3.0. SR 05-17-1999 - Laserfiche WebLink

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.. . . General Fund BudQet and Fund Balance There is an interrelationship between ending General Fund fund balance and the upcoming year's adopted budget. The City's auditor recommends a minimum fund balance of approximately 35 to 40 percent of the upcoming year's budget as an appropriate level for the fund balance. As outlined in the transmittal letter of the CAFR, the City's General Fund balance for the period ended December 31, 1998, is 36.79 percent of the 1999 adopted budget. Because the General Fund cash inflows do not coincide with cash outflows, it is important to maintain an adequate cash reserve in order to meet operating expenditures. General Fund cash balance is typically lowest in April or May and reaches a high point in December. In previous years when the fund balance was less than 30 percent of the upcoming year's budget, the General Fund experienced a cash deficit in April and/or May. Since the fund balance has increased, this has not occurred and adequate cash has been available throughout the year to meet General Fund obligations. The General Fund fund balance has continued to see slow but steady growth with the exception of 1998. The 1998 fund balance did not increase based on a motion made by the City Council to transfer excess funds to the development fund. Because the balance did not increase in 1998, it will be important to carefully monitor the 1999 fund balance to ensure that there is adequate growth to maintain proportionate ratio to the 2000 adopted budget. The 1999 budget increased 9.3 percent over the 1998 budget. If a similar increase is approved for the 2000 budget, the fund balance will need to increase $200,000 in order to maintain a constant fund balance to budget percentage. In the past, all of the increases in the fund balance have been due to higher than expected growth related revenues. When budgeting, the growth related revenues have been estimated conservatively for several reasons. First, it is impossible to guess what the economy may do, which could have a significant impact on the amount of revenues received. Second, it is not prudent to rely on uncertain revenue sources to a high degree to fund necessary programs and services. Third, the revenues generated in excess of budget amounts have allowed the fund balance to increase and have substantially improved the City's financial position. Maintaining a healthy fund balance is especially important now in consideration of the amount of bonds that the City will issue in 1999 and 2000 to fund major improvement projects. 12