§ 1112 Bond Fund Withdrawal Authority

This law lets the finance director take money out of the General Fund, but only up to the amount of unsold bonds that were approved for this project, and then requires that money (plus the interest it could have earned) be put back into the General Fund later.

Key Takeaways

•The finance director can only borrow up to the value of bonds that haven’t been sold yet.
•All borrowed money must go back into the General Fund.
•The city must also pay back the interest the money would have earned in the Pooled Money Investment Account.

Example

A city wants to build a new park and has been approved to sell $5 million in bonds for the project. Only $2 million of those bonds have been sold so far, leaving $3 million of unsold bonds.

The finance director can borrow up to $3 million from the General Fund to start the park work. After the bonds are sold and the money is used, the city must put the borrowed amount back into the General Fund and also add the interest it would have earned if the money had stayed in the Pooled Money Investment Account.

How to Calculate

Return to General Fund = Withdrawn Amount + (Withdrawn Amount × Interest Rate × Time)

Find the amount taken out of the General Fund (the withdrawn amount).
Determine the interest rate that the Pooled Money Investment Account would have paid (the law doesn’t give a rate, so use the rate the account actually pays).
Multiply the withdrawn amount by the interest rate and the length of time the money was out (in years) to get the interest earned.
Add that interest to the withdrawn amount. The total is what must be returned to the General Fund.

The city withdraws $1 million for three months. The Pooled Money Investment Account pays 4% interest per year.

Result: Interest = $1,000,000 × 0.04 × 0.25 = $10,000. Return = $1,000,000 + $10,000 = $1,010,000.

The Director of Finance may authorize the withdrawal from the General Fund of an amount or amounts not to exceed the amount of the unsold bonds that have been authorized by the committee to be sold for the purpose of carrying out this chapter. Any amount withdrawn shall be deposited in the fund. Any money made available under this section shall be returned to the General Fund, plus an amount equal to the interest that the money would have earned in the Pooled Money Investment Account, from money received from the sale of bonds for the purpose of carrying out this chapter. (Added by Stats. 1999, Ch. 728, Sec. 2. Approved in Proposition 16 at the March 7, 2000, election.)

Key Takeaways

•The finance director can only borrow up to the value of bonds that haven’t been sold yet.
•All borrowed money must go back into the General Fund.
•The city must also pay back the interest the money would have earned in the Pooled Money Investment Account.

Example

A city wants to build a new park and has been approved to sell $5 million in bonds for the project. Only $2 million of those bonds have been sold so far, leaving $3 million of unsold bonds.

How to Calculate

Return to General Fund = Withdrawn Amount + (Withdrawn Amount × Interest Rate × Time)

Find the amount taken out of the General Fund (the withdrawn amount).
Determine the interest rate that the Pooled Money Investment Account would have paid (the law doesn’t give a rate, so use the rate the account actually pays).
Multiply the withdrawn amount by the interest rate and the length of time the money was out (in years) to get the interest earned.
Add that interest to the withdrawn amount. The total is what must be returned to the General Fund.

The city withdraws $1 million for three months. The Pooled Money Investment Account pays 4% interest per year.

Result: Interest = $1,000,000 × 0.04 × 0.25 = $10,000. Return = $1,000,000 + $10,000 = $1,010,000.

Key Takeaways

Example

How to Calculate

Key Terms

References

§ 1112 Bond Fund Withdrawal Authority

Key Takeaways

Example

How to Calculate

Key Terms

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References