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11 /01 /2010 <br />Both are acceptable measures of fund balance levels. The Minnesota Office of the <br />State Auditor indicates that a General Fund fund balance level of 40% to 60% of the <br />next years operating budget is an acceptable level for cities at the end of their fiscal <br />year. <br />The "health" of the General Fund fund balance and acceptable fund balance levels were <br />taken into consideration while refining the 2011 Proposed General Fund Budget and <br />goal of reducing the General Fund fund balance to 60% of the current years operating <br />budget over two years was used in developing the attached information. <br />In order to achieve this goal, the 2011 Proposed General Fund Budget anticipates <br />deficit budgeting for 2011. Two things were done to achieve this: <br />1) The tax rate was "bought down" by using $60,599 of fund balance to "fund" 2011 <br />operations in the General Fund. <br />2) Included a transfer of $25,000 to establish an Improvement Revolving Fund in <br />2011. This fund would be used in the future to fund for infrastructure (other than <br />sewer) and facility improvements within Gem Lake. Funding sources for this <br />fund would be future transfers from the General Fund as well as residual <br />balances from bond issues as they are paid. <br />The use of General Fund fund balance and outlined above would leave a General Fund <br />fund balance that is still approximately 75% of the 2011 Proposed General Fund Budget <br />with a goal of 60% to be attained over two years (2011 and 2012). <br />Attached to this memorandum are the following documents: <br />2011 Proposed General Fund Operating Budget — Includes projected 2010 and <br />proposed 2011. <br />2011 Proposed Capital Improvement Plan (City Hall) Bonds Budget <br />2007 Actual to 2011 Proposed Tax Capacity Rate Calculations <br />2004 Actual to 2011 Proposed Fixed vs. Discretionary Expenditures <br />The information contained in this memorandum and attachments, including any <br />adjustments directed by Council discussion at tonight's meeting, will be used in the <br />presentation at the November 16, 2010 City Council Meeting where the City Council will <br />address any citizen concerns regarding the 2011 Proposed Budget as well as adopt the <br />2011 Property Tax Levy and Operating Budgets. <br />Page 2 <br />