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Regular City Council Meeting Monday, November 19, 2012 Page 19 reserve targets, and unless those targets were adjusted, there didn't appear to be much surplus available. Related to using cash reserves for operating costs, Mayor Roe cautioned Coun- cilmembers of two (2) considerations or issues to consider, as addressed in the RCA. Mayor Roe noted that final year-end numbers remained variable and should provide for a cushion, with remaining 2012 revenues available for use in 2013, further reducing budget needs. Mayor Roe opined that the public and City Council needed to be cognizant that to the extent reserves were used for ongoing levied costs, it simply deferred that levy increase to subsequent years, or necessitated use of those reserves again, and didn't ultimately solve the prob- lem,but simply deferred it. Regarding recycling, Councilmember Willmus questioned the need for a reserve fund for a service contracted on a three (3) year basis. Mayor Roe questioned, while reserves could be put back into the rates, to what extent would be indicated to run a $500,000 program with limited reserves. Finance Director Miller concurred, and also reminded Councilmembers of the timing of payments to the recycling contractor monthly and availability of cash flow with households paying recycling bills quarterly. Mr. Miller noted that this required that a certain amount of reserves be available upfront for contrac- tor payments before revenue was available from customers. Mayor Roe noted that recycling fees were paid on a staggered basis by custom- ers, providing a monthly cash flow, but not necessarily being sufficient when needed to meet the monthly contractor payment; however, noted that they were paid by customers in advance. Finance Director Miller clarified that customers pay for three (3) months of ser- vice, after they had consumed that service, based on standard procedures; with the cash flow still needed by the City. City Manager Malinen also noted in his review of the Recycling Fund financial summary, his recollection under the existing contractor when the market went bad, revenues were not meeting current projections, allowing for further vulner- ability of the Fund. Councilmember Willmus opined that this was one of the pitfalls of a contract based on the commodities market. Councilmember McGehee opined that she had less of a problem keeping some reserves available if and when needed to address a shortfall rather than passing