Faced with a serious cash flow problem caused by the ongoing budget impasse in Harrisburg, Northampton County Council Thursday night authorized county executive John Brown to borrow up to $50 million.
According to officials, the money is meant to keep the county from slipping under a potential $35 million tsunami of red ink in the coming months.
Brown said Northampton is not the first county in the state to make such a move since cash has stopped flowing from Harrisburg to local government entities as a result of the legislature's inability to produce a budget
"There's no light at the end of the state budget," Brown told council, which passed an emergency ordinance authorizing Brown to "obtain necessary funding to maintain and provide services for departments directly affected by the state budget impasse."
The $50 million will not be borrowed in one lump sum but rather will be drawn down on as needed on a week-by-week basis, Brown said.
According to Brown, negotiations are underway with five banks and the interest rate is expected to be about two percent.
The county's coffers have nosedived in the wake of the stalemate in the state legislature. As of the fourth week of October, the county had $19.3 million on hand, compared to $61.6 million it had this time last year, a $41 million drop, according to an analysis presented to council by the county's budget administrator Doran Hamann.
So far the county has been able to liquidate funds without incurring penalties, but the county will incur stiff penalties if it continues along that path.
Hamann said the county, which currently has about $19 million on hand, will find itself in a financial danger zone once its cash drops to $5 million.
The county's biweekly payroll is $3.2 million and by the beginning of December the county is projected to have only $5.7 million in cash, he said.
Brown said he expects the borrowing process will begin the first week in December.
The county will be back in the black by the third week of March when about $20 million in real estate taxes are received.
The borrowed funds will be repaid as soon as the county receives its share of the state funds that have been held up in Harrisburg.
But even if the budget were approved tomorrow Brown said it may take at least two months for the money to arrive.
"Funds are in such dire need," said Council President Peg Ferarro.