Superior’s City Council adopted changes to its reserve fund policy but sent a proposal to spend down excess funds back to committee to develop a plan.
The ordinance adopted by the Council on Tuesday, March 3 establishes a threshold of 32% to be held in undesignated reserves and establishes a process for spending excess revenues available after the fiscal year books are closed.
Previously, the excess revenue was to be divided equally among the city's reserve fund, capital improvement program and for reducing the tax levy the following year. That practice has allowed the reserve fund to climb to $10.6 million, or 43% of the city’s current budget.
RELATED: Superior finance committee votes to change reserve fund policy
RELATED: Superior to sell bonds for street projects
ADVERTISEMENT
“Because of this, the general fund reserve levels have risen to a point above what is necessary in order to gain the benefits of maintaining a healthy reserve,” said Ashley Puetz, finance director, in a memo to the Council.
The new ordinance establishes a policy to draw down those reserves by a maximum of 5% annually. Revenue held in reserve between 32% to 20% is intended to safeguard against the city going over budget and could be drawn down only with a majority vote of the Council.
Reserve funds below 20% could only be used for fiscal emergencies such as natural disasters, economic downturns or other unforeseeable circumstances. A three-fourths vote of the Council would be necessary for a draw-down if the reserve fund is below 20% of the city’s budget.
Previously, the policy — enacted in 1971 and revised in 2005 — established minimums at fixed values that did not grow with city budgets.
“Additionally, the current ordinance does not allow for flexibility in the way we use surplus funds,” Puetz said in the memo.
The the city’s bond rating adviser, Ehler’s, and the mayor and Finance Committee developed the new ordinance.
“The new proposed language provides flexibility while safeguarding one of the city’s most important assets,” Puetz said.
The city has maintained an AA bond rating, the second highest rating available, with Standard and Poors since 2009.
ADVERTISEMENT
If the reserve fund is at or exceeds 32%, excess budget revenue could be used to address other city needs as proposed by the mayor and approved by the Council.
The Council also sent plans to spend down the current reserve fund by $1.1 million back to the Finance Committee until there is a plan in place for how the money will be used.
Mayor Jim Paine said the committee was given a draft policy and a sample plan that had not been fully vetted.
“I think it was just a slip of the tongue that the committee approved this,” Paine said.
