PROVO — Provo city leaders want to launch a city investment fund, an idea they believe will save money for some city departments while making more money for others, at the same time and with the same money.

The proposal is a simple one — but apparently new to Utah, state auditor Auston Johnson said.

The plan would allow city departments with cash reserves to invest that money in the proposed fund and earn interest at a regular market rate — more than they're getting now from regular savings accounts or the state treasurer's investment pool.

Then, city departments that need money for projects would be able to go to the new city investment fund for loans and pay the market rate but without any fees or bond-issuance costs.

"If we go out and issue a small bond through a financial institution for a $2 million to $4 million project, we have fairly significant issuance costs," Provo finance director John Borget said. "It costs us about $30,000 to $50,000, and with a city investment fund, we'd save that money."

How much the city would save would depend on the number of projects.

Borget will present his final plan for the city investment fund tonight during an informal Provo City Council meeting at 6 p.m. at 351 W. Center. He said the proposal doesn't need council approval, but he is seeking its support.

"If they're supportive, we're going to proceed," Borget said. "The proposal we have now is one we feel works well for the city council and for us."

The idea is new to Johnson. "I don't know of anybody else who does it," the state auditor said. "Accounting standards and state law allow a fund to make a loan to another fund, and cities do it all the time, but they wanted to set up a central pooling of reserve funds to make loans to other funds.

"We couldn't find anything in accounting practice or state law that wouldn't allow Provo to do this. We're not recommending it, but I don't know anything wrong with it. In a lot of ways it's probably good to have it all happening in one place where people can keep an eye on all of the loans."

The Utah Taxpayers Association has no general problem with the idea of a city investment fund, association vice president Mike Jerman said.

"If the city has the money, there's no need for it to go to the private sector to borrow," he said.

The association has criticized Provo's $1 million loan from the city's energy fund to its iProvo telecommunications fund because it believes the energy department should not charge any more than it costs to provide power to Provo residents.