CORNWALL – Turning the city’s $25 million Progress Fund into a loan vehicle for small purchases would have “no significant impact” on the amount of taxes the city collects over the next decade.
That’s according to a report before the budget committee this afternoon (April 9, 1 p.m., city hall).
Mayor Leslie O’Shaughnessy first floated the idea during a meeting March 2 of using the fund for smaller purchases (less than $2.5 million), possibly saving the city money in interest payments to the bank.
The proposal seems to fly in the face of the fund’s mandate to use the interest income to fund “quality of life” projects in the city.
But a report for this afternoon’s meeting shows that were would be “no significant impact to the (tax) levy by 2027” though there would be some short term savings due to the interest free loans. In other words, taxpayers hoping this move would save them money come tax time, largely wouldn’t happen.
The other caveat is the city would be earning less interest on the Progress Fund by drawing against it – earning about $340,000 a year instead of the $545,000 it’s bringing in now.
Loan scenario projections would draw the $25 million nest egg down to $11.8 by 2023 before bouncing back to $18.1 million by 2027, provided council sticks with its plan to pay back the fund.
The other fallout from taking loans against the Progress Fund would be payments for the Benson Center. The fund is not covering the $739,000 yearly payments right now for the Seventh Street facility. With fewer interest dollars in the fund, taxpayers would also find themselves paying for the Benson Center. In 2010, the arena complex was sold with a vision of not having to cost taxpayers any money as the payments would be coming from interest earned on the $25 million Progress Fund.
As for today’s proposal, the scenario has been reviewed by the city’s auditor, CKDM (now MNP) and KPMG, the firm who created the city’s long term financial plan. Both say the city shouldn’t tinker with the Progress Fund.