7.2. SR 04-06-2009 - Laserfiche WebLink

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~j City of Elk River REQUEST FOR ACTION To Item Number Ci Council 7.2. Agenda Section Meeting Date Prepared by Administration A ri16, 2009 Tim Simon, Finance Director Item Description Reviewed by 2008 Fund Balance Designations Reviewed by Action Requested Approval on the 2008 Unreserved, designated fund balances in the General and Severance pay reserve fund. Background/Discussion Fund balance designations are presented to the City Council in accordance with the City's Financial Management Plan. Section 9.2 of the Financial Management Plan regarding General fund balance is reprinted below for your reference. 9.2 The General Fund shall have an unreserved balance of not less than 40 percent of the next year's budgeted expenditures. This calculation is made at the end of each fiscal year. If the year-end fund balance exceeds this threshold, the City Council will consider the need to retain the excess and increase the minimum fund balance before allocating the monies to other uses. In previous years the City Council has set the unreserved, designated fund balance at 41.5 percent of next year's General fund budgeted expenditures and allocated the amount over that for capital equipment, pay adjustments, or other one-time expenditures. In 2007, the fund balance was 42.8 percent of next year's budgeted expenditures as we anticipated some uncertainty with future LGA impacts and the potential to use reserves to offset some of the loss of revenue. The 2008 unreserved, designated fund balance has decreased to 41.1 percent of next year's budgeted expenditures. The main reason for the decrease is the reductions in revenues (LGA, MVHC), but the percent would have been decreased further if not for all the City departments working together to reduce expenditures to help offset the sudden reduction of revenue. The City managed to stay above the goal of 40 percent of next year's budgeted expenditures and still maintain a strong financial position at year-end. Moody's investor services have consistently reviewed the fund balance level in the General fund as a financial condition of the City. Maintaining a fund balance for working capital is very important to cash flow the City's General fund between tax cycles Qune, Dec) and Local government aid payments Quly, Dec). With the 2008 Financial Statements the City had to implement Governmental Accounting Standards Board (GASB) statement number 45. The statement related to the accounting and reporting for postemployment benefits other than pensions (OPEB). The city has a very small OPEB liability since we only have the implicit rate subsidy. Last fall, we reviewed the actuarial calculations and our total actuarial C:\Documents and Settings\jjohnson\Local Settings\Temporary Internet Fi]es\OLK49\2008fundbalancedesignations.doc