Clinton’s city administrator has confirmed to the Clinton Herald that the city this week worked out a rare agreement with a local bank that will cover the city’s cash flow crunch — and included covering payroll this week — as it tides itself over until receiving taxes in October.

That confirmation, made by City Administrator Jeff Horne, came on the heels of a one-half hour session this afternoon during which he told the Clinton City Council that the city’s general fund was $1.44 million short at the end of the fiscal year in June and the council must find ways to close $1 million of that gap, reorganize the city structure to support itself and start building up its reserves.

According to a memo sent from Horne to city council members, Mayor Rodger Holm and Horne created a plan with Clinton National Bank in which the bank will cover the city’s cash flow needs. When the city receives tax payments in October, it will pay back the amount owed to the bank plus interest.

“Without this, we would not have made payroll this week.” Horne stated in his email.

The council today was beginning work to fill in the gap, restructure and find ways to rebuild city coffers. During their session, Horne explained a general fund budget reduction matrix in which he listed every possible large item that could be cut. He tasked the council with cutting $800,000 by having council members individually score items to determine how cuts could be made.

Horne said he also is working with departments to make smaller cuts that could equal $200,000. He said he is developing an early retirement plan for city workers and will have a list of those retirees ready by the end of next week. That also could affect the number of staff members the council may reduce as it reorganizes the city structure. The possibility of selling city assets, such as the municipal dock, also will be discussed at a separate meeting.

As Horne described the use of the matrix, Ward 3 Councilwoman Bev Hermann asked Horne how the city ended up in this financial situation.

Horne said lack of proper recordkeeping played a major role.

“There’s been no financial reporting — basically — at all,” he said, adding that city officials have been working with numbers that “weren’t good. ... The key for the city is good reporting.”

He said other items playing a role include the purchase of the Dodd farm and investment in the Clinton Marina and said the city’s investment in the railpark development is ”hamstringing us now.” He said while the Clinton County Development Association will be granting the city $200,000 a year for eight years, the city has fronted money for the work and is in a cash bind.

Also, a $4.5 million lawsuit settlement over Medicare and Medicaid reimbursement — a 2010 settlement in which the city agreed to pay $450,000 over a 10-year-time period for suspected overbilling — has caused an impact on cash flow. He said 8 percent of property taxes also had not been paid to the city, some of which can be blamed on foreclosures and waiting for lenders to cover the taxes, and that the shortfall hurt city receipts. Firefighter post-employment benefits also cost the city $500,000 over three years, Horne said.

After the council members score their budget reduction lists, they will turn them in to Horne, who will use a weighted system to determine what the council wants to have happen. A special meeting will be called to go over the council’s selections and draw up a list of cuts.

For more on this story, see Wednesday’s Clinton Herald.

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