Finance Highlights 2011 0708 - Laserfiche WebLink

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Interfund Loan and Advances July 8, 2011 The proposed policy allows the City Manager to approve interfund loans or advances for terms not to exceed 15 years. The City funds eligible to participate are limited to those that may legally do so. Documentation evidencing these transactions will be executed by the City Manager and the Finance Director, and will specify the principal amount; the interest rate per annum; the maturity date and repayment schedule, including an early prepayment provision; and the particular funds involved. These interfund loans or advances may not be used to solve ongoing structural budget problems. These are risk -free "investments" to the lending funds. Since the money will be replaced regardless of what happens in the external markets, there is little risk of investment losses. Interest rates will be established using the United States Treasury rates for comparable terms as of the date of the loan /advance (for example, loans of one year or less will be based on United States Treasury bill rates, and advances of one to five years will be based on United States Treasury note rates of similar timing as a term of the advance), orthe Local Agency Investment Fund (LAIF) rate. Loans and Advances will be coordinated with the City Attorney's Office to ensure compliance with the Municipal Code and will be approved by the City Council. Payments made on outstanding loans or advances shall be reflected in the Proposed and Adopted Budget. A summary of all outstanding loans and advances will also be included in the Comprehensive Annual Financial Report (CAFR). The CAFR will also consistently include the loan and advance term, rate of interest, and the interest amount due in its calculation of the total liability associated with this "investment ". Certain funds will not be eligible to participate in these transactions because of the strict statutory spending restrictions and their short intended holding periods between receipt and use. Gas tax funds, federal streets and highway funds, Proposition 1B funds, trust funds and all grant funds are ineligible to participate in these transactions. Redevelopment Agency funds will not participate unless the interfund transactions are approved by the City Council and the Agency Board. CONCLUSION Staff recommends Finance Committee approval and forward to City Council for approval of the City of San Leandro Interfund Loan and Advance process and authorizing the City Manager to approve such loans and advances; City Council meeting July 18, 2011.