Council debates use of General Fund reserves for FRPD radio system

The Front Royal Town Council appeared torn over a staff recommendation that it fund the $545,000 cost of a new Town Police radio system through an internal loan from the Town General Fund reserves.

While all councilmen agreed an interest-free self-loan lowering annual payments and eliminating an estimated $50,000 to $113,000 in interest expenses was a good idea – exactly how “interest-free” an internal loan should be was at issue.

“We knew we needed these radios, and yet no effort was made to put money in the budget” says Vice-Mayor Gene Tewalt

As he often has been, Vice-Mayor Eugene Tewalt was critical of borrowing from General Fund reserves without a plan to replace the borrowed money.  Town Manager Joe Waltz injected that he did favor reimbursing General Fund reserves utilized for non-Enterprise Fund projects.

In fact, the plan submitted by staff included an internal loan paid back in 5, 7 or 10 year spans; as well as a “no repayment” option.

The staff summary noted that currently the General Fund balance is $1.5 million above the minimum required 3-month town operating budget reserve, as well as any other outstanding commitments.  Factoring in those other commitments, taking the full $545,000 radio system purchase price out would reduce the General Fund surplus to $968,000 staff noted.  According to the town manager a recent accounting showed the total General Fund balance at approximately $7,632,807.

It was observed that the General Fund option allowed council to set the parameters of any payback, rather than those parameters being dictated by a third-party.

Councilman Chris Morrison suggested taking only half the purchase price out of reserves to reduce price and interest payments while keeping the General Fund surplus above the $1-million mark.  Other options discussed included using the Virginia Municipal League (VML) loan rates at reduced interest rates from those offered by the seller, Motorola.

The internal loan, interest-free payback option would result in annual payments from $109,000 over 5 years, $77,857 over 7 years, or as little as $54,500 over 10 years.

That compared to the Motorola offer at as much as $151,986 over 4 years (4.52% interest), $124,389 over 5 years (4.57%), or $93,709 over 7 years (4.86%); or the VML option at $119,278 over 5 years (3% interest), $88,639 over 7 years (3.3%), or $65,821 over 10 years (3.55%).

A longer term option through the New Market Tax Credit Program got little traction from council.

As these options were discussed the life expectancy of the new digital-based VHF radio system was raised.  FRPD Chief Kahle Magalis estimated a 10 to 15-year life span – 20 if we’re lucky – before replacement with a new system in the rapidly-changing technology environment became an issue.  In addition to improved departmental connectivity, the new system will make FRPD interconnective with the county sheriff’s office and emergency services, the state police and a number of surrounding municipal law enforcement departments that it is currently not able to radio communicate with.

A three-month set-up and installation timeframe has been estimated by the Motorola vendor Teltronic.

See precisely how the mayor and council moved a decision on the payment options forward toward a vote in the accompanying Royal Examiner video:

Download Work Session Agenda – click here