A close look has shown Atherton officials that they should have all the money needed to build a new civic center, but also a few months of negative cash flow during several years of construction as the project proceeds.
While it's far too early to really know what lies ahead financially for Atherton as it builds its new civic center -- the project hasn't even gone out to bid yet -- the town is trying to predict any cash flow problems it might have.
A spread sheet looking at the town's finances through June 2021, put together by Finance Director Robert Barron, was discussed by the Atherton City Council at a Jan. 10 study session.
Right now, that spread sheet shows a total of four months in 2020 and 2021 when the town might not have enough money on hand to pay its construction bills, with $2.9 million as the largest one-month deficit. By May 2021, however, the spread sheet shows the town back in the black.
The problems occur because the way in which the town receives funds doesn't line up with its bills. For example, property taxes, Atherton's largest source of revenues, are paid only twice a year, in April and December.
The spread sheet shows that even without a major construction project, the town had a negative cash flow in November 2017 of just under $160,000, but by December had a $4.4 million cash balance.
The spreadsheet is based on the assumption that the town will maintain a reserve fund of 35 percent of general fund expenditures, or about $5.2 million, at all times.
Construction is expected to take two to three years over periods of four fiscal years, from the current 2017-18 fiscal year to 2020-21.
Council members had several ideas about how to deal with any short-term cash flow problem, although it's anticipated they won't have to make a decision for several years.
One suggestion was to ask San Mateo County to advance Atherton some of its property tax revenues or make it a loan that would be repaid with property taxes. Another was to get a line of credit that would allow the town to borrow money as needed.
Two council members, Bill Widmer and Rick DeGolia, suggested they might "reinvigorate the fundraising" to get another $3 million or so in donations toward the civic center. Offering the rights to name parts of the project after donors is still an option, Mr. DeGolia said.
The town will be able to update the spreadsheet as it gets more information about the project and about its future revenues and spending.
Right now the spreadsheet shows a $2.2 million negative cash balance in October 2020, and a $2.9 million negative balance in November 2020. The town is then projected to operate in the black until March 2021, when the balance dips to negative $910,000, and April 2021, when the town's cash flow is nearly $2 million in the red.
The spreadsheet shows that the project will deplete all of the existing surplus library funds (which come from the county library system) as well as any additional surplus funds that come in during construction.
By June 2020, the town will also have spent all of its investment portfolio, except for a $5.4 million reserve fund.