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In addition, the City also maintains cash reserves in separately-held capital replacement funds. <br />These funds do not provide for any day-to-day-activities. A separate memo regarding these <br />reserves will be forthcoming in conjunction with the discussion on the 20-Year Capital <br />Improvement Plan. <br />Relationshap between Reserves & Property Taxes <br />In addition to the roles identified above, cash reserves also play a role in determining what the <br />City's property tax levy needs to be. In 2013, the City's operating cash reserves earned <br />approximately $300,000 in interest earnings. These interest earnings were used to provide <br />funding for current operations, thereby reducing the amount needed from property taxes or fees. <br />A significant portion of these earnings were contained in the Street Replacement Fund and were <br />used to finance the annual Mill and Overlay Program for neighborhood streets. <br />Holding all other factors constant, if reserve levels drop by 10%, the City would have earned <br />only $270,000 in earnings; a decrease of $30,000. This would have necessitated a corresponding <br />increase in the tax levy and/or faes to keep funding levels the same. <br />Final Comments <br />It is recognized that the City's overall financial condition is strong in large part due to its healthy <br />reserve levels. However, the Council is advised to refrain from unsustainable practices such as <br />using reserves to support day-to-day operations for successive years. In addition, to remain <br />strong, cash reserve levels need to continue growing in proportion with the operating budget. <br />3 <br />