Hurry up, slow down – short-term FRPD radio financing vote aborted

Despite having called a Special Meeting on September 4 for the express purpose of commencing with the purchase of a new digital-based VHF radio system for its police department that will facilitate crucial inter-departmental communications, it took the Front Royal Town Council about 10 minutes to abort that plan.

Councilman Chris Morrison expressed an unwillingness to vote on the planned approval of a temporary internal $545,000 loan from General Fund reserves until he had an opportunity to consult further with town staff on ramifications of the plan. After some initial grumbling from the mayor, council voted 4-0, two (Sealock and Meza) absent, to delay action on the FRPD radio system purchase.

Vice-Mayor Eugene Tewalt suggested the majority respect a councilman’s request for additional time to accumulate information.

Council scheduled the Special Meeting vote following new information received prior to a scheduled vote approving the purchase through an internal loan nine days earlier, on August 27. A primary concern voiced August 27 in forwarding a temporary financing plan as soon as possible was the projected three-month delivery and installation period for the radio system from the time of purchase.

At a previous work session, Councilman William Sealock suggested that the new radio system should be in place by the end of the year when the town police are scheduled to move into their new $11-million headquarters on Kendrick Lane. However, Sealock was absent from the September 4 meeting, as was Jacob Meza. Meza has expressed past frustration with the pace at which council takes action on presented items. Both Sealock and Meza noted conflicting scheduling would force them to miss the September 4 meeting but appeared in favor of forwarding the temporary financing solution.

Of course, if the council approves a financing plan at its scheduled regular meeting of September 10, that should still bring installation of the new system in before the end of 2018 as desired.

In addition to improved departmental connectivity, the new digital radio 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 communicate with by radio. Past work session discussion with Motorola vendor Teltronic indicated that the ability to achieve such across-departmental radio communications became a trend nationally in the wake of the 9/11, 2001 terrorist attack on New York City and the Pentagon.

On August 27 council abandoned a plan to authorize the purchase fully through an internal loan from General Fund reserves due to new information that an unexpected

$1.2 million of the General Fund reserve of $1.5 million would be lost to unexpected retirement fund commitments related to a program known as GASB 75 – Governmental Accounting Standards Board Pronouncement 75.

While the Town began setting aside money for the program in 2014, recently acquired information shows the authorized set aside fell short of required funding by $1.2 million.

The bottom line was that the planned internal loan paid back as council sees fit over a period of time it determines, would not leave the anticipated $968,000 above the minimum suggested General Fund surplus, but perhaps only $200,000, or even considerably less when other retirement funding requirements become known.

The planned Special Meeting compromise of a temporary General Fund reserve loan to move the purchase forward while council ponders its long-term financing options appeared to be a consensus on August 27, if not nine days later.

Concerns about radical reductions to the General Fund balance reserve are well founded. A failure to maintain recommended General Fund reserve level minimums could affect the Town’s financial-stability bond rating, negatively impacting access to lower interest rates on any loans the Town might require for future projects. That suggested surplus requires a three-month operational reserve, as well as coverage of any outstanding non-enterprise fund encumbrances.

The total General Fund balance that supports the Town’s non-self-supporting fee-based or utility endeavors (Enterprise Funds) is currently estimated at approximately $7,632,807 – though that $1.2-million-plus hit is on the near horizon.

However, it appeared the borrowing scheduled to be voted on Tuesday evening, September 4, would be repaid immediately following the council’s decision on a long-term financing option.

As Royal Examiner reported following the August 27 meeting, those options included the new finance staff-recommended 10-year Virginia Municipal League (VML) loan with annual payments of $65,821 at 3.55% interest totaling $113,205 in interest.

That compared to the now rejected full internal loan, 10-year payback with annual payments of $54,500 annually with no interest involved. Other rejected options included higher annual and interest payments, as well as a lower-interest loan through the New Market Tax Credit Program, utilized to fund the new police headquarters.

Morrison also previously suggested a partial internal loan/partial outside financing option that would not hit General Fund reserves so hard and reduce the amount of interest paid. But on September 4 the councilman decided he did not have enough information to vote on the interim, compromise solution.

Or not – nine days after the special meeting was called Councilman Chris Morrison said he was not prepared to vote without further discussion with staff on the financial implications of a short-term internal loan – maybe next week.