Behrmann says 'No' to public funding of biotech district, does not see Elk Grove issuing bonds 'near term'

Although Elk Grove is taking steps to enhance its credit rating, city manager Jason Behrmann said
taxpayers should not expect to see the city issue bonds "near term."  |  

A staff report for an item on tonight's city council meeting suggests Elk Grove is positioning itself to be more attractive to Wall Street hedge funds and bond rating agencies.

That information was conveyed in agenda item 10.4 that is proposing the city to amend the cash reserve policy. Specifically, in a staff report prepared by Jamie Bandy, who works under the supervision of city treasurer Brad Koehn, recommends the city council adopt an amendment to the policy that would increase from the 15 to 20-percent range to a 20 to 25-percent of annual appropriations be diverted to cash reserves. 

Bandy reasoned "as the revenue neutrality [payments to Sacramento County] deduction is eliminated, the City will have a higher dependency on property tax revenue, resulting also in higher exposure in an economic downturn." 

That additional five-percent cash diversion will be placed in an account Bandy dubbed the "Opportunity Reserve." That money will be "utilized for unanticipated projects, acquisitions, or other needs identified during the course of a fiscal year."

Aside from the saving for a rainy day, Bandy notes there are other benefits to the city council to the creation of the opportunity fund. Notably, the report says "increasing the level of reserves will also be viewed favorably by the national credit rating agencies and the bond market when city bonds are evaluated by potential bond buyers."

In recent weeks, public documents revealed that Elk Grove's economic development director Darrell Doan and California Northstate University president and CEO Alvin Cheung discussed the possibility of Elk Grove playing a role in financing their proposed $750 million for-profit hospital. Although Doan and others said the city would not aid CNU, an inquiry to Koehn and Elk Grove city manager Jason Behrmann was made earlier this week with regards to possible uses of the proposed opportunity reserve account.

To the question if the city will use this or any other public money to fund a biotech district, which has been part of the city's economic development advertising and loosely tied to CNU's proposed hospital campus, Behrman replied "no." Behrmann also said Elk Grove taxpayer money would not be used "to assist in water service delivery or actual purveying of water."   

Perhaps the most revealing information about the city's possible issuance of bonds from Behrmann was his answer to the question "does the city anticipate issuing bonds in the foreseeable future? If yes, for what purpose?" 

Behrmann said "We are not currently planning for any City issued bonds and do not foresee any in the near term. However, we are always evaluating City infrastructure needs for which debt financing may be a viable option for the Council to consider in the future."

If enacted $3.6 million will be allocated to the opportunity reserve.  

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Capt. Benjamin Willard said...

I suspect there might be an ulterior move to establishing the opportunity reserve. Given the clubby nature of our council members, could it be that each council member will be given 1% of that money for use in their respective district?

Nothing helps reelection purposes better than a well-time in-district project. Call it the city council reelection slush fund in the interest of full disclosure.

Josie said...

I believe Mr. Behrmann said it best 'opportunity reserve'! Each councilperson is waiting with baited breath for their next move. Sorry you Mello Roos folks, you lose!

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