The city's plan to sell tax-anticipation notes and make money by investing the funds has been postponed until the summer because it would be only a "break-even situation" during the current fiscal year, according to City Manager R. Kenneth Jue. He said that because the fiscal year is more than half over and interest rates are declining, the cost of issuing the bonds would be about equal to the earnings, leaving a "zero profit."
During the 1985-86 fiscal year, however, the city hopes to earn a $30,000 profit by selling about $2 million in notes. Jue said work has started on putting a package together and notes will be marketed in June. The city has retained the Century City investment banking firm of Bancroft, O'Connor, Chilton & Lavell to serve as a consultant and managing underwriter for the issue of notes.
Tax-anticipation notes may be sold by public agencies with general fund deficits, such as Hawthorne, and are intended to ease cash-flow problems. However, Hawthorne is putting the emphasis on profit, which is derived from the difference between the marketing costs and interest paid on the notes, and the rate earned on investments. Notes must be redeemed by the end of the fiscal year in which they are issued.