The city is projecting an $11.6 million surplus at the end of the current fiscal year thanks to an August bond refunding that pushes increased debt payments decades into the future.
That update is at the top of the city’s latest monthly financial report. The report was published on Sept. 28, and covers city finances through the first two months of the fiscal year 2018-2019 (FY19), from July 1 through Aug. 31.
The monthly report is the first to detail the projected short-term benefits of the city’s Aug. 2 restructuring of $160 million worth of existing debt, the largest such bond sale and debt refunding in the city’s history.
It projects that the city will spend $31.9 million on debt service payments this fiscal year, which is $26 million less than the original debt service budget of $57.9 million.
According to the monthly report, those debt savings will be directed towards closing FY19’s projected Board of Education (BOE) budget deficit of $8.4 million. The refunding proceeds will also result in $2.25 million added to each to the city’s two public employee pension funds, the City Employees Retirement Fund (CERF) and the Police & Fire Retirement Fund (P&F).
The city plans to use $1 million of the debt refunding proceeds to create a litigation settlement reserve, boosting the city’s anticipated self-insurance fund payments from $4.6 million to $5.6 million for the year.
The report counts the other $11 million-plus of the city’s debt service savings for the year towards a projected general fund surplus.
“The BOE continues working to get their budgeted deficit figure down to zero,” the report’s summary reads. “Progress on the BOE budget will be updated as their projections are made available for the monthly report.”
According to the August bond sale document, the $160 million bond refunding generated $108 million in debt service savings over the next seven fiscal years. However, the refunding’s total cost to the city over the course of a 16-year term will be upwards of $89 million in additional debt service owed.
The monthly report also states that a portion of the August bond refunding proceeds will be used to close last fiscal year’s general fund deficit. The June 2018 monthly financial report, which was the final monthly report for the fiscal year 2017-2018 (FY18), projected the end-of-year general fund deficit to be around $11.5 million.
Acting Budget Director Michael Gormany said that the city will be officially closing the books on FY18 in early October and that his department will publish an end-of-year review when all of the numbers are finally in.
That's great - we took an additional $160M in loans to put money in the bank so that the Harp administration can buy more fancy dinners.