BERLIN – Berlin has plenty in the bank, a review of the town’s finances revealed this week, but town officials will not use that cash to pay down debt on the electric plant.
The Berlin Mayor and Council held the work session Monday before the regular town council meeting simply to make sure everyone has current information on the town’s finances and cash flow.
“There’s no crisis. There’s no problem. It’s just time to do this,” Mayor Gee Williams said.
Using Berlin’s reserves to prepay debt is not the best use of that money for the foreseeable future, financial consultant Charlie Cursio said.
“It’s just not a good use of the money,” Cursio said.
Maintaining the reserve in the bank is more important, he said.’
The town has no trouble making debt payments and does not anticipate any problems in paying those bills. The budget is structured to handle the debt payments.
“We’re not having any trouble paying that rate now,” said Williams.
There are also no plans to issue a lot more debt in the future, Cursio noted.
Having the cash on hand helps the town negotiate bond rates and sell bonds in general, he said.
“It’s giving you some flexibility,” said Cursio.
“We simply wouldn’t have qualified for the grants and loans we got if we didn’t have the money,” said Williams, referring to funding for wastewater improvements.
The town’s total cash equals roughly $7.4 million. The same account includes Enterprise Fund monies, some special connection fees and impact fees.
“This is a working pool of cash the town controls,” Cursio said.
About $2 million of that cash is special connection fees for water and sewer service, which is not available for general expenditures.
Berlin has a budget of about $6 million a year. The town needs to keep about $2 million in the bank, available, to cover operating expenses for three or four months.
“I think you’d never actually want to go below that,” said Cursio.
Berlin’s three Enterprise Funds, water, sewer, and electric, just about break even, making enough money each month to cover the next month.
The electric enterprise fund has $7.2 million in debt, which Berlin pays $850,000 in payments and interest every year.
The electric fund is also in debt to the general fund, about $600,000 as of this summer. Forgiving that loan will just make more funding available in the cash pool, and to pay off the intrafund loan, the town would need to raise electric rates.
“You’re not going to raise your rates so high you’ll generate $1 million profit,” Cursio said.