare a more detailed presentation on the city’s cash flow issues to be given to City Council.

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