EAST CHICAGO | The City Council on Monday offered preliminary approval for a line of credit to hedge against the possible late distribution of property taxes next year.
Each year for more than a decade, East Chicago, like many Indiana communities, has sold so-called tax anticipation warrants so that payroll can be met and bills paid even if Lake County is tardy in releasing the city's share of tax revenues collected this fall.
Council members without comment unanimously approved borrowing up to $35.2 million from the Indiana Bond Bank to ensure funding for next year, with a final vote scheduled for Dec. 10.
The bond bank, a state agency, annually loans more than $700 million on these tax anticipation warrants to local Indiana governments, and those loans are then repaid when property taxes are distributed.
Money available on the warrants is based on the city's assessed valuation, though East Chicago used only $15 million in advance this year, and $19 million in 2010.
The state bank generally offers lower interest rates than private financial institutions. The ordinance preliminarily approved Monday provides for a maximum rate of 6.5 percent, but the exact rates are set when the bonds are sold.
Tax anticipation warrants sold by East Chicago for this year's funding carried an interest rate of just under 3 percent.