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Officials differ on spending windfall

SALEM

March 30, 2013
By MARY ANN GREIER , Salem News

The auditor wants to pay down debt, the mayor wants to bolster the capital improvements fund and Utilities Commission members want included in further discussions on what to do with a $1.3 million oil/gas lease windfall.

For now, the money remains in a pile, pending another meeting of the Finance Committee of City Council and further information requested regarding the debt paydown idea.

City Auditor Betty Brothers and Mayor John Berlin both made their cases for their ideas, but Utilities Commission members Bob Hodgson and Ben Funderburg, who both attended the committee meeting Thursday, didn't voice their desire for the money, although Hodgson said there's an interest in it.

"You need to make your feelings known at the next meeting," Committee Chairman Councilman K. Bret Apple said.

Utilities Commission Chairman Geoff Goll did make his feelings known late last fall, saying his argument will be that the money should be returned to the source, the water fund, since the lease money was generated through land purchased outside the city limits with water department funds.

The city has been sitting on the $1,352,000 since November, pondering how to use the money that's a one-time boost to the city coffers and can't be counted on every year.

A three-year lease agreement was signed last summer with Chesapeake for $3,500 an acre for non-surface rights, a 20 percent royalty on gross proceeds and a three-year renewal option worth another $3,500 per acre signing bonus.

Brothers had said previously she thought the money should be used to retire some of the city's debt, with the remainder going to capital improvements. On Thursday, she outlined her plan, asking the Finance Committee to consider paying off a $683,500 note for the Pershing Street Phase I and Cunningham Bentley

Connector, Phase IV projects, a $138,632 loan through the Ohio Public Works Commission for the Cunningham Road and Bentley Drive project and a $87,279 loan through OPWC for the Southeast Boulevard reconstruction.

She said she was told by bond counsel that they would still be collecting a payment of $90,000 from a business on the Pershing Street Phase I section and could apply that to the Home Depot Tax Increment Finance loan, which has a balance of $832,875. The Home Depot TIF is costing the city an increasing amount of money from the general fund each year because the payments from the affected businesses aren't enough to cover the yearly payment. The $90,000 could help with that.

She explained the Home Depot TIF can't be paid off or refinanced before maturity because it's non-callable. A loan with a balance of $2.3 million for Third Street, Bentley, Roosevelt and Cunningham Road isn't callable either, which is why she selected the debts she did to pay off.

Councilman Dave Nestic, a member of the committee, questioned whether they can still collect the $90,000 from the business on Pershing Street if the debt is paid off. She said that's what bond counsel told her, but the committee asked for clarification and to get it in writing.

Under her plan, roughly $909,000 worth of debt would be paid off, leaving about $442,000 for the capital improvement fund out of the oil and gas money.

Before Berlin spoke, Councilwoman Cyndy Baronzzi Dickey, who was in the audience, put in a plug for the parks department, which needs about $200,000 for paving projects in the parks. The parks department relies solely on park levy money, fundraisers and fees.

"I believe it's in the best interest of the city to put the entire $1.3 million into capital," Berlin said.

He talked about the history of the income tax split and how the amount placed in capital improvements has continued to dwindle down. He said in 2001, about $1 million was going into capital improvements from the income tax. Now he said it's down to $334,000 and the projected split for this year puts the total at $275,411. The split places 85 percent of the city income tax money into the general fund and 15 percent into capital improvements, all after the money for running the income tax department is subtracted out.

Examples of projects Berlin said could be done with the money included the city hall roof (not including the utilities department because it's in good shape), paving the gravel city hall parking lot, and covering the city's share for a Small Cities paving grant to repave Second Street, Third Street and Ellsworth Avenue.

He said he could use $850,706 for the many projects and keep the rest for future capital improvements.

In other business, the committee agreed to recommend city council approve the purchase of a new bucket truck for the city electrician. As part of the motion, they noted they want to pay the cost up front, but will be amenable to amending the ordinance so the truck can be purchased over time. The cost of the truck is $105,820, but according to Berlin, the Utilities Commission members have indicated a willingness to pay part of the cost since the electrician spends part of his time on utilities projects.

The current truck being used is 20 years old.

Mary Ann Greier can be reached at mgreier@salemnews.net

 
 

 

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