No Need for Short-Term Borrowing for City of Annapolis
Annapolis MD (10-17-13) Annapolis Mayor Joshua J. Cohen announces that since addressing an inherited $23 million dollar deficit, cutting expenses, cutting spending and cutting the budget by a larger percentage than any of Maryland’s 157 municipalities, the City has rebounded from any need to use short-term borrowing in 2013.
The City received a total of $19,083,204.40, on October 10, from the County for the City’s share of the property tax, and no short-term borrowing was needed to produce cash flow until the tax receipts were received.
“Getting us back to that point of solvency has required more than balancing the budget,” Mayor Cohen said. “It has required that we rebuild our fund balances and today we can say, with no hesitation, that we have enough cash on hand to pay the bills and all of our hard work over the past three years has paid off. We fully repaid all of our lines of credit and tax anticipation notes, and have no need for short-term borrowing for day-to-day operations.”
During this year’s State of the City Address, Mayor Cohen focused on the fact that in just three short years, the City was nearing the point where it would no longer need to rely on short-term loans for cash flow. In 2011 the City owed $18 million in short-term borrowing. In 2012, because the City cut expenses and had already begun to significantly rebuild the fund balances, the need for short-term borrowing was lowered to $10 million. In 2013 the City has no need for short-term borrowing.
In March of 2013, the Mayor told a packed City Council chamber, “This year, if we need to draw down a line of credit at all, it will only be in the $2 to $3 million range this fall.”
This all comes in the wake of abrupt course change in March of 2010. The Cohen administration cut expenses and services. Not only did the City cut spending for the first time in 20 years, Mayor Cohen had to lay off 33 employees. The City realigned taxes and fees to reflect the accurate costs of service. It responded to a dramatic drop in the City’s assessable base, and it modernized and streamlined the solid waste program, leading to the largest privatization of City services.
“Many steps have been taken to get us to this point,” City Manager Michael Mallinoff said. “The constant need to remain fiscally prudent through every step of the budget process can not be overstated. The results are positive for both our residents and our employees. I believe the rating agencies will also recognize and value the approach we have taken."
A $3 million loan was taken as a precaution on August 7, 2013 to ensure the City was able to meet the demands between property tax receipts. The loan will be returned to Wells Fargo at the end of October.