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<br />o <br />:E <br />w <br />:E <br /> <br /> <br />EHLERS <br /> <br />& ASSOCIATES INC <br /> <br />To: <br /> <br />City of Arden HilIs <br />Mark Ruff <br />November 15,2006 <br />Update on Financial Management Plan <br /> <br />From: <br /> <br />Date: <br />Subject: <br /> <br />We look forward to discussing the progress on the financial management plan with the City <br />Council. <br /> <br />Part of the process of a financial management is for the Council to set goals and parameters <br />for future budgets. These goals wiII help guide decisions on use of budgeted, one-time, and <br />unexpected revenues. The plan wiII also help prioritize capital expenditures and guide the <br />use of debt, if any, as a tool. <br /> <br />We wanted to raise a few issues prior to Monday's meeting for consideration: <br /> <br />General Fund Balance: The Office of the State Auditor recommends general fund balances <br />of35% to 50% of expenditures for cash flow and contingency purposes. The City is <br />currently at approximately 50%, which meets rating agency recommendation. The balance <br />as a percentage will drop as the budget increases in future years. The Council may want to <br />consider using excess funds at the end of the each year to maintain this level. <br /> <br />Use of Land Sale Proceeds from the Old City Hall Site: We have preliminarily shown the <br />majority of the expected land sale proceeds as transferred into public safety capital in <br />anticipation ofa new/renovated fire station in 2012. This may avoid the use of debt in the <br />future, but we should discuss these options on Monday. <br /> <br />Future Cash Flows of Streets and Equipment: Attached is a preliminary cash flow for street <br />and capital replacement over the next ten years. The balance in this fund is expected to <br />decline from over $6M to $3M. We look forward to a discussion on what is a reasonable <br />minimum balance in this fund and what general fund sources should be utilized in the future. <br /> <br />Establishment of Separate Capital Equipment Fund: Most cities eventually establish a <br />separate fund for capital equipment and budget specifically for replacement of equipment out <br />of the general fund. Our cash flows do not separate out these funding sources and uses, but <br />we have anticipated a budget line item for equipment and would recommend a discussion on <br />this topic. <br /> <br />Please let us know if you need additional information <br /> <br />LEADERS IN PUBLIC FINANCE <br /> <br />3-060-Cen-tre"P61nfe-bd;;"e-- <br />Roseville, MN 55113-1105 <br /> <br />t <br />""" ""Phone,"65f69j:8505 Fax'65j:697-8555 <br />mark@ehlers~lnc.com <br />