*Authorize a temporary operating loan between the Solid Waste Management Fund and the Recreational Cannabis Tax Fund for not more than $800,000 to provide interim funding for approved carry-over allocations and avoid negative fund balance at the end of FY 2023-24

This legislation authorizes a temporary interfund loan from the Solid Waste Management Fund to the Recreational Cannabis Tax Fund. The loaned funds will not exceed $800,000 and will be repaid with interest no later than June 30, 2025. Since FY 2022-23, recreational cannabis tax revenues have declined. The City has responded by making reductions to ongoing allocations as necessary, including by an additional 22% beginning in FY 2024-25 to balance the RCT Fund’s five-year forecast. These planned reductions in ongoing allocations of RCT Fund revenues are expected to put the RCT Fund budget in a sustainable and balanced position over the coming five years. While reductions to ongoing allocations are expected to put the fund in balance over the five-year forecast, there remains a one-time funding gap in FY 2023-24 as a result of a combination of significant revenue declines and City Council's approval of a large one-time allocation related to prior year carryovers of unspent allocations. The resulting unfunded liability is projected to be approximately $800,000, which is the amount funding needed to ensure that the RCT Fund remains in balance at the end of FY 2023-24. Oregon State Local Budget Law requires that fund balances not be negative at the end of a fiscal year. U.S. Generally Accepted Accounting Principles ("GAAP") require that governmental funds not end the year with negative cash assets. An interfund loan can provide resources necessary to comply with Local Budget Law and GAAP. Per Oregon Local Budget Law, the City may loan money from one fund to another for operating purposes for up to one fiscal year. The Solid Waste Management Fund has sufficient resources to lend $800,000 to the RCT Fund temporarily until sufficient recreational cannabis tax revenues are received to repay the loan. Loaned funds from the Solid Waste Management Fund will be repaid with interest no later than June 30, 2025, the maturity date of the loan.

The RCT Fund will repay the Solid Waste Management Fund borrowed funds with interest no later than June 30, 2025. The interest rate will be equal to the City’s Investment Portfolio monthly average yield, resulting in a neutral economic impact to the Solid Waste Management Fund. The l oan may be prepaid in whole or in part at any time. Partial prepayments of the interfund loan, if any, will be applied first to accrued interest on unpaid principal and then to the outstanding principal balance. If an interfund loan from the Solid Waste Management Fund to the RCT Fund is approved by the City Council, resources and expenditures relating to the loan will be included in the Over Expenditure Ordinance for the City’s FY 2023-24 budget.

This is an administrative action to provide a temporary loan to the RCT Fund. No direct community impact or involvement is anticipated.