The City Council is being asked to approve an interfund loan between the Stormwater Utility Fund and the Water & Sewer Fund.  The interfund loan would be used to fund a portion of the costs related to the Beach Street Stormwater Resiliency Improvement Project.

Background

The project is included in the 2024/2025 - 2028/2029 Capital Improvement Program and was identified in the City’s 2013 Stormwater Master Drainage Plan 10-year Update due to continual street flooding and repetitive flooding of homes during storm events. The City was awarded grant funding through FEMA’s Hazard Mitigation Grant Program with a 90% reimbursement. At the time of the award, the project was projected to be $859,556. However, due to economic changes, inflation, and rescoping of the project needs, costs increased to $1,898,770.

Funding:

After careful consideration, Staff is proposing that the remaining costs of the project be funded through a 3-year interfund loan from the City’s Water & Sewer Fund, in the amount of $768,860, as well as $206,310 from prior year reserves in the Stormwater Utility Fund.  

Use of an interfund loan allows the Stormwater Utility Fund to begin a long-standing project with much needed mitigation to areas identified within the Beach Street Drainage system.

The State provides the minimum acceptable procedures for making and accounting for interfund loans as follows:

• The legislative body of a municipality must approve all interfund loans and provide in the authorization a planned schedule of repayment of the loan principal, as well as setting a reasonable rate of interest (based on the external rate available to the municipality) to be paid to the lending fund.
• Interest should be charged in all cases, unless the borrowing fund has no other source of revenue other than the lending fund or the borrowing fund is normally funded by the lending fund.
• The borrowing fund must anticipate sufficient revenues to be in a position over the period of the loan to make the specified principal and interest payments as required in the authorizing ordinance or resolution.
• The term of the loan may continue over a period of more than one year, but must be “temporary” in the sense that no permanent diversion of the lending fund results from the failure to repay by the borrowing fund.

 Staff has analyzed the cash flow needs of the Water/Sewer Utility fund and finds that there are sufficient funds available to make this loan for the three year period. The table below summarizes unrestricted fund balance available.  It starts with beginning unrestricted fund balance for FY2025 and backs out required reserves (amounts the City is required to hold).  Then, budgeted Revenues for FY2025 are added and budgeted expenditures for FY2025 are subtracted. What’s left is the amount that is available for use. 

The estimated interfund loan terms will be:

• $768,600 from the Water/Sewer Utility fund, payable in annual payments of $280,060.07 beginning 10/01/2025.
• The term will be three years, but the loan can be repaid any time during that period,
• The interest rate paid on this loan will be 4.57%, utilizing the Florida Prime Rate as of 01/31/2025.

On December 24, 2024, the City requested a budget increase with the granting authority. There is potential that the grant amount could be extended, in which case, the Stormwater Utility Fund would expedite the repayment of the interfund borrowings to the Water & Sewer Revenue Fund.