March 5, 2013
City weighs borrowing to repave more streets
Aldermen will consider a plan at tonight’s Common Council meeting to use a $1 million line of credit to pave more city streets than it usually can afford to pave.
The city of Cortland would enter into a five-year renewable line of credit using, as its repayment, state money it currently receives for paving.
The state funds come from the Consolidated Local Street and Highway Improvement Program, also called CHIPS.
The plan would allow paving of more streets for three years, then two years of maintenance work.
The state money totals $229,000 per year for Cortland. The rest of the repayment would have to come from the general fund, said Mayor Brian Tobin.
“There are a lot of strengths but a lot of questions,” Tobin said. “This would allow us to catch up on paving. We either accept being behind where we want to be or be more proactive. Generally I’m not in favor of borrowing.”
The plan is based on a projection that the state does not intend to lower the CHIPS amount or stop the money anytime soon, said Mack Cook, city director of administration and finance.
“There’s no sign of the funding drying up, although it won’t increase either, which is unfortunate,” Cook said Monday. “The CHIPS funding is not keeping up with the deterioration of our streets. This would be a method for tackling more than a few streets per year.”
The council will meet at 7 p.m. at City Hall.
CHIPS funds come from the state Department of Transportation. The source is state and federal gasoline tax money, Cook said.
The municipality that receives the CHIPS funds must certify the project in question will have a life span of at least 10 years. Paving lasts about 10 years.
The downside of having the line of credit, according to a memo to aldermen from the Department of Public Works and Cook, is that over 15 years the city will pay interest slightly below one year’s worth of CHIPS funding. The benefit is the department can make a long-term plan based on need and not annual funding levels.
Chris Bistocci, the department head, said in the memo that as an example, 10 streets could be scheduled this paving season — spring through fall — at a cost of $708,309. Seven streets would be paved in 2014 for $276,484 and two in 2015 for $72,062. That would leave about $22,500 on the credit line for 2016 to pay for street maintenance.
About four to five streets have been paved annually in recent years.
The credit line would be replenished in 2018 back to $1 million.
“The estimated cost of the work planned in 2013 exceeds the annual funding received under the CHIPS program,” the memo said. “However, by establishing the line of credit amortized as follows, the department is able to work as needed and not do work as funded.”
The memo then included a table of payment and interest rates. Over 17 years, Cortland would borrow $3,238,146 and repay $3,435,000, with interest totaling $196,854.
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