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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. A bond rating that is reduced by just one tier from `Aaa' to Aa1' could result in an
<br /> additional$25,000-$35,000 in interest costs for each $1 million issued in today's markets.
<br /> Restricted vs. Unrestricted
<br /> As noted above, all municipalities must distinguish between restricted and unrestricted cash
<br /> reserves. Restricted reserves are monies that have constraints placed on them by either external
<br /> entities such as debt covenants, grantors, or laws and regulations of another government; or by
<br /> laws through constitutional provisions or enabling legislation.
<br /> Examples of Restricted Funds include:
<br /> a) Community Development(building permit fees)
<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, unrestricted cash 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 Reserve Levels
<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 operating funds:
<br /> Target Actual $$Over $$Amount
<br /> Fund 2011 Pct. Pct. (Under) Unrestricted
<br /> General $ 5,864,386 40% 47% $ 899,707 $ 5,864,386
<br /> Parks&Recreation 321,089 25% 8% (655,127) 321,089
<br /> Community Development 163,163 40% 16% (257,451) -
<br /> Communications 521,444 20% 142% 448,097 -
<br /> Information Technology 109,199 20% 9% (140,447) 109,199
<br /> License Center 598,391 20% 53% 372,286 598,391
<br /> Water - 50% 0% (3,501,375) -
<br /> Sanitary Sewer 1,694,303 50% 35% (724,546) -
<br /> Storm Sewer 2,614,527 50% 137% 1,659,558 -
<br /> Recycling 136,342 50% 26% (126,104) -
<br /> Golf Course $ 391,242 50% 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 $12.4 million in cash reserves in its key
<br /> operating funds—funds used to provide for day-to-day activities.
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