In June, when Hidalgo County allocated millions to cities for COVID-19 expenses, the cash came with a catch.
Hidalgo County provided cities with a 20% advance but kept the remainder of the money — and required cities to submit coronavirus-related expenses for reimbursement.
The city of Mission, which received an allocation of about $11.1 million, couldn’t afford to wait months for reimbursement. To avoid a cash crunch, the City Council applied for a $5 million line of credit from Texas National Bank to cover COVID-19 expenses.
“As per county guidance, the City of Mission was only allowed to submit expenditures at the end of the month, and not as expenditures were incurred, so we made the administrative decision to not use available funds which could have impacted city operations if funds were not reimbursed in a timely matter,” Finance Director Angie Vela said in a statement.
The concerns about reimbursement proved valid. They also underscored the importance of building a healthy fund balance, which provides a financial cushion during emergencies.
The line of credit, which came with a 5% interest rate, allowed Mission to spend the full $11.1 million.
“If the county had sent the full amount up front, there would have been no need for a line of credit,” Vela said. “City management wanted to utilize all funds that were awarded for the benefit of the city and its citizens.”
Mission submitted an initial reimbursement request to Hidalgo County on Aug. 18, asking for $876.07 to cover the cost of personal protective equipment and sanitizing supplies, according to documents released under the Texas Public Information Act.
More than a dozen requests for reimbursement followed, covering everything from the public safety payroll to a Zoom subscription for remote work.
The process flooded Hidalgo County with paperwork, forcing auditors to pore over thousands of pages before authorizing payments.
Hidalgo County released another 20% advance a few months later, which reduced some of the financial pressure.
To avoid the need for borrowing in the future, Mission would need to build up the city’s fund balance.
The city is supposed to keep two months of operating expenses in reserve but fell short during the past few years.
Mission had just $3 million in reserve when the 2018-2019 fiscal year ended, less than half the amount required, according to the Comprehensive Annual Financial Report approved by the City Council last year.
The city administration and City Council, though, keep a close eye on expenses, said City Councilman Ruben Plata, adding that he’s not concerned about the city’s financial position.
“I think we were very careful in Mission,” Plata said.
Mission is also working to keep a full two months of operating expenses in reserve.
“The City of Mission has not completed our 09/30/2020 audit but we have a preliminary figure of $6.68 million general fund balance,” Vela said. “At this preliminary amount we do meet our two month fund reserve policy.”