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Annapolis Running Out Of Cash Fast

| September 13, 2010, 07:32 PM | 2 Comments

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Disclaimer: We were unable to attend tonight’s City Council meeting. We were provided with the attached (PDF) cash projections prior to the meeting. Naturally, we had some questions and observations. We had a call with Phill McGowan moments before the meeting was to begin and his comments are included. You can reach your own conclusions and we welcome you to leave your thoughts in a comment..


  • The three entries from Bank of America on September 13 ($1.1 million) appear to be the last of the $10 million dollars approved in May. (PM: No, the $10 M was spent in July. These are other receipts)
  • It seems that the plan to receive money from the County on an every other week basis never materialized as the property tax revenues are coming in monthly. (PM: The plan was for every other week through October and then monthly thereafter)
  • It seems that the monthly debt service payments are for interest on the initial $10 million dollar line of credit plus the bond payments. (PM: Bonds and Leases)
  • The $10 million line of credit appears to be paid back in late November. (PM: Yes)
  • At the end of the year ,the City will not have enough cash to pay their bills and without any property tax revenue will be forced to seek yet another loan.
  • The unreleased checks (top right column page 1) are currently being held and are reflected in the 10/11 release. (PM: Yes)


  • Where and how did the City spend the initial $10 million line of credit?
  • Is the Mayor looking to introduce the bill tonight to access the additional $6 million already authorized by the Council? (PM: No)
  • Will the Mayor be looking to increase that $6 million to the $10 million he initially requested?

Comments From McGowan

  • This does not include future cuts in transportation or reduced overtime spending.
  • This does not include increased revenue from increased development fees.
  • The City is considering refinancing their bonds which could realize a $5 million savings.
  • The goal is to make it through October and then look at a longer term picture as to the need for additional loans or lines of credit

Again, the financial survival of the City is based on a lot of stars aligning.  We do not have developers lined up to build int he city, so the additional revenue from increased fees is a dream. We are still in a precarious position with the litigation surrounding the construction of the police station. We have some expenses to look forward to for the Market House (either in construction, management or a litigation–which we understand is a real possibility). Once November rolls around, the revenues to the City decrease and the expenses have the potential to increase.

With these factors, it seems very likely that the Mayor and Council will, once again, borrow money to balance the budget. Expect a resolution in October to tap the $6 million and another in January to tap the balance of the of the requested $10 million.  The net result will be that in order to balance an $80 million budget, the City will have borrowed $20 million and paid back $10 million.

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About the Author - John Frenaye

John is the publisher and editor of Eye On Annapolis. As a resident and business owner in Anne Arundel County for nearly 25 years, he realized that there was something missing in terms of community news–and Eye On Annapolis was born in late spring 2009.

John’s background is in the travel industry as a business owner, industry speaker, and travel writer. In terms of blogging and social media, he cut his teeth with MSNBC.com.

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Comments (2)

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  1. Reynold Cavern says:

    it seems to be a rather transparent shell game. I guess it beats closing down city hall in the short term. Very nice information and observations .

  2. Let me address a few issues that were raised (not in any particular order):

    Your prediction that the City will hold a LOC balance in excess of $5 million in early 2011 is likely wrong. Here’s why: When the City Council authorized to extend the City’s credit limit to $16 million on July 29, it approved a provision that requires the City to reduce its credit limit to $5 million by the end of 2010. Unless the council adjusts the credit limit again by charter amendment, the City’s credit limit will reset to $5 million on Jan. 1, 2011.

    Development fees have NOT been raised. City Manager Mike Mallinoff recently proposed the idea of raising fees to make them consistent with Anne Arundel County’s fee schedule, and developers are considering whether to break ground on projects before fees might go up. (Any fee increase must be approved by the City Council.)

    Regarding how the City spent the line of credit, here is the comment I prepared for Annapolis Sound last month:

    The $10 million line of credit was drawn in the following increments over the course of two months: $3 million on May 26; $4 million on June 23; and $3 million on July 28. These amounts were deposited into the City’s checking account at Bank of America. All payments are made out of this account.

    The LOC was used for payroll, paying vendor bills, insurance bills and debt service, and purchasing supplies. Money drawn from the LOC was co-mingled with other City funds collected – such as utility payments, recreation fees, parking fees and permit fees – during this period. So while we know what the City’s expenses have been over those two months, it’s difficult to identify which expense was paid with the LOC and which was paid with other funds.

    For the presentation to the City Council on July 29, Finance Director Tim Elliott broke down the City’s revenues and expenses between May and July 27 – the period in which the LOC was drawn and spent.

    Expenses are broken down into three broad categories:

    Cash paid to non-employees, i.e., electricity, phone service, other vendors
    Cash paid to personnel, i.e., payroll and insurance
    Debt service payments, i.e., bond and lease payments

    Cash received: May-July 27

    LOC Overall
    May $3,000,000 –> $6,592,974
    June $4,000,000 –> $9,195,738
    July $3,000,000 –> $6,760,033

    Total $10,000,000 –> $22,548,745

    Expenses: May-July 27

    Cash paid to non-employees: $6,143,311
    Cash paid to personnel: $14,506,902
    Debt service payments: $1,752,107

    Total $22,402,320

    Phill McGowan
    Public Information Officer
    City of Annapolis

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