John K. Manna
New Castle News
NEW CASTLE —
A budget reserve will allow the city of New Castle to pay off a federal loan three years early.
The city obtained the $2.6 million loan from the U.S. Department of Housing and Urban Development in 2002 for downtown improvements.
The city is scheduled to pay $225,000 a year toward the loan until it is retired in 2017.
Under its Act 47 recovery plan, however, the city is required to maintain a general fund reserve equal to 15 percent of annual operating revenue. Any money exceeding the 15 percent threshold must be committed to repaying debt, making additional contributions to the employee pension fund or funding projects through the city’s capital improvement program.
According to the Act 47 coordinator, a 2012 audit shows the city has approximately $800,000 above the 15 percent threshold in the general fund. To comply with the recovery plan, the coordinator has recommended using that money to pay off the loan.
In a resolution approved by city council last night, the loan will be paid in full on Feb. 1, 2014.
The coordinator said paying the loan ahead of schedule will save the city $91,000 in interest and reduce the amount that has to be budgeted for debt service by $225,000 per year beginning in 2015.
The coordinator added that paying the debt early “may also alleviate” some of the need for property tax increases as the city’s contribution to the employee pension fund continues to rise.