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Overview of City Financial Reserve policies

This document provides a comprehensive overview of the City's financial reserve policies, including background information and goals set by the new Council. It highlights the importance of various reserve accounts such as Equipment Replacement Reserve, Facility Maintenance Reserve, Housing Reserve, and Unrestricted Reserve. Additionally, it identifies a proposed allocation of $1.5 million for streets, sidewalks, and ADA work. The document also addresses the use of the Unrestricted Reserve and offers recommendations for establishing reserve level policies and reporting. The issue is complex and varies by jurisdiction, and the document includes a review of the City's operating expenses by month and examines the practices of other Maryland Municipalities. Finally, it recommends a move to a 17% reserve level consistent with GFOA guidance.

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Overview of City Financial Reserve policies

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  1. Overview of City Financial Reserve policies Providing overview of background information Goal is direction from new Council on reserve levels before FY19 budget begins What Information will be helpful for new Council to have?

  2. Equipment Replacement Reserve • Facility Maintenance Reserve • Housing Reserve • Unrestricted Reserve • Also, generally identify $1.5 million for streets, sidewalks and ADA work Type of Reserve Accounts

  3. Fluctuations in operating funds • Obligations such as bond and other loan payments • Emergencies • Natural (climate change bringing less predictability) • Manmade ( e.g. terrorism, gas explosion economic downturn, and major policy changes from State and Federal Government) Use of Unrestricted Reserve

  4. Establish a policy to address level of unassigned fund balance to be no less than two months of regular operating expenditures (17%) • Adopt a multi-year plan to project for replacement costs and useful life of reserve • Report replacement plan and allocation of reserve fund on regular basis GFOA Guidance

  5. 2016 Winter Storm

  6. Global Financial Crisis 2008

  7. Issue is complex and varies by jurisdiction • Looked at goals and practices of other Maryland Municipalities • Looked at City’s operating expenses by month Reserve Policy

  8. Move to 17% reserve level and be consistent with GFOA guidance rather than use flat dollar amount • Policies to define this to be established after discussion with new City Council Recommendation

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