CC_Minutes_2012_0827 - Laserfiche WebLink

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However, even with these reserve levels, the City remains $1.8 million below the Council- adopted target levels. In addition, only $7.2 million is unrestricted and available for general public purposes. Again, the Council is cautioned when considering whether to re-purpose these funds. Doing so would leave critical functions in a weaker financial condition. The City also maintains cash reserves in its capital replacement funds. The following table depicts the City's current cash reserve levels as of 12/31/11 (the last year for which audited financial statements are available) for key capital replacement funds: Target Actual $$Over $$Amount Fund 2011 Pct. Pct. (Under) Unrestricted Police Vehicles&Equipment $ 133,242 n/a n/a n/a $ 133,242 Fire Vehicles&Equipment 368,041 n/a n/a n/a $ 368,041 Parks&Rec Vehicles&Equipment 25,358 n/a n/a n/a $ 25,358 Public Works Vehicles&Equipment 204,329 n/a n/a n/a $ 204,329 Central Svcs.Equipment 93,928 n/a n/a n/a $ 93,928 Building Replacement 576,280 n/a n/a n/a 576,280 PIP 322,823 n/a n/a n/a - Street Replacement $12,829,107 n/a n/a n/a $ 12,829,107 Total $14,553,108 $ 14,230,285 As indicated in the chart, the City has approximately $14.5 million in cash reserves in its key capital replacement funds — funds set aside for future capital. Nearly all of these reserves are unrestricted meaning they could be re-purposed. Again, doing so could come at great expense to existing programs and service levels. The Council is strongly advised to look at the 20-year Capital Improvement Plan (CIP) to fully ascertain whether the reserves held in these funds are sufficient to meet the City's long-term capital asset needs. Relationship between Reserves & Property Taxes In addition to the roles identified above, cash reserves also play a role in determining what the City's property tax levy needs to be. In 2011, the City's operating cash reserves earned approximately $850,000 in interest earnings. These interest earnings were used to provide funding for current operations, thereby reducing the amount needed from property taxes or fees. A significant portion of these earnings were contained in the Street Replacement Fund and were used to finance the annual Mill and Overlay Program for neighborhood streets. Holding all other factors constant, if reserve levels drop by 10%, the City would have earned only $750,000 in earnings; a decrease of $100,000. This would have necessitated a corresponding increase in the tax levy and/or fees to keep funding levels the same. Final Comments It is recognized that the City's overall financial condition is strong in large part due to its healthy reserve levels. However, the Council is advised to refrain from unsustainable practices such as using reserves to support regular on-going operations. In addition, to remain strong, cash reserve levels need to continue growing in proportion with the operating budget. 3