Title
Consider/Discuss/Act on a Resolution Authorizing the Transfer of $5,177,500 McKinney Economic Development Corporation (MEDC) Loans Receivable from General Fund to Solid Waste Fund.
Summary
MEETING DATE: July 20, 2010
DEPARTMENT: Finance
CONTACT: Jennifer Fung, Executive Director of Finance
RECOMMENDED CITY COUNCIL ACTION:
• Approve the resolution
ITEM SUMMARY:
• This resolution authorizes the transfer of $5,177,500 MEDC Loans Receivable from General Fund to Solid Waste Fund.
• The transfer is required in order for General Fund to include half of the outstanding notes receivable from MEDC as available fund balance.
BACKGROUND INFORMATION:
• In January 2009, the City and MEDC entered into two loan agreements totaled $11,070,000 with interest of 4% to 5% and annual repayment of $1.01 million to $1.395 million.
• The transactions were recorded using General Fund cash.
• Due to new Government Accounting Standards Board Statement No. 54, loans from component units are nonspenable and should not be included as available fund balance.
• As the General Fund balance includes half of the loans, it is necessary to transfer half of the outstanding loans ($5,177,500) to another fund.
• It was determined to transfer half of the loan to Solid Waste Fund because of the health fund balance.
• With the transfer, Solid Waste Fund will earn the interest as specified on the transferred loans.
SPECIAL CONSIDERATIONS: None
FINANCIAL SUMMARY:
• Estimated average annual interest income for Solid Waste Fund will increase about $100,000 for the coming seven years. General Fund will lose the opportunity to earn the interest on the transferred loans.
BOARD OR COMMISSION RECOMMENDATION:
• The Audit Committee recommended the transfer of the $5,177,500 from General Fund to Solid Waste Fund during the Audit Committee Meeting on June 22, 2010.