The city typically borrows the money in November, with City Council approval, for projects such as paving streets, constructing athletic fields, renovating city buildings and buying firetrucks.
Gray said the city will delay borrowing the money until early next year, when Portland officials are expected to have a plan in place to address the School Department's estimated $2.5 million budget deficit and make sure it doesn't happen again.
Gray said the deficit reduction plan will show Moody's Investors Service and other ratings agencies that Portland is financially sound and worthy of lower interest rates when it sells municipal bonds to raise money for capital projects.
"Before we go to Wall Street and sell the bonds, we have to show them a plan to address the deficit," he said.
Selling bonds now, without a deficit reduction plan in place, could cost the city thousands of dollars in higher interest rates, Gray said.
The borrowing delay and the deficit reduction plan are among several actions that city finance officials are taking as they try to reconcile school expenditures and revenues for the 2006-07 school budget.
The city took over the school finance office Thursday after schools finance director Richard Paulson resigned amid the city's worst financial and credibility crisis in years.
The deficit includes $1.7 million in overspending that started shortly after the City Council reduced the overall 2006-07 school budget by $500,000. Then the committee agreed to hire more than a dozen special education teachers and settled employee contracts with 3 percent salary increases instead of 2.5 percent as budgeted.
The deficit also includes a revenue shortfall of $850,000 in Medicaid reimbursements, school officials said.
Part of the deficit will be covered by the School Department's remaining $1 million in surplus funds. The $1.5 million balance is considered a cash deficit that probably will be covered by the city's $20 million reserve account. It must be repaid within two years to preserve the city's high financial rating.
Gray said he expects to have a firmer number soon for the school deficit, as well as any overspending by other city departments during the fiscal year that ended June 30.
Gray said his finance staff is expected to reconcile all spending and revenue, including grants, in last year's $82 million school budget and assess the validity of the current $85.7 million school budget.
City finance officials are expected to oversee the school finance office through the end of the year. Gray said the added duties could become permanent.
Gray said he has yet to ask city department heads to recommend projects suitable for capital borrowing. He said he is unaware of any major projects that would be delayed as a result of the precaution.Last year, the city borrowed $3.1 million for sidewalk and paving projects; $1.7 million for improvements to the Barron Center, Evergreen Cemetery and other public buildings; $1 million for school building repairs; $1.6 million for park improvements; and $1.1 million for Public Works and Fire Department equipment.
Staff Writer Kelley Bouchard can be contacted at 791-6328 or at:
kbouchard@pressherald.com
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