Sparta to refinance Town Hall to help increase fund balance reserves

The members of the Sparta Town Council gave permission to Town Manager Bryan Edwards to request permission from the Local Government Commission to refinance the remaining $336,000 balance owed on the Town Hall over a period of 10 years during an Oct. 5 meeting.

The action came after the Local Government Commission issued a recommendation for the town to increase its fund balance. By refinancing the loan, the town will have more unappropriated funds in the budget.

Reading from a document distributed to members of the board, Edwards said, “As of June 30, 2004, the amount of the fund balance available for appropriation in the general fund was $235,528, or 24.64 percent of total general fund expenditures. For cash flow purposes, local governments need to maintain adequate amounts of fund balance to finance operations during periods of declining revenues. Also, the fund balance for appropriation is a reserve that can be used for emergencies and other unexpected expenditures or for financial opportunities that unexpectedly arise.

“The fund balance available decreased from 31.01 percent on June 30, 2003,” Edwards continued. “The primary reason for the decline is the general fund expenditures exceeded revenues by $12,136. Continuation for this practice will further reduce the general fund’s reserves. The board should analyze the statewide average fund balance available for comparably sized municipality is 74.33 percent of their general fund expenditures. We urge the board to review the current level of fund balance available for appropriation and determine if it is adequate to meet your needs.”

Edwards continued, noting the commission’s recommendation. “The recommendation is to request permission from the local government commission to refinance the remaining balance owed on the town building over a period of 10 years,” he said. “The present financing arrangement calls for a payout in four years. We currently budget a payment of $100,000 annually. The difference will amount to an annual payment of approximately $46,000, allowing the town to rebuild our fund balance by approximately $50,000 per year over the next several years.

Turning to the council, Edwards continued, “I have discussed this refinancing arrangement with our auditor, Mr. David Todd, and he concurs with the idea. I have also reviewed the concept with a representative of the local government commission and received a favorable endorsement. With the approval of the council, we will make formal application to the local government commission.

“Following conversations with town auditor, he feels (renegotiating) is a good move for us,” Edwards said. “However, we need approval from the Local Government (Commission).”

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