OAKRIDGE — An unexplained $420,000 budget gap has forced the city of Oakridge to turn to an Oregon bank for a bailout to avoid a financial collapse.

City Manager Gordon Zimmerman has told the Lane County Board of Commissioners that Siuslaw Bank has agreed to grant the city a six-month property tax anticipation loan for $500,000, The Register-Guard reported Thursday.

The loan would solve the immediate cash flow problem for Oakridge that has resulted from the budget gap while allowing city officials to pay back the loan after Nov. 15 when they receive the bulk of their annual property tax revenue.

Last year, the city received about $725,000 in property tax income in mid-November.

Bank wants assurance

But before the deal is finalized, Siuslaw Bank wants assurances from the county commissioners that, once property taxes are collected, the bank will get its loan back, Zimmerman said.

County government is responsible for distributing property tax revenue to cities, and Lane County would become a “paying agent” or intermediary in the loan, albeit with no financial liability should Oakridge be unable to pay up by the end of the year.

County commissioners appeared willing to consider such a scenario at a Wednesday meeting, but chose to delay immediate action until the Oakridge City Council itself passes a resolution backing the loan’s concept.

Commissioners also requested more details on the terms of the loan which Zimmerman said would carry a “generous” annual interest rate of 4 percent and expressed a desire that county staff provide some oversight of the financial audits under way in Oakridge.

“We’d welcome any assistance,” Zimmerman said.

Like Oakridge residents who spoke up at the meeting, Commissioner Rob Handy expressed concern that “to date, we have more questions than answers” about the financial hole the city finds itself in.

Audits under way

Earlier this month, city officials revealed that they could not explain a $420,000 shortfall in the budget. Audits of the city’s finances by external accountants and an internal review have since been launched, but no answers have been forthcoming.

Zimmerman didn’t provide any new information at the board meeting Wednesday. But he repeated his earlier statement that no indications of embezzlement or fraud have been found.

“Until we have accountants finalize their reviews, I’d rather not speculate,” Zimmerman said. “I have my suspicions.”