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REQUEST FOR COUNCIL ACTION Date: 3/18/2024 Item No.: 7.b. Department Approval City Manager Approval Item Description: Receive the 2023 Cash Reserve Fund Report and consider transfers 1 2 Background 3 The Operating Fund Reserve Policy, as revised on September 20, 2021, (Attachment 1) states that 4 excess reserves above the maximum reserve level for that specific fund (less funds needed for capital 5 expenditures and funds received as donations) shall be placed into the Cash Reserve Fund. 6 7 Identifying Excess Cash Reserves 8 Attachment 2 shows the cash reserve levels along with the targets for each fund. In accordance with the 9 cash reserve policy, the following amounts have been identified to be in excess of the high target 10 reserve level for each fund. Therefore, these amounts should be transferred to the cash reserve fund. 11 12 Parks & Recreation fund $162,207 above the high target range of 30% 13 License Center Fund $327,318 above the high target range of 15% 14 15 Parks and Recreation fund achieved higher than anticipated reserves as a result of higher participation 16 in various programs than were anticipated during the budget preparation. 17 18 License Center fund received a one-time transfer of $127,697 from the State to offset additional time 19 spent processing driver’s licenses on the new MNDRIVE system. Deputy Registrars are now doing all 20 the data entry that previously was done by the State, so in recognition of the additional time it takes to 21 process these transactions, a one-time infusion was received. 22 23 General Fund, exclusive of the cash reserve fund, ended the year at a 38% cash reserve level, which is 24 a good financial sign. When the City’s Comprehensive Annual Financial Report is prepared, the Cash 25 Reserve Fund is rolled up with this fund, so the audit report will show a higher reserve level. 26 27 Communications fund ended the year with a 12% cash reserve level, which is within the target range 28 set for this fund of 10%-30%. 29 30 Information about other city fund balances will be included as part of the audit presentation in May. 31 32 Financial Sustainability Impacts 33 As noted last year, the COVID-19 pandemic demonstrated why the City has reserves and the impacts 34 that can occur from unforeseen events. The fund balance policies are set up to address such 35 unforeseen situations. The general fund reserve is set at a higher level as this fund is primarily funded 36 through property taxes but also serves as the fund that provides financial support in the short term 37 should another fund fall below it’s minimum fund balance. Based on reserve fund policies and 38 operational needs, staff recommends that the following amounts should be transferred to the cash 39 reserve fund, for a net of $489,525: 40 Page 1 of 2 Qbhf!27!pg!241