05-21-07 Item 2B, Financial Mgmt Plan

Home Browse Search

~ /]'\~ HILLS MEMORANDUM DATE: May 16, 2007 Agenda Item 2.B. TO: Honorable Mayor and City Council Sue Iverson, Finance Director if FROM: SUBJECT: Financial Management Plan Update BACKGROUND: In late 2006, the City contracted with Ehlers & Associates, Inc. to develop a Financial Management Plan. This tool will help us assess our current financial status, assist with budget decisions, and provide a foundation for future planning. Part of this process involves the Council setting goals and parameters for future budgets. These goals help to guide decisions on uses of budgeted, one-time, and unexpected revenues. The plan also helps to prioritize capital expenditures and guide the use of debt as a financing tool. Mark Ruff from Ehlers and Associates presented the plan at a Council work session on November 20, 2006. In that discussion, a number of issues were presented for consideration. (Memo and Financial Plan are attached) DISCUSSION: To use this tool in the current budget process and more importantly, in TCAAP discussions, staff needs Council direction on the issues that were presented at the November 20, 2006 meeting. 1) General Fund Balance - The City is currently at the recommended 50% of expenditures. This will drop as the budget increases in future years. Does Council want to consider using excess funds as the end of each year to maintain this level? Would the Council like to budget for contingency? Staff would recommend setting a fund balance policy of 50% as recommended by the State Auditor. This could be sent to the FP AC. 2) Use of Land Sale Proceeds from the Old City Hall Site - The preliminary model shows the proceeds deposited in the Public Safety Capital Fund in anticipation of the new/renovated fire station in 2012. The $40,000 down payment on the sale which fell through last fall was deposited in the Permanent Revolving Fund. Where should these funds be allocated?