INDIANAPOLIS — A new Logansport city administration may mean new plans for $1.1 million the previous mayor and City Council earmarked for 18th Street.

Councilman Bob Bishop is leading the charge to find out whether the federal highway dollars left over from a $4 million bond issue to build roads for the new Ivy Tech Community College campus can, in fact, be used for the replacement of two culverts and construction of a roundabout on 18th Street. The money had been allocated by Indiana Department of Transportation.

He said he believes that using that money to repay the bond will help prevent the city from having to dip into its reserves, which it has had to do to make four of the last six payments.

“If there’s surplus money, my interpretation is that it must be paid back,” he said. “You move it into the same fund that’s used to pay back that bond, that $4 million bond, and if we can get that done, which I believe we will, that relieves the taxpayers of $1.1 million in what they’re liable for.”

Bishop referred to Indiana Code 5-1-13-2 (b), which states: “The legislative body or other governing body of any such local issuing body may by an order, ordinance or resolution entered of record direct the disbursing officer of such local issuing body to transfer the surplus bond proceeds or investment earnings to the fund of the local issuing body pledged to the payment of principal and interest on those bonds, and upon such order, ordinance or resolution being made, the disbursing officer shall make such transfer. Thereafter such funds transferred shall be used for the payment of the bonds to which the surplus bond proceeds or investment earnings are attributable or interest due for such bonds.”

The $180,000 bond payments are paid from property taxes. Bishop said the city pulled from its rainy day fund to make four of its last six payments, for as little as about $30,000 to as much as $77,000.

“We’ve been making up the difference out of our rainy day fund when we have this $1.1 million that I want to use to pay that back,” he said. “We have our attorney looking at it now.”

The previous City Council voted in 2010 to put some of the money toward the 20 percent local match on an 18th Street project that consultants from American Structurepoint have priced between $15 million and $20 million.

Former Mayor Mike Fincher, who was mayor at the time of allocation, declined to comment on Bishop’s interpretation. He said the reason the city had not been able to make its bond payments was a decline in property tax revenue resulting from a down economy and state-imposed property tax caps.

The bond, issued in 2008, is a 10-year call and requires that the city maintain it for 10 years. During his campaign for office, Bishop’s argument was countered by a letter printed in the Pharos-Tribune Public Forum from his opponent, Brannon Meagher. Meagher argued the city had an obligation to the bond holders to allocate the money within three years of receiving it — by 2011.

“Moving the excess money to the debt service fund is not considered a proper allocation,” Meagher wrote. “So, the choice of the council was to properly allocate it rather than violate the terms of our bond and subject ourselves to IRS penalty.”

Bond attorney Sue Beesley of the Indianapolis law firm Bingham McHale had told the council that the city had until the end of December to commit the money or face penalties from the Internal Revenue Service. She said the city could not just give back the unused money because the investors who bought the bonds expected a return on their investment for at least three years.

Beesley could not be reached for comment on Bishop’s proposal.

Mark Leeman, former deputy city attorney, said he could not comment on the issue because of attorney-client privilege.

Although the new council has not publicly met about the issue, Bishop said there is a consensus to pay the bond and not use the money for 18th Street.

“We don’t want to spend it on that,” he said. “We want to pay that money back.”

• Jason M. Rodriguez is news editor of the Pharos-Tribune. He can be reached at 574-732-5117 or jason.rodriguez@pharostribune.com.