An unexpected bond expense to fund a new Medford police headquarters, fire stations and expansion of a park could require tapping into three city accounts to the tune of $3 million over five years.
"It looks like we're robbing Peter to pay Paul," Councilor Chris Corcoran said.
With some reluctance, the Medford City Council agreed to allow temporary borrowing from three city funds set aside to pay for other city services — sewer, storm drains and risk management, which is an account that pays out in situations such as large insurance claims.
The council previously approved raising utility fees to pay off $32 million in bonds for a new police headquarters and fire stations. The council also approved raising rental car fees to pay for a $6 million expansion at U.S. Cellular Park. The city will seek $38 million in bonds to pay for the projects.
Alison Chan, city finance director, said in her conversations with bond experts she discovered that if the city paid an extra $600,000 a year for the first five years on its bond payments, it would get a better interest rate and save money in the long run.
Chan said she wasn't aware of the need for the short-term money when the council approved the bond money for the projects.
Though she couldn't say exactly how much the city would save by front-loading interest payments, she said a maximum of $200,000 would be taken out of each account annually.
The money eventually would be paid back to each of the city accounts with interest, Chan said.
Faced with an additional $600,000 in bond-related expenses annually for five years, the council opted to move money from other city funds rather than further raise utility or car rental fees.
"Unfortunately, we're in this position," Councilor Bob Strosser said.
Councilors expressed concern that taking money out of sewer or storm drain accounts could endanger projects.
Cory Crebbin, public works director, said it would likely not be a problem, but he said the city could borrow from other accounts temporarily if a large project was necessary.
"It might require a rejiggering in the future," he said.
Reach reporter Damian Mann at 541-776-4476 or firstname.lastname@example.org. Follow him on Twitter at @reporterdm.