Weslaco to seek credit line to offset revenue shortfall

WESLACO — The city will secure a $300,000 line of credit from a local bank to ensure it can continue meeting daily financial obligations, the City Commission decided Tuesday.

The move comes as the city tries to prepare for an expected revenue shortfall in its general fund in early December if some of its expected revenue does not come in as early as hoped.

The vote to secure a credit line does not mean the city will automatically obtain a loan from Edinburg's First National Bank; rather, it ensures the city has the option to do so if other remedies aren't effective.

"This will be a last resort," City Manager Anthony Covacevich said at Tuesday's commission meeting. "The last thing ... I want to do is borrow money."

The city plans to use some $312,000 in revenue from the sale of the Boys & Girls Club building earlier this year to temporarily offset the revenue shortfall.

That money was in a separate city fund but will be transferred to the city's general fund. Mayor Buddy De La Rosa said during Tuesday's meeting the move would "ensure the solvency of the city," adding that if no action had been taken, Weslaco would have "run out of money."

The transfer will only be temporary, as city officials anticipate securing $1.3 million in property taxes and other revenue come late December and early January to fill the gap.

The city has found itself in a tough spot after it spent years drawing money from its rainy-day fund while also taking money from its water and sewer funds, making it difficult for the municipality to address unanticipated financial problems.

Originally, the city administration had sought a $1 million line of credit, but that move drew the ire of De La Rosa.

The new $300,000 credit line will be available through March 2009 and will be used as a safety net in case the city is still unable to meet financial obligations despite the temporary use of money from property sales.

The only city commissioner who opposed the credit line was Patrick Kennedy, who said he was skeptical of the city taking on loans at a time when it is already in a delicate financial situation.

"If we have the money internally, we should just take care of it," Kennedy said.

In the future, the city may also take out a tax anticipation loan, a short-term loan that uses future tax revenues as collateral, De La Rosa said. Such a move would require notification to the public and authorization from the state.

Meanwhile, the city plans to work with its financial advisers to examine the books to find out where it went wrong and how it can address its financial crisis in the long term.

"I don't think by any means that we're out of the woods," De La Rosa said, adding he believes the city is now taking steps to address its financial woes.

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Ryan Holeywell covers McAllen, PSJA, the Mid-Valley and general assignments for The Monitor. He can be reached at (956) 683-4446.