ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, February 1, 1996 TAG: 9602010013
SECTION: CURRENT PAGE: NRV-1 EDITION: NEW RIVER VALLEY
DATELINE: PULASKI
SOURCE: PAUL DELLINGER STAFF WRITER
The interest the town had hoped to earn on some of its investments is falling short six months into the fiscal year.
And that means the town may have to dig into the investments themselves to help fund its year-old economic development program. And that will mean less interest for the town as time goes on.
This week, members of the town's Finance Committee learned that bank investments of the town's Urban Development Action Grant funds, earmarked for industrial development, are not performing as expected.
Nearly two-thirds of the town's economic development program, established a year ago, is funded from interest generated by those investments. The other third came out of the principal.
If the anticipated interest is not there by year's end, the town may have to increase the amount it takes from its principal investment.
The money so far has allowed the town to hire an economic development director, Barry Matherly, and fund a number of initiatives by its 30-member Economic Development Board.
Accomplishments to date include promoting tourism by keeping two annual town festivals going, improving signs at town entrances and getting state tax breaks for new or expanding industry in an Enterprise Zone within the town.
Based on current interest rates, the urban development money will generate $72,148 in interest by the end of the fiscal year next June. Original estimates had been for $125,000 in interest earnings.
The town first secured the funds from federal sources for an industrial expansion loan. When the loan was repaid, the town was allowed to keep the money. Since then, the fund has served as a loan source for new or expanding businesses.
When the town first approved funding for its economic development program, some Town Council members had expressed concern about using any of their principal.
The interest performance was part of a six-month "snapshot" of Pulaski's financial status, presented to the town's Finance Committee this week.
Town Manager Tom Combiths pointed out that the economic development program had spent only 32 percent of its budget as of the end of November, so the funding is being used carefully.
Interest rates have declined nationwide since Max Beyer, the town's former finance director, invested the urban development monies and other available funds last year.
Another reason for the lower interest is that two of Beyer's investments will not mature until the 1996-97 fiscal year, and cannot be counted as part of this year's interest.
The delayed interest payments on the two long-term investments would bring the generated interest closer to projections if they were pro-rated for the first six months of the fiscal year. Total interest, however, still would not be as high as projected.
LENGTH: Medium: 58 linesby CNB