2019_0318_CCPacket - Laserfiche WebLink

Home

Attachment B While some funds like the General and Parks & Recreation have a fair amount of volatility in its cash flow needs; others such as Information Technology and License Center have much greater stability which results in lower cash reserve target levels. The impact of cash reserves on the City’s financial strength and sustainability As noted above, the City’s cash flow needs serves as one of the primary factor behind the establishment of specific cash reserve target levels. Another important consideration is the role that cash reserves play in maintaining financial strength and sustainability –i.e. the ability to not only provide for future operations but also address contingencies and unforeseen circumstances. Perhaps the most comprehensive and independent assessment of a City’s financial strength is the credit risk assigned by the bond rating agencies such as Moody’s or Standard & Poor’s (S&P). Similar to an individual’s FICO Score, the City’s bond rating is a reflection of how disciplined a City is in managing its finances and how prepared it is to handle future obligations. The City current enjoys anAAAbondrating (credit rating) from both Moody’s and S&P –the highest rating available.The Subcommittee reviewed the latest reports from these agencies along with arecent independent assessment from Springsted Municipal Advisors to get a sense of whether our cash reserves were sufficient to maintain this bond rating. Copies of these reports are included in Attachments A through C.Key takeaways from these reports include: 71&!pg!uif!Djuzt!cpoe!sbujoh!tufnt!gspn!locally.dpouspmmfe!gbdupst!tvdi!bt!uif!tusfohui!pg! uif!Djuzt!dbti!sftfswft-!cvehfubsz!qfsgpsnbodf!)j/f/!cbmbodfe!cvehfut*-!boe!gpmmpxjoh! ftubcmjtife!qpmjdjft/!Uif!sfnbjojoh!gbdupst!bsf!efufsnjofe!cz!sfhjpobm!boe!tubuf!fdpopnjd! dpoejujpot/ Nppezt!sfmfbtfe!jut!nptu!sfdfou!dpnnfout!po!uif!Djuzt!gjobodjbm!dpoejujpo!jo!Kbovbsz!pg! uijt!zfbs-!xijdi!xbt!cbtfe!po!uif!Djuzt!3127!Boovbm!Sfqpsu/Pg!uif!gpvs!sbujoh!dbufhpsjft! djufe-!Sptfwjmmf!dpnqbsft!gbwpsbcmzup!puifs!BBB.sbufe!bhfodjft!jo!pomz!pof!dbufhpsz!!uif! mfwfm!pg!dbti!sftfswft/ To summarize, strong levels of cash reserves play a critical role in ensuring that the City’s bond rating remains at the AAA category. A ratings decline to AA, would have resulted in an estimated $500,000 in additional interest costs for the bonds issued to finance the Park Renewal Program and new Fire Station. Available ‘excess’ cash reserves The amounts shown in the table below represent the unrestricted monies held in key operating funds as of 12/31/17.