What does the $206K note authorization mean for the sewer fund?

The FY 24-25 AFR (latest audited year) shows a sewer-fund balance of $2,449,030. Read fast, that looks like a healthy cushion. Read carefully, it isn’t:

So the working liquid position entering FY 25-26 was about $76K of cash plus $97K of receivables, with $116K of unrestricted equity backing it. That’s the number against which the $451K annual budget and the $205K bond payment in March 2027 have to clear.

The FY 26-27 sewer budget balances at $451,490 in and $451,490 out. The way that balance is constructed creates the borrowing pattern.

What these three choices combine to produce: a fund that covers its bond exactly when collections come in on schedule, has nothing to absorb operating shocks, and depends on a cross-fund transfer to balance even before shocks. The May 11 budget note is what happens when one of those choices meets a real year.

The cashflow simulator runs the adopted FY 26-27 budget day-by-day. With opening cash of $76,472 (the FY 24-25 AFR baseline), the daily balance bottoms out at −$162,048 on 2027-03-31 — two weeks after the bond payment, before Q4 rate collections arrive. The fund needs another emergency advance unless it opens the year with more cash.

The simulator inverts the question: what opening cash would keep the minimum daily balance above each policy floor? All four floors are defensible — each answers a different question about how cautious the village wants to be.

The Solvent floor — $238,525— is the minimum that prevents another emergency advance this year. It’s roughly the size of the budget note the Board just authorized. Said differently: the village is borrowing externally to substitute for the fund balance the sewer fund would need to make it through the year on its own. The GFOA enterprise-fund floor (45 days of operating expense) requires $294,189 — about a $200K gap from where the fund actually sits.

Methodology: opex spread evenly day-by-day; quarterly billings collected with a U-decay pattern (1−U in due month, 60/30/10% of U over next three); bond principal as a single Mar 18, 2027 event; budget-note interest of $7,952on May 31, 2027 (renew scenario — the default outcome if the Board doesn’t act). The full table comparing renew vs. payoff floors lives at /sewer-cashflow.

The note is the sewer fund’s obligation, due May 2027 (or May 2028 with the one-year renewal) for $206K principal plus interest. Three options are on the table. The cashflow simulator dimensions the first two precisely; the third depends on financing terms the village doesn’t yet have.

The two options trade off against each other on two dimensions: renew costs $7,952 more in lifetime interest (a second year of $7,952), but spreads the principal repayment across two fiscal years rather than concentrating it. The per-EDU quarterly rate increase to fund the obligation entirely from rates is +$186.90 under payoff (one year) vs. +$96.92 under renew (level for two years) — math at /sewer-cashflow. Either option leaves the fund cash-negative at year-end absent a reserve build or a transfer; neither replaces the underlying need for a fund-balance policy.

A third option exists but isn’t dimensioned here:

• Convert the advance to a deliberate General Fund subsidy. Instead of repaying the $205,430 advance with borrowed money, the Board can vote to forgive it — recognizing the General Fund as a structural source of support for the Sewer Fund, not a temporary bridge. The budget note never gets issued. This is the cheapest path in current-year cash and the most honest about the enterprise fund’s actual standing, but it breaks the convention that the sewer fund is self-supporting and would invite a rate-design conversation about whether the General Fund subsidy should be made permanent, rate-phased out, or treated as a separate line of accountability. The Board would also need to confirm with bond counsel that recharacterizing the advance as a subsidy doesn’t conflict with GML §9-a.