State Leaves Local Government Shorthanded

It sounds bad — not to mention confusing — but the Town of Corte Madera has a plan to get out of the red.

Town Treasurer George Warman outlined Tuesday night in front of the Town Council a plan to sell Tax and Revenue Anticipation Notes (TRANS) to pay for an anticipated short-term debt in this fiscal year. 

The notes, similar to bonds, are used to cover to budget shortfall after the State of California borrows a percentage of local sales tax revenue, to be paid later.

The motion to issue the TRANS was passed unanimously by the Town Council. Council member Michael Lappert was not in attendance. The money can be used for general fund projects.

The Town of Corte Madera has gone to TRANS four times since the 2006-07 fiscal year. The Town didn't need any TRANS money last year. This year's TRANS is calculated at $2,495,000.

Financial consultant Craig Hill estimated that the underwriting cost will be $20,000 and the interest rate on the TRANS will be about 1.5 percent. Hill said that is similar to what other towns pay.

TRANS are "short-term notes that fund the State’s cash management needs during a fiscal year. Each note is a promise by the State to repay investors the amount of money borrowed (the principal), plus interest, from the State's available monies at the end of that fiscal year," according to a State web page.

According to Warman's analysis, the TRANS are a result of a plan by the State of California to take 25 percent of local sales taxes and 25 percent of vehicle license fees. That money is then repaid to local governments in two parts, in January and May. The strategy leaves towns like Corte Madera with a temporary debt that "we are required to cover from the end of September to the middle of December," according to Warman.

"This year the TRANS is a little bit less than it has been in the past," Warman said, because the Corte Madera Public Library is no longer part of the town's budget. Its budget is directed by the Marin County Free Library.