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cl� t. - <br /> ISLVILI_jE <br /> Memo <br /> To: Mayor and City Council <br /> Bill Malinen,City Manager <br /> From: Chris Miller,Finance Director <br /> Date: August 27,2012 <br /> Re: Summary of City Cash Reserves <br /> Introduction <br /> The purpose of this memo is to provide a summary of the City's current cash reserve levels, as <br /> well as an overview on why the City maintains cash reserves. <br /> Reserves are oftentimes referred to as cash, rainy day funds, contingency funds, or fund balance. <br /> In many instances these terms can be used interchangeably. However, for purposes of this <br /> discussion we'll refer to them as `cash reserves' - or monies that the City can draw upon to <br /> provide for; day-to-day operations, capital replacements, one-time expenditures, or unforeseen <br /> circumstances. <br /> One further distinction is made with regard to the City's cash reserves. All municipalities are <br /> required to distinguish between restricted reserves and unrestricted reserves. These categories <br /> are described in further detail below. <br /> The Role of Cash Reserves <br /> Municipalities maintain reserves for the following reasons: <br /> ❖ Provide cash flow to support current operations in between revenue collection periods <br /> ❖ To address unforeseen circumstances <br /> ❖ To provide for future capital expenditures <br /> ❖ Strengthen overall financial condition, and bond(credit)rating <br /> Most municipalities in Minnesota, including Roseville, rely heavily on the property tax to <br /> provide for its General Fund operations. However, property taxes are received by the City only <br /> twice per year. Therefore, the City must maintain reserves to offset the lengthy period of time <br /> during which property taxes are not being collected. Reserves are also held to address <br /> unforeseen circumstances such as weather-related damage to City facilities, or to offset an <br /> unexpected loss in revenues like state-aid. <br /> In addition, reserves are also systematically established to provide for future expenditures that <br /> are expected to occur in the future, such as reconstructing a road or replacing a fire truck. <br /> Finally, reserves are held to strengthen a City's overall financial condition. Simply put, the <br /> greater the reserves, the stronger the City's overall financial condition will be. Strong reserve <br /> levels allow cities to respond better to changing circumstances, and preserve a greater number of <br /> options as compared to weaker reserve levels. <br /> 1 <br />