EAST PROVIDENCE — Besides clarifying the language of the Homestead Audit letter sent out to residents of the city, the East Providence Budget Commission conducted some other imperative business at its meeting Thursday afternoon, Nov. 29, including talk of an immediate financial issue.
James Ryan, a loan officer from Webster Bank, joined the Commission to discuss the borrowing of money in the form of Tax Anticipatory Notes or “TANs,” which are necessary for the city to meet its fiscal obligations.
The Commission approved seeking as much as $25 million in TANs in December to use towards payroll and other bills, though it’s likely the city will not need to borrow that much. East Providence Finance Director Malcolm Moore pegged the number closer to $22 million and was even hopeful it could be as little as $20 million. Both figures are significantly less than the city has had to borrow in the recent past.
Mr. Ryan told the Commission the process of Webster Bank approving the lending of TANs to East Providence is well underway. The bank, which backed TANs for the city last fiscal year as well, is waiting for a little more information from Mr. Moore.
“Once we have all the documentation, it will probably take another two or three days to finish the process. And the cash will be in the city’s account within five business days,” Mr. Ryan said. “We’ve already drafted our internal numbers. The fundamentals (of the loan) are already there. We can turn it around in a matter of days.”
Budget Commission chairman Diane Brennan pressed Mr. Ryan slightly, asking for some assurance that the loan will go through in a timely manner.
“You’re off credit watch and you have a positive outlook. Those things usually indicate what the ratings agencies will do,” Mr. Ryan added. “I’m very comfortable with (the loan). We have a verbal agreement internally.”
Significant to the city getting the TANs has been the work done by the Commission over the last year as the state-overseers have reduced East Providence’s expenditures and attempted to close the retirement plan funding gap in the budget, two key factors to pulling the city out of its fiscal morass. Ratings agencies like Standard & Poors and Moody’s have taken notice, improving their current and future forecasts about East Providence’s finances.
The Commission’s efforts also mean it’s likely the city will be able to borrow at a lesser rate of interest. Mr. Ryan said TANs for Fiscal Year 2012 came at a rate of 3.75 percent. The new TANs should be between 3.25 and 3.5 percent. It’s also expected the city will use a so-called “draw-down” account, which gives it the flexibility to borrow only as much as it needs instead of one lump sum and should save on interest payments.
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