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39 <br />40 <br />�1 <br />42 <br />43 <br />44 <br />45 <br />46 <br />4�7 <br />48 <br />49 <br />50 <br />S1 <br />52 <br />53 <br />54 <br />55 <br />5b <br />57 <br />58 <br />S9 <br />60 <br />61 <br />b2 <br />63 <br />64 <br />6S <br />66 <br />G7 <br />GS <br />69 <br />70 <br />71 <br />72 <br />73 <br />74 <br />7S <br />76 <br />77 <br />78 <br />79 <br />80 <br />T�ae R�le oi Cash Reserve� <br />Like individuals, rnunicipal�fiie� maintain resezves for the following reasons: <br />1) Provzda cash flor�r to su�apart current operatiar�s in between xevenue collection pexiods <br />2) To addr�ss un%reseen circu�nstances <br />3) Tn �rovide �or future expenditures <br />4} Strengthen averall f nancial candition, and bond (credit) arating <br />Most mu�icxpalities, incl�ding Rose�ville, rely heavily or� the prnpe�.y tax ta pra�ride for its <br />�e�era� aperations. However, praperty taxes are reeeived by the Ciiy only twice per yearr. <br />Therefare, the City m�ust main�ain resez�ves to nff'set the lengthy perind o� tiame during whic� <br />prnperty �a.xes are r�ot being collected. Reserves are also heid to address unforeseen <br />circtzmstances such as weat�er-related damage ta City facilities, Ioss in expecied revenues (like <br />state-ai�,), or tizne sensitive re�airs (li�Ce ��e Oval). <br />�n additian, reserves are alsa es#ablished ta provide for fu�tuare expenditures thai are expected to <br />occur in the foreseeable fi�ture, Exar.�ples i�clude; reconstxuctiz�g a road, replacing a�ire tr�ck, <br />or renovati�g City Hall. �'inally, reserves aze held to strengthen a City's ovexall financial <br />condition. Si��aly put, the greater the reserves, the �ironger the City's overail financial conditinn <br />will be. Strong reserve levels allow eities to respond l�etter to changzng circ�mstances, and <br />preserve a greater number of optza�s as com�ared to weaker reserve �evels. This principle is <br />easily de�nonstra�ed wlnen you took at t�is an an indi�vidual level. Would you rather have $1,000 <br />in the ba� or $2,000? Which amaunt is more favnrabie in the eyes of a ler�der? <br />G€�vernra�et��al Best Praeti�es & Other Consideratio�s <br />Tl�e Ci�y's Operating Budget Reserve Palicy shaw�n ahove zs �argely based ozz the recornxnended <br />prac�ices a� �he Govern�ara.ez�t �inance Off cexs Associatian (G�'OA), Interr�atio�a� City/County <br />Managem.ent Association {ICMAj, and o�her i�dus�ry experts. �t also is bas�d upo� the timing <br />by whicl� tlae City collects its revenues, which is s�zbs�antially di�fexe�fi from other governrnen�al <br />entiiies. For example, the �tate is �argely fua�ded by incorne and sales tax revenues w�ich are <br />typically collected bi-weekly or monthly. Their acevenues a.re fairly constan�, thereby alleviating <br />t�e need to tnaintaiz� reserves ta p�ovide fnr operatior�s in be��veen revenue ca�lection periods. <br />By co��trast, �he City collects property �axes anly twice annuatly, which requires us to maintai� <br />reserves to finance operatioz�s in the interirr�. <br />Reserves alsa p�ay a critical rale in deter�inzng a Ciiy's bond ra�ing (creciit rating). A sirnng <br />areserve level ean pxoduce a bet�er band rating. C�enti�, ihe City e�joys an `Aa1' rating frorn <br />Mopdy's, wi�ich places the City in t�e upper 6% natioz�ally. If that rati�g shouid �all to the next <br />tier, zt would translate into higher boz-�c�wxng costs. Depencling on �he a�nount and frequency of <br />firtuEx� �ond issues, a lower bond rating cauid resulY in several hurzclred thousand dol�ars in added <br />debt sez vice costs. <br />2 <br />