4.11. SR 12-21-1995 - Laserfiche WebLink

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ITEM 4.11. ty of Elk RiverTO: • FROM: MEMORANDUM Mayor and City Council Lori Johnson, Finance Direct DATE: December 21, 1995 SUBJECT: Budget Amendments At the Thursday Council meeting, the City Council will be asked to act on 1995 Budget Amendments. During the course of the year the City Council approves expenditures which were not included as part of the original budget. At the end of the year, budget amendments are approved in order to incorporate the previously approved expenditures into the budget. Also, significant revenue and expenditure changes will be included in the 1995 budget amendments. In addition, budget amendments allow the Council to increase expenditures if revenues exceed budgeted projections as is the case in 1995. The City Administrator has attached a memo with several expenditure requests. If approved, those will become part of the 1995 budget • amendments. Prior to authorizing additional expenditures, it is important to review the General Fund cash flow reserve. Each year the importance of maintaining an adequate fund balance is stressed. Maintaining a sufficient fund balance is important for numerous reasons. First, the majority of the city's revenues are received in the second half of the fiscal year which means that adequate cash is needed to fund expenditures for the first half of the year. Also, the fund balance becomes an important factor in determining the city's bond rating. The rating agencies consider a city's fund balance to be a very important factor in the over -all economic condition of the city. Finally, revenue short -falls and/or expenditure over -runs in an upcoming budget year due to loss of state aids or some unanticipated expenditures require that sufficient reserves be available. In 1994, the city's fund balance was 26.33 % of the 1995 budget. That was down from 27.79 % in 1993. In order to maintain the 1994 level, the city's fund balance needs to increase approximately $100,000 in 1995. It would be preferable to have the fund balance increase in excess of $100,000 to show an increase in the fund balance percentage. In addition to approving budget amendments, there are several encumbrances which will be made in 1995. Since these expenditures were already included in the original 1995 budget, they are not included in the 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441 -7420 • Fax: (612) 441 -7425