The City of Milford took additional steps to prepare for a possible referendum down the road for a new water tower
Milford City Council recently approve two resolutions in preparation for possible issuance of debt related to a new water tower and the Milford Corporate Center. The cost of the water tower is estimated to be just over $7 million and would require a referendum.
“The water tower has been in the CIP for a few years. Most recently, the engineering was approved,” Finance Director Lou Vitola said. “We knew this was one that we would ultimately want to finance and likely through the USDA. And if we do end up taking that course, not only would a referendum be required down the road, but we want to have this intent to reimburse resolution authorized so that we’re permitted to acquire the debt.”
According to Vitola, this is an IRS rule that prevents tax exempt organizations from issuing tax exempt debt and depositing proceeds into reserves in order to benefit financially from interest income. It also prevents the city from issuing debt to repay or refund for projects completed years earlier.
The second intent to reimburse was prompted by a discussion at a previous council meeting when Vitola informed council that some of the grant funded portions of the Milford Corporate center may require the city to issue debt. The grant funding may not be received prior to expenditure and issuing debt would help the city avoid depleting reserves.
“As you recall, Councilman James explored the notion of deploying debt in support of this project if it can help us retain more of our reserves,” Vitola explained. “We wanted to issue this resolution for the corporate center as a measure against being behind in IRS requirements if we do decide to issue debt.”
Councilman Katrina Wilson equated the resolutions as preventing “double dipping” and Vitola stated that she was correct, it was very similar. Councilman Dan Marabello asked what the finance rates were currently.
“I know some short term debt is still over five based on any of these new indices. But honestly, I haven’t looked at yield curves recently,” Vitola said. “If we do the water project with USDA, they have a favorable rate schedule that takes into account the tax exempt nature of cities and towns, while also discounting them without actually saying they’re discounted rates.”
Vitola told council he would look into current rates and bring that information back to council. Both resolutions were approved unanimously.
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