City Officials Prepare to Borrow $4 Million to Cover Projected Shortfall

Manassas Park City Council voted this week to apply for a $4 million loan because the city doesn’t quite have enough cash on hand to make it until December when it receives more tax revenue. 

 The decision came during a special, last-minute council meeting on Monday at city hall.

Manassas Park city manager Jim Zumwalt said the city has had to borrow money in late summer for the same reason for the last three years.

The city receives tax revenue from bussinesses and residents who pay taxes twice a year. The city is borrowing money to tide it over until taxes are due again at the end of the year. 

This year, city officials found the city reached the point where it needed to borrow money about three weeks earlier than it has in the past, Zumwalt said. This is why there was somewhat of a rush to get it all arranged, he said.

 The city needs to have enough liquid assets available just in case something major goes wrong that the city needs to address, he said Wednesday.

The city has had to borrow money—$ 3 million last year and $4 million this year—because the city has drawn down its resources, Zumwalt said.

 The city manager made an appearance at the Manassas Park City Schools School Board meeting Wednesday evening and presented a slide show and talk to explain the matter to the board.

 Most of the board members were at the meeting on Monday, but they were there as guests, so Wednesday was an opportunity for the body to have dialogue with someone from the city about what it all means, school officials said.

 City officials are in talks with Alliance Bank, Wells Fargo Bank and a non-bank investor about borrowing the money, Zumwalt told the school board Wednesday.

 Alliance Bank officials said they can cut a $3 million loan to the city, he said.

Wells Fargo officials said they, too, can loan the city money, but it may cost the city some money, he said.

 Plus, Wells Fargo officials said if the city gets the loan, then the bank wants its business, Zumwalt said.

 That’s doable, he said. But it will require the city having to switch its accounts and other information from one bank to another.

 The city should have all three options in hand by next week, Zumwalt said.

 The city’s financial situation affects the school division because the resources for both entities are pooled into the same debt-service account.

 The city and the school division sharing the same account is comparable to a married couple having a joint checking account. In order to ensure that the account isn’t overdrawn, the pair has to have conversations about who is spending what and when.

 The school division has been making adjustments in its spending over the last few weeks as the situation developed, Manassas Park City Schools finance director Krista Kelly said Wednesday.

 They are making sure bills are paid right on time instead of early, she said.

If the school division can hold off on making a payment, then it will, she added.

The division has also been making charges on a Bank of America purchasing card, which is beneficial because it earns rebates, she said.

Using the card allows a delay in having a cash transaction until the bill is due.

 School board member Brenda Foster asked Wednesday if the school division could possibly hold its money in a separate account than city funds.

 Kelly said she is uncertain if there is enough school division money for its debt service for it to have a separate account. She would have to do some more calculations to accurately determine if that is possible, Kelly added. 

 A significant amount of money from the state is paid in arrears, which means  the school division has to spend its own money before receiving a reimbursement, she said.

 Kelly also told the board she doesn’t believe the city has the cash on hand to make that separation at this time.

 “ .. We are continuously put at risk when our money has to be used to pay another city bill,” Foster said.

 She puts money aside for certain bills and doesn’t touch it and the city should be able to do the same, Foster said.

 Going forward, it is a good idea that school division officials speak with city financial officials about what revenue they are expecting and other matters, Kelly said.

 The school board is expected to meet again on Aug. 15 at 7 p.m. in the school board meeting room in city hall.