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A strong reserve level can also produce a better bond rating. Currently, the City enjoys an ‘Aaa’
<br />rating from Moody’s, and an ‘AA’ rating from Standard & Poor’s, which places the City in the
<br />upper 6% nationally. If our bond rating should fall, it would translate into higher borrowing
<br />costs. Abond rating that is reduced by just one tier from ‘Aaa’ to Aa1’ could result in an
<br />additional $25,000-$35,000in interest costs for each $1 million issued in today’s markets.
<br />Restricted vs. Unrestricted
<br />As noted above, all municipalities must distinguish between restrictedand unrestrictedcash
<br />reserves. Restrictedreserves are monies that have constraints placed on them by either external
<br />entities such as debt covenants, grantors, or laws and regulationsof another government; or by
<br />laws through constitutional provisions or enabling legislation.
<br />Examples of RestrictedFunds include:
<br />a)Community Development (building permitfees)
<br />b)Communications (franchise fees)
<br />c)Water, Sanitary Sewer, Storm Sewer (fees)
<br />Because these funds are restricted, they are unavailable for general purposes such as police, fire,
<br />streets, etc. They can only be used for the purpose in which the fees were imposed.
<br />In contrast, unrestrictedcash reserves such as those held in the General Fund can be used for any
<br />public purpose. It should be noted however that these funds are oftentimes segregated or
<br />earmarked for specific programs and services. Re-purposing these funds will likely have an
<br />impact on service levels.
<br />Current Cash ReserveLevels
<br />The following table depicts the City’s current cash reserve levels as of 12/31/11(the last year for
<br />which audited financial statements are available) for key operatingfunds:
<br />TargetActual$$ Over$$ Amount
<br />Fund2011Pct.Pct.(Under)Unrestricted
<br />General$5,864,38640%47%$899,707$5,864,386
<br />Parks & Recreation321,08925%8%(655,127)321,089
<br />Community Development163,16340%16%(257,451)-
<br />Communications521,44420%142%448,097-
<br />Information Technology109,19920%9%(140,447)109,199
<br />License Center598,39120%53%372,286598,391
<br />Water-50%0%(3,501,375)-
<br />Sanitary Sewer1,694,30350%35%(724,546)-
<br />Storm Sewer2,614,52750%137%1,659,558-
<br />Recycling136,34250%26%(126,104)-
<br />Golf Course$391,24250%94%$184,167$391,242
<br />Total$12,414,086$(1,841,234)$7,284,307
<br />As indicated in the chart, the City has approximately $12.4million in cash reserves in its key
<br />operating funds–funds used to provide for day-to-day activities.
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