MONROE - Members of the city's Finance and Taxation committee were reluctant Wednesday to assign $1.43 million in the general fund balance to designated spending categories.
The Governmental Accounting Standards Board (GASB) has established a hierarchy of five fund balance classifications, each with an increasing level of spending constraint, for reporting purposes. Not all governments will use all five classifications.
Before making any decision that would assign funds to a category, from which it cannot be removed or reassigned without a vote or authority of the Common Council, the committee has asked Cathy Maurer, city comptroller, and Bridget Schuchart, accounting manager, for recommendations by next week.
"I think we can change to more restricted (categories) as it becomes needed," committee chairman Charles Koch said.
Maurer agreed, adding that the unassigned amount provides a contingency fund for unforeseen or mandated expenses. She pointed out, as one example, the council last year needed about $250,000 to fund a federal- and state-mandated emergency radio upgrade project.
The $1.43 million represents only 13 percent of the city's total fund balance of $10.7 million as of the end of 2010, up just $300,000 from 2009.
"One point forty-three million is not much in city government (spending)," Schuchart said.
The remaining money is already committed to specific projects and programs or in reserve by city policy or legal obligations.
About $3.1 million is reserved, the amount based on the 2012 operating budget.
By council action last year, 25 percent of the operating budget must be set aside as a minimum reserved balance. The amount represents about three months of expenditures to be used in the event of an emergency, such as a natural disaster. It also benefits the city's bond rating, allowing it to borrow money at favorable interest rates. That money can be removed from its classification only by a super majority vote of the Common Council.
Specific, budgeted items carve out $2.3 million. The city must also keep another $2.2 million reserved as non-spendable by legal or contract requirements.
Another $1.67 million was committed to various project expenses last year. These include the $250,000 radio upgrade project that Maurer noted; a $600,000 loan to the water utility; $340,000 in street construction; $270,000 to cover debt service for Tax Increment District No. 7; $125,000 for the trail bridge; and $87,000 to the 2012 budget capital accounts for city hall, engineering and the fire department.
The committee did approve nearly $50,000 of the $1.43 million to be assigned to purchase two police department vehicles.
Police Chief Fred Kelley approached the committee last week with a request to use unclassified funds for 2012 replacement vehicles, and foregoing the department's normal use of a five-year "lease-to-own" program, which charges interest. The department would repay the fund using its vehicle lease payments, which are budgeted annually and placed in its capital account.
According to Kelley, the city would save about $6,300 in interest costs, and his department could pay off the vehicles in four years.
Kelley's proposal is similar to a vehicle and equipment replacement fund plan, on a smaller scale, being suggested by City Attorney Phil Rath. The biggest hurdle, according to Maurer, is committing the required amount of money out of the budget to the account each and every year.
Koch said Kelley's plan will be a test of Rath's replacement fund idea and "will test the resolve of the council to make it work."
A $270,000 annual loan payment for Tax Increment District (TID) No. 7, for which the council committed undesignated funds to cover in the 2012 budget, still looms large for the 2013 budget.
But committee members objected to using the meager $1.43 million undesignated funds, plus nearly deleting the city's emergency reserve $3.1 million to pay off the remaining $4 million of the loan.
"I don't feel we can pay it off," Koch said. "I look for TID seven to turn around and become viable and be able to pay off its obligations. Only refinancing is an option; I'm comfortable refinancing the whole amount."
Recommendations from Ehlers, the city financial advisor firm, regarding paying off or refinancing the loan are pending and may come sometime in March.
If the district is unable to cover its loan payment, the city becomes obligated to pay it. Paying off the loan could save $10,000 to $14,000 annually in interest costs. The TID ends in 2029.
The Governmental Accounting Standards Board (GASB) has established a hierarchy of five fund balance classifications, each with an increasing level of spending constraint, for reporting purposes. Not all governments will use all five classifications.
Before making any decision that would assign funds to a category, from which it cannot be removed or reassigned without a vote or authority of the Common Council, the committee has asked Cathy Maurer, city comptroller, and Bridget Schuchart, accounting manager, for recommendations by next week.
"I think we can change to more restricted (categories) as it becomes needed," committee chairman Charles Koch said.
Maurer agreed, adding that the unassigned amount provides a contingency fund for unforeseen or mandated expenses. She pointed out, as one example, the council last year needed about $250,000 to fund a federal- and state-mandated emergency radio upgrade project.
The $1.43 million represents only 13 percent of the city's total fund balance of $10.7 million as of the end of 2010, up just $300,000 from 2009.
"One point forty-three million is not much in city government (spending)," Schuchart said.
The remaining money is already committed to specific projects and programs or in reserve by city policy or legal obligations.
About $3.1 million is reserved, the amount based on the 2012 operating budget.
By council action last year, 25 percent of the operating budget must be set aside as a minimum reserved balance. The amount represents about three months of expenditures to be used in the event of an emergency, such as a natural disaster. It also benefits the city's bond rating, allowing it to borrow money at favorable interest rates. That money can be removed from its classification only by a super majority vote of the Common Council.
Specific, budgeted items carve out $2.3 million. The city must also keep another $2.2 million reserved as non-spendable by legal or contract requirements.
Another $1.67 million was committed to various project expenses last year. These include the $250,000 radio upgrade project that Maurer noted; a $600,000 loan to the water utility; $340,000 in street construction; $270,000 to cover debt service for Tax Increment District No. 7; $125,000 for the trail bridge; and $87,000 to the 2012 budget capital accounts for city hall, engineering and the fire department.
The committee did approve nearly $50,000 of the $1.43 million to be assigned to purchase two police department vehicles.
Police Chief Fred Kelley approached the committee last week with a request to use unclassified funds for 2012 replacement vehicles, and foregoing the department's normal use of a five-year "lease-to-own" program, which charges interest. The department would repay the fund using its vehicle lease payments, which are budgeted annually and placed in its capital account.
According to Kelley, the city would save about $6,300 in interest costs, and his department could pay off the vehicles in four years.
Kelley's proposal is similar to a vehicle and equipment replacement fund plan, on a smaller scale, being suggested by City Attorney Phil Rath. The biggest hurdle, according to Maurer, is committing the required amount of money out of the budget to the account each and every year.
Koch said Kelley's plan will be a test of Rath's replacement fund idea and "will test the resolve of the council to make it work."
A $270,000 annual loan payment for Tax Increment District (TID) No. 7, for which the council committed undesignated funds to cover in the 2012 budget, still looms large for the 2013 budget.
But committee members objected to using the meager $1.43 million undesignated funds, plus nearly deleting the city's emergency reserve $3.1 million to pay off the remaining $4 million of the loan.
"I don't feel we can pay it off," Koch said. "I look for TID seven to turn around and become viable and be able to pay off its obligations. Only refinancing is an option; I'm comfortable refinancing the whole amount."
Recommendations from Ehlers, the city financial advisor firm, regarding paying off or refinancing the loan are pending and may come sometime in March.
If the district is unable to cover its loan payment, the city becomes obligated to pay it. Paying off the loan could save $10,000 to $14,000 annually in interest costs. The TID ends in 2029.