City council approves capital fund

Libby City Council voted unanimously March 15 to create a capital improvement fund, the first step in creating a fiscal tool to prepare for major expenditures down the line.

Used in conjunction with a Capital Improvement Plan (CIP), the fund will let city officials plan for expenses as well as soften the blow to municipal coffers — and the taxpayer by extension. City Clerk Samuel Sikes, who also serves as treasurer, is spearheading the effort.

“The problem is we know the cop cars are going to wear out, we know the dump trucks are going to be replaced and we’re going to need a new loader, and what if the city needs a new fire engine,” Sikes said. “[This] is a long-range, financial planning tool.”

CIPs and funds are common among local governments across the nation. Sikes said by saving up ahead of time, city officials might be less reliant on loans — thus avoiding accruing interest — to fund major purchases, improvements and repairs.

To be eligible for the CIP, expenditures must exceed $5,000 and have a life expectancy of five or more years. Sikes foresaw potentially spending the money to secure grants that required matches for major projects.

“Why are we always getting loans for things when we could save money, so instead of paying interest we could make interest,” Sikes said.

He pointed to the rebuilt Flower Creek Dam as an example. The city could still be paying off the loan when the structure reaches the end of its lifespan.

With the capital improvement fund created, Sikes is beginning to craft a CIP. The plan will include scheduling impending projects as well as working out where the dollars will come from. One method might be rerouting funds as outstanding loans are paid off instead of lowering taxes, he said. Setting aside unspent dollars at the end of the fiscal year is another approach.

Sikes took a hypothetical $50,000 loan as an example. Once it’s paid off, the money that would have gone toward repayment could end up in the capital improvement fund. That would keep tax rates steady and free officials from scrambling and potentially turning to taxpayers again to cover the cost of an expense just over the horizon.

Once the plan is crafted, it will go before the public and city council for adoption. Public buy-in is critical, Sikes said. He said he spoke with past city officials to try and understand why Libby lacked the fiscal tool.

Among the responses, Sikes was told that residents reasoned that if the city could afford to save, it could afford to lower taxes.

“I can’t atone for the people in the past, I can only say that, moving forward as the city’s financial officer, I cannot advise we keep getting loans and be considered a good steward of the people’s money,” Sikes said.