Loading...
HomeMy WebLinkAbout2013-08-07 PACKET 03 Cash Fund Balance Memo To: Mayor and City Council From: Ryan R. Schroeder, City Administrator Date: August 2, 2013 Subject: Fund Cash Balances As part of the 2014/15 Budget deliberations Council has requested edification of cash balances within the various funds of the City. An exhibit that denotes 2012 year- end cash is enclosed. The exhibit is exclusive of TIF, Bond, and Project funds. These funds, which totaled $4,160,071 on 12/31/12 are restricted by law and cannot be sourced for any purpose other than repayment of intended obligations. Within the enclosure are cash balances for 27 funds that existed as of 12/31/12. There are various restrictions on the cash within many of these funds as well although restrictions in many cases can be waived by change in Council policy. In other cases, while Council may choose to reallocate from a fund there could be risk of a third party objection (such as in the case of area charges and Park Trust) wherein the assets of the fund are received from a developer or similar party with an understanding that the funds will be used for an express development purpose. The MSA fund is a project reimbursement fund from the state with inherent restrictions. The allocation of cash from other funds is often malleable. Council has adopted policy regarding the use and cash reserves in various funds. Included is the General Fund reserve, the ED Trust, a portion of the Future Projects Fund (through the Major Road Fee within the Upper Ravine), and the Park Trust (limiting the minimum cash balance). This exhibit reflects suggestions from staff regarding cash reserves in a few other funds including Equipment Replacement ($2 million), Surface Water ($400,000), Municipal Building ($2.5 million), Self Insurance ($2 million) and the utility operating budgets. In the latter case (utility funds) we are reflecting accounting standards but we see these “floor” levels as being bare minimums and would suggest much greater reserves than that if the City is able (reserves in all three cases are currently well above the standard). Some of the funds shown in the exhibit do not have existing policy regarding cash reserves at present. In many of these cases we would need input from Council prior to suggesting policy. The reason is that there is a range of approaches. For instance, the most conservative approach would be to provide for any annual operating expense plus all near term capital needs. In many cases, however, this approach would be unrealistic and in some cases inappropriately burdensome to current taxpayers to the benefit of future taxpayers. Following are summary comments regarding specific funds. General Fund This is the general operating fund of the City. Council policy dictates cash reserves of 60% of following year revenues; the purpose of which is to provide operating cash for the first six months of each fiscal year prior to receipt of our tax settlement each June/July. Cash at year- end 2012 was $9,665,773 in accordance with this long standing policy. Equipment Replacement: The fund was created decades ago in order to provide a funding source to replace the rolling stock of the City. Absent such a fund the City would be required to issue equipment certificates (borrow) or take similar action to acquire dump trucks, fire trucks, and the like. Revenue is created for this fund by levy/department charges, interest, and year end transfer of unspent funds. Over the past four years we have used about $2 million in unreimbursed reserves from this fund. Within the Capital Outlay plan it is proposed to acquire over $4 million in equipment over the next five years. We recommend policy that maintains at least $2 million in reserves. We will have a balance at about that point at the end of 2013. Surface Water: This fund receives revenues from the Storm Water utility fee. It has a low current cash balance and is projected to run deficits over the next three years after which we will likely propose a fee increase to restore an adequate cash balance at 50% of annual expenditures. Ice Arena: The Ice Arena currently has less than a $200,000 cash balance. Projected capital outlay of $1.2 million between 2014 and 2023 is anticipated plus we will need to provide a coolant conversion at between $1.5 and $3.0 million in the 2018 timeframe. In order to avoid additional debt this operation needs to grow its cash reserves substantially. EDA and ED Trust: The EDA (cash of $227,642) receives a levy allocation each year and the ED Trust receives gifts, grants and interest earnings. The ED Trust balance (cash of $2,403,032) is restricted by Council policy to activities that create C/I development. Projects such as the Home Depot redevelopment will likely tap the ED Trust cash balance. It should be noted that both the EDA and ED Trust have granted operating loans to River Oaks ($900,000 and $1.2 million respectively). The EDA has recommended that the ED Trust be repaid. Closed Debt/Completed Construction: These funds gain revenues when projects have net cash at the end of the project and are closed into one of these funds. Both have granted loans to the PSCH project in a combined amount of $3.5 million. There currently is no written policy regarding the use of these funds which totaled (combined) $1,556,725 at year end. Future Projects: This fund exists to pay for municipal infrastructure projects. From time to time it has received revenues from year end transfers and in a few cases from budgeted levies in order to grow the cash balance in order to reduce future tax levy requirements for the pavement project (much like a public improvement revolving fund). A portion of the cash balance is restricted by the major road fee. The balance at year end was $2,162,667. In a typical interest environment that cash balance would allow the City to tap the fund interest for about 10% of the projected annual pavement debt levy (note, we are not currently in a typical interest environment). Hence, growth in this fund balance would be a laudable long term goal. MSA Construction: This fund, with a cash balance of $738,968 can only be used on MSA roadways such as Ravine Parkway and Jamaica. Our annual allocation is roughly $1.4 million. The City constructs MSA streets and then requests reimbursement from the State MSA account. It is common for cities to request advance reimbursements. Municipal Building: The City levied dollars into this fund over the past 10-12 years in order to provide a funding source for the City Hall project although the fund is not restricted to that purpose. It is intended to provide a source of funds to maintain repair and replace the major buildings of the City (Public Works, Fire Stations, City Hall; not park shelters). At the time of the PSCH project construction about 1/3 of necessary cash to fund that project was contained within this fund. With about $10 million in potential projects on the horizon (PS Training and FS #2) it is recommended Council set a target of achieving 25% of projected project costs within this fund in order to reduce debt obligations for those projects. Park Trust: The fund currently has a minimal balance. Revenues will be created through future developments; however, in the short term those revenues will be exhausted by planned for park developments within those same developments. Water, Sewer, and Storm Area Funds These funds, with current cash balances, combined, of $3,585,296 exist to provide funds for infrastructure within developing areas. For instance, the sanitary sewer that was constructed through the Upper Ravine District, that will now serve the new subdivisions within that district, are funded through these area funds. Upcoming projects for the Area funds include a well at $1.5 million and tower at $4 million along with various smaller pipe projects. Water and Sewer Operating Utilities The funds are synonymous with the general fund for the respective utilities. They provide for payroll, capital outlay, commodity and similar costs for the utilities including pavement management pipe repair and replacement. Future pavement management projects project over $5 million in pipe repair and replacement between the two funds over the next ten years or so. Revenues into the funds are from the rate payers and cell tower leases of about $360,000/year. The cash in these two utilities at year end was $5,935,308. Additionally, the funds have granted a loan to the PSCH project in the amount of $6.4 million which is in the process of being paid back to these funds. Projected expenditures in 2014 total $4,855,000. Major contractual expenses are being incurred with the meter replacement program (about $700,000 over three years and two upcoming water tower painting projects (of between $500,000 and $750,000 per tower). The GFOA recommends 35% of annual expenditures in cash reserves. Council should maintain that amount plus a significant overage to provide for future infrastructure needs. Street Light Utility The year-end cash balance in this fund was $2,415,907. Revenues into the fund are primarily from the rate payers (estimated at $506,000 in 2014). This utility is currently in an operating deficit (we anticipate much lower cash reserves by the end of 2015). Expenses from the fund are for O&M for the street light system, and traffic signals. Unscheduled signal and similar infrastructure need is estimated at $2,815,000. We anticipate proposing a large LED replacement program in the near term. 2014 expenditures are $1,073,000. The GFOA recommends 35% of annual expenditures in cash reserves. Golf Course The golf course is presently in a position of requiring operating cash from other funds for 2013 in addition to being unable to service internal debt to the EDA and ED Trust. It is proposed that the Course convert to a Revenue fund with a transfer from the General Fund for operating support in the short term. EMS This fund, with a year-end cash balance of $651,000, runs our ambulance service with revenues into the fund from the customers and third party insurance companies. With changes in health care law our future revenues could be volatile. The GFOA recommends 35% of annual operating expenditures in cash reserves. Self Insurance At year-end 2012 this internal service fund had cash reserves of $2,451,987. Revenues into the fund are primarily from internal charges to departments and premium sharing with employees. Expenditures are from premiums and claims (property/casualty, workers comp and employee benefits) with occasional expenditures for safety/risk related items. Expenditures in 2014 are anticipated to be in the $1.7 million range with revenues in the $1.5 million range. Staff recommends that the cash balance goal of $2 million is maintained to provide coverage for premium and claims exposure (we self insure over significant portions of claims risk). We project that we will be slightly below that goal by 2015. Fleet Fleet is also an internal service fund with a year-end cash balance of $308,945. Revenues into the fund are primarily from internal charges to departments. The cash within this fund serves as operating capital. IT This is a relatively new fund created through the G2G process in order to provide a stable revenue source for scheduled replacement and updates to the management information systems and hardware. Revenues into the fund are primarily from internal charges to departments. There is currently a minimal cash balance. Sealcoating This fund provides a stable revenue source to ensure that sealcoating of streets and bituminous trails along with sidewalk repair occurs on a scheduled basis. The year-end cash balance is $190,320 and we anticipate deficit operations over the next three years. Revenue into the fund is from franchise fees charged against Centerpoint Gas and Xcel Electric and Gas billings. Budgeted expenditures in 2014/15 are projected at $772,750 in each year with revenues dropping below $500,000 in each year. It is anticipated that for 2017 an increase in the franchise fee rates will be required to begin a recovery to positive cash balances beyond that date. Recycling This fund provides for receipt of an annual grant from Washington County in support of recycling programs and corollary expenditures on recycling activities. The year-end cash balance was at $67,668. Expenditures from the fund are restricted to grant eligible activities. Forfeiture This fund provides for receipt of revenues due to public safety forfeiture activities. Year-end cash balance in the fund was $26,474. Expenditures from the fund are restricted to state law eligible activities directly related to the source of the revenues. Gambling This fund provides for receipt of revenues due to charitable gambling activities in local bars and restaurants. The year-end fund balance was $6,625. Expenditures from the fund are restricted to state provided eligible activities to the benefit of youth and community. Fund Cash Reserves 080213 Status of City Cash Balances Exclusive of TIF, Bond, and Improvement Projects Aug-13 Fund12/31/2012DesiredPolicy or GuidelineNotes12/31/2009 General$9,665,773$9,665,77360% of Annual Expenditures9,056,544 Equip Replacement$3,040,864$2,000,00050% of Five year projectionsOver $4 million projected2013 Def. Projected2,991,641 Surface Water$55,283$400,00050% of Annual Expenditures$800,000 projected2013-15 Def. Proj.141,270 Ice Arena$189,992?None$1.2 million in C.O plus refrig @ $1.5 to $3.0 over 10 years556,181 EDA$227,642?NoneLoan to RO665,318 ED Trust$2,403,032?Only C/I DevelopmentHD and similar projects require fundingLoan to RO1,781,178 Closed Debt$1,381,186?NoneCash balance is exclusive of Loan to PSCH4,191,740 Completed Construction$175,539?NoneCash balance is exclusive of Loan to PSCH1,441,539 Future Projects$2,162,667?Major Road is RestrictedCreated to fund 55% City portion of Pavement Mgmt1,884,982 MSA Construction$950,755?RestrictedCan only be used on MSA projects1,584,226 Municipal Building$738,968$2,500,00025% of projected blding projectsPS Training and FS#2 projected4,318,055 Park Trust$116,349?Cannot be below $100K695,626 Water Area$2,670,341?Restrictedholds developer payments towards future infrastructure1,724,218 Sewer Area($451,516)?Restrictedholds developer payments towards future infrastructure1,112,926 Storm Area$1,366,471?Restrictedholds developer payments towards future infrastructure2,581,928 Water Operating$3,611,236$850,000 *Minimum 35% Annual ExpendTwo tower paintings in 14/15PSCH Loan4,683,752 Sewer Operating$2,324,072$850,000*Minimum 35% Annual ExpendPSCH Loan4,821,158 Street Lights$2,415,907$375,000*Minimum 35% Annual ExpendConduit, signals, and LED/Fixture replaceDef. Proj2,845,749 Golf Course$8,360?NoneDebted to EDA and ED TrustDef. Proj158,174 EMS$651,000?Minimum 35% Annual Expend383,131 Self Insurance$2,451,987$2,000,000Cover Prem + Claims Exp2014 Deficit projected2,169,119 Fleet$308,945?NoneProvides cash for activity327,705 IT$4,941?to support replacement of all city computers every four years0 Sealcoating$190,320?Developer Fees RestrictedDeficits Projected113,225 Recycling$67,668?Restricted86,006 Forfeiture$26,474?Restricted55,632 Gambling$6,625?None5,335 $36,760,88150,376,358 Italisized are staff recommended; others are adopted policy or Accounting Guidance *In addition to GFOA operating the City needs to provide for infrastructure needs: For water/sewer that is just over $5 million and street lights that is $2.8 million at present