Wilmington Mayor Mike Purzycki announced a plan to repay what he said is an unanticipated and ill-advised $3.4 million loan that was given the green light by previous city administrations for the Wilmington Housing Partnership.
He rejected a proposal by the City Treasurer to dip into the city’s reserves to pay off the loan. The Treasurer’s post is an elected position, independent of the mayor’s office.
The housing partnership is a public-private nonprofit that has provided affordable housing for a quarter century. The organization has struggled with recent projects.
Purzycki said his proposal to repay the loan owed to JP Morgan Chase will preserve the city’s current financial and debt position and protect the city’s bond rating.
The Mayor said he is proposing that the City obtain a $3.4 million short-term bridge loan from a local lender to repay JP Morgan Chase in full.
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Purzycki said the short-term bridge loan will be converted to a bond as part of Wilmington’s next bond issue, scheduled for the fall of 2020.
The $3.4 million borrowing is included in a proposed fiscal 2020 Capital Budget, which will be presented to the City Council later this month.
A release stated that the repayment plan is supported by the city’s external financial advisor, external auditor, Director of Finance and Budget Director.
Mayor Purzycki also said today that he is opposed to a loan repayment proposal suggested by City Treasurer Velda Jones-Potter because it does not consider the importance of preserving the city’s fund balance and protecting the city’s bond rating.
Rating agencies downgrade municipalities without adequate reserves, with lower ratings resulting in higher interest payments by cities.
Purzycki said the Treasurer is suggesting that $3.4 million in city cash reserves be used to repay the loan, which he said will lead to a tax increase.
He estimated that the Treasurer’s proposal could result in a tax increase as large as 8.5 percent.
Purzycki said the $3.4 million loan is uncollectable by the city, with the partnership having insufficient assets.
“I will not support, nor will I ask City Council to support, any amount of tax increase related to the repayment of this loan,” said Purzycki. “I look forward to working with City Council to resolve this matter as quickly as possible.”
