The loan, actually called a Revenue Anticipation Note, was approved by a unanimous vote Tuesday night during a council meeting at city hall. The loan is a renewal of an arrangement the city initiated with Alliance last year.
The city is forced to borrow money because residents and businesses pay taxes twice a year. The city borrows money to pay for essential operations, like salaries, until taxes are due again at the end of the year, said Manassas Park City Manager Jim Zumwalt. The loan also gives the city a cushion against a catastrophe or major failure of city services that needs an immediate fix.
The loan works similar to a line of credit, allowing the city to borrow what it needs up to the $4 million ceiling, Zumwalt said. It will then pay it back, at market rates, when the revenue comes into the city.
“It’s the same deal that we did last year,” Zumwalt said.
Officials felt it was an advantage to have the deal with Alliance, which has offices in the city.
“They are local, which I think is a good thing,” said Mayor Frank Jones. “It’s good that we are doing it with somebody in our backyard.”
City officials last year talked with Alliance Bank, Wells Fargo Bank and a non-bank investor about borrowing the money. They eventually settled on Alliance, which offered them the best overall deal.