This past Friday we reported that the City planned to revise the policy governing the unrestricted fund balance, sometimes known as the rainy day fund, which currently stands at a healthy 83 days of operating costs, or $135,546,670.
Intended to be used for emergencies, item 16 on the agenda for tomorrow would have provided justification for City Council to spend up to $33.6 million from the fund balance for “capital outlays” in addition to emergencies or budget shortfalls.
To be clear, the City has never used the fund balance to pay for non-emergency items costing more than a few hundred thousand dollars, and not in many years; nor has it been used to close budget gaps, at least in the 15 years since we began monitoring the City. The City Manager was authorized to use a portion of the reserve (less than $10 million) for the FY 2024 and FY 2025 budgets but decided against it.
Our concern was that there may have been a nefarious plan to raid the fund balance to help meet the City’s $35 million commitment to the Deck Plaza, which we feel should not be paid for with local taxpayer money.
Thankfully, Diana Nunez from the City Clerk’s Office wrote to us today with the news that item 16 has been deleted from the agenda.
Excellent! We commend the City for not falling into this fiscal trap.
City Clerk Laura Prine followed up immediately with a second email to inform us that “the policy will be brought back at a later date.” We hope that if that happens, the City will set the minimum threshold at 80 days, protecting its bond rating and reinforcing business confidence in the fiscal health of our municipality, and refrain from referring to capital outlays or even budget gaps.
The unrestricted fund balance should only be expended for emergencies, just like certificates of obligation. That is what it is for, period.