CCP 05-27-1997 - Laserfiche WebLink

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I I City of Arden Hills APIX.) ~ April 10, 1997 .- Page Two CERllfID) PUI\LIC AaX'Jl.JNT....~TS ANO C'.oNSULTAN"fS I Most of the general fund revenue comes from property taxes and property tax credits. They represent 75% of 1996 revenue. This type of revenue is received during the second half of the year. As a result, a reserve for working capital needs to be established equal to about 35% ofp\anned expenditures and transfers out. Arden HiUs established I this reserve from several different sources. The general fund has a fund balance designated for working capital of $519,185. The other funds that should be considered when detennining available fund balance for working capital are the Municipal Land and Buildings, Capital Equipment Sinking, Fire Equipment Sinking and the Pennanent Improvement Revolving Funds. These additional funds have a combined fund balance of over $5,000,000. The I general fund has an excellent reserve to draw on for working capital and emergency needs. It is important to maintain an adequate fund balance for the following reasons: I . Expenditures are incurred somewhat evenly throughout the year. However, property tax and state aid revenues are not received until the second half of the year. An adequate fund balance will provide the cash flow required to finance the General Fund expenditures. I . The City is vulnerable to legislative actions at the State and Federal level. Recent years have seen the State continually adjusting the local government aid and property tax credit fonnulas. An adequate fund balance will provide a temporary buffer against those aid adjustments. I . Expenditures not anticipated at the time the annual budget was adopted may need immediate Council action. These would include capital outlay replacement, lawsuits and other items. An adequate fund balance will I' provide the financing needed for such expenditures. . A strong fund balance will assist the City in detennining its bond rating. I A summary of the 1996 operations is as follows: Variance - I Favorable Budeet Actual (Unfavorable) Revenue $2 270 092 $2 703 613 $ 433521 I Expenditures 2094521 2122100 (27 579) Excess of Revenue Over Expenditures 175571 581 513 405 942 Operating transfers in 40 000 1000 (39000) I Operating transfers out (211 050) (528550) (317500) Excess of Revenue Over Expenditures and Other Uses $ 4521 53 963 $ 49442 I Fund Balance, January I 486 903 I Fund Balance, December 31 $ 540 866 I I- I