Beverly Hills : Bond Issue Considered

City officials are looking into issuing short-term revenue bonds to make up for a routine discrepancy between revenue and expenditures during the fiscal year.

According to Finance Director Don Oblander, Beverly Hills generally spends more than it earns during the first half of the fiscal year, which begins July 1. This is generally offset by license fees and other revenues later in the year, he said in a memo submitted to the City Council.

But this year, since the City Council decided to make its entire $5-million support payment to the Beverly Hills Unified School District in July, rather than spacing it out over 12 months, the municipal cash flow could suffer a crimp, Oblander said.

To offset that, he proposed the issuance of $15 million in short-term, tax-exempt notes for a period of up to 13 months--in effect, borrowing that much money at a cost of about 6.5%.

At the same time, the city would invest its revenue in financial instruments paying 8% or more. The difference, expected to be more than $100,000, would offset the loss of interest income resulting from the one-time, $5-million payout to the school district, Oblander said.

In an accompanying letter, City Manager Mark Scott said the short-term financing technique would maximize investment earnings and be seen by analysts who follow municipal investments as a sign of professional management.

The proposal is expected to be discussed at the City Council’s Tuesday meeting, its first in the newly refurbished Civic Center.