1997 AGN JUL 15 I26 - Laserfiche WebLink

Browse Search

AGENDA REPORT CITY OF COLTON For City Council Meeting of April 2, 1996 March 28, 1996 TO: MAYOR PULP, CITY COUNCIL AND CITY MANAGER FROM: Julie Hayward Biggs, City Attorney SUBJECT: Forgiveness of Inter -fund Debt INTRODUCTION In February, I was directed by the Council to evaluate the legal consequences that will result to the City if the obligations for repayment from the general fund to the various enterprise, funds were to be written -off or forgiven. At that time, I requested information from the directors of each of the City's enterprise operations as to what effect they believed such action would have on their operations. To date, I have received no quantified information from any enterprise as to what amount is believed to be due that enterprise from the general fund. In discussions with department heads, it appears that while all enterprise operations would benefit from the availability of more funds, current operations are not dependent upon repayment of amounts previously borrowed from these accounts. Necessarily, the analysis presented here is limited to the legal effects of a policy decision regarding non -repayment of these funds. QUESTION PRESENTED Are there any adverse legal consequences that will result if the City elects not to repay funds that were informally borrowed from the City's utility enterprises to cover general fund needs? SHORT ANSWER There are no adverse legal consequences that will result from a decision not to repay the City'senterprise funds. DISCUSSION As indicated in the attached memorandum which was distributed to the City Council in June of 1994, inter -fund debts do not reflect an obligation to third parties for payment of any sum. Rather, they represent internal borrowings from City resources and reserves. There is no due date on these borrowings, no penalty for non-payment, and no interest accruing other than as the City Council may direct. Essentially, the City is its own creditor and can