While Crestwood aldermen have transferred money out of the city’s general fund to keep the majority of last year’s refinancing of $2.87 million of debt tax exempt, they will decide in January whether to convert more than $435,000 in excess cash into a more costly taxable note.

Aldermen voted unanimously Dec. 11 to repay from the general fund $331,228 to the capital-improvements fund and $53,281 to the sewer-lateral fund.

The motion made by Ward 1 Alderman Richard Bland and seconded by board President Gregg Roby of Ward 3 also included waiting until a January meeting to discuss the option of converting more than $435,000 in excess general-fund cash into a taxable note.

Reducing the general fund’s cash balance to a federally required level of no more than 5 percent of this year’s expenses in that fund to keep the note tax exempt would result in a negative general-fund balance by the end of 2008, according to a Dec. 7 memorandum from City Administrator Frank Myers to aldermen.

Because of this possibility, Myers has recommended that aldermen consider “the unpleasant option” of converting to a taxable note $442,042 of the city’s projected $773,270 excess above the desired 5-percent reserve needed to keep the annual-appropriation note tax exempt.

“Given the uncertainty of our sales-tax performance in light of recent developments with the Crestwood mall, I believe it is critical to protect our cash position as much as possible, which means the unpleasant option of converting a significant portion of our excess cash limit to a taxable note,” Myers wrote in the memorandum.

If the city wishes to keep its administratively projected balance of $1,195,260 by the end of 2007 in the general fund instead of dropping down to $421,990 and possibly leaving the general fund in debt by the end of 2008, aldermen have the option of converting that excess balance to a taxable note.

The city would have to pay additional interest of up to 2 percent on top of the note’s already-approved 5.44 interest rate on $442,042 of the general fund’s projected excess of $773,270. Converting that excess cash to a taxable note also would result in conversion costs to the city.

Aldermen considered various options Dec. 11 that would have brought the city’s general-fund reserve below 5 percent of operating expenditures, or $421,990 of a projected $8,439,816 in general-fund expenses for all of 2007, to keep the note at tax-exempt status.

The city’s $2.87 annual-appropriation note approved in October 2006 with Royal Banks of Missouri contains an Internal Revenue Service provision that requires a 5-percent cash-balance limit in the general fund to stay at a tax-exempt status.

Any dollar amount more than the projected 5-percent balance of $421,990 in the general fund would have to be applied to the principal on the city’s annual-appropriation note by April 1 if the city wishes to keep a tax-exempt note, according to city officials.

As of Sept. 30, the city reported that it had paid $553,275 of the $2.87 million note, leaving the city with an unfulfilled debt of $2,435,000 to Royal Banks of Missouri.

City officials said aldermen can choose a combination of the following options to keep the excess of more than $435,000 in the general fund out of a taxable note:

• Paying $71,549 in accrued compensatory time for all employees as of Dec. 5.

• Paying $17,825 in accrued compensatory time for employees in excess of the city’s 60-hour cap as of Dec. 5.

• Paying $356,386 for the city’s new police communications system.

• Transferring $773,269 from the general fund to the city’s non-expendable trust.

As of Sept. 30, the general fund had a cash balance of $250,032.91. As for financial activity this year in the general fund, the fund was in the red by $789,215 as of Sept. 30, having collected $5,638,128 in revenues and spending $6,156,343.

Despite that cash loss in the general fund by the end of September, city officials estimate a total revenues-over-expenses 2007 gain of $282,338 in the general fund.

While the city had collected only 59 percent of this year’s expected revenues in the general fund by Sept. 30, city officials are expecting to receive $1,375,895 in property-tax payments from Sept. 30 to Dec. 31.

The city had collected $53,719 in property-tax revenue this year as of Sept. 30 and expect $1,429,614 for the year.

And as the city reported a $2,968,098.39 cash balance in 15 separate accounts — including the general fund — as of Sept. 30, city officials have declined to say how much of that balance is already designated for expenses.

On Dec. 11, several aldermen questioned why a recent audit of the city’s financial statements showed some discrepancies from administratively projected numbers.

“The auditors are showing $488,922 (in the city’s non-expendable trust),” Ward 1 Alderman Mac McGee said. “In the slide before that, you’re showing $657,000. So are you telling me your staff had a $200,000 mistake right there?”

“I’m telling you that a cash-flow analysis is not what our staff is particularly … we don’t do this on a regular basis,” Myers said. “We put these numbers together. Our financial adviser advised us to have the auditors double-check them, which was an excellent suggestion. And as those numbers were double-checked, there were further refinements that were made. And these reflect those further refinements.”

Ward 4 Alderman Steve Nieder suggested that that the administration provide updated audited numbers before aldermen decide in January whether to convert excess cash in the general fund to a taxable note.

“We need to make sure that we have audited, actual numbers that we count on,” Nieder said. “Not the administrative numbers. Those have been shown to be false.

“That would be one thing I would ask the board to consider to have the administration do before we come to a meeting in January to decide what we’re going to do with that money.

“The second concern I have is well, we’re at the last minute again on this particular topic as we’ve done with others throughout the year so far. We knew about this 5-percent limit. And it was brought up at several meetings way back in late August and early September. Why again are we at this 12th hour making decisions? I have a hard time understanding that. Can you help me understand why it took so long to get to this point and how we can keep it from happening again?”

“I can appreciate your frustration,” Myers said. “And I can appreciate the frustration of the entire board in having to make this decision at this point in time. I think there are some circumstances that have led to this kind of dragging on.”

“Like what?” Nieder said.

“I really … if I could talk to you privately about those,” Myers said. “And I’d be happy to do that with any other aldermen. We will certainly work and do our best to not put this board in a position to have to make last-minute decisions. And I appreciate your concern. And I hear what you’re saying.”