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HomeMy WebLinkAbout8C - General Fund Transfers mLY 15,2002 8C RALPH TESCHNER, FINANCE DIRECTOR CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING GENERAL FUND TRANSFERS TO THE REVOLVING EQUIPMENT FUND, SEVERANCE COMPENSATION FUND AND THE BUILDING FUND DISCUSSION: The General Fund balance for the City increased by $873,180 from $3,481,261 to $4,354,441 during the past year as indicated in the 2001 City of Prior Lake Financial Report. In accordance with the City's Council's previous direction, we are requesting specific designation of these funds. The Council will recall that the reserve growth was larger than usual due to the following three reasons: . The first was careful expenditure of budgeted funds. The City Manager, Finance Director and City department and division supervisors expect that purchases are made only if needed, and adhere to this practice. . The second occurrence is that nearly 84% of the revenue increase was attributed to growth related revenues, specifically building permits and development agreement revenue. . Third, interest earnings were increased as a result of structuring investments over longer terms to realize a higher return. History The City Council approved Resolution 94-27 on June 6, 1994 that authorized a working capital designation or General Fund reserve of 30% of the current year's Operating Budget, based upon the availability of sufficient funds. Any remaining portion is to be allocated by the Council as unreserved fund balance. Each year the Council is to review these amounts for the purpose of allocating them on an as needed basis. The existing audited General Fund balance represents a reserve of 57% of the City's 2002 operating budget. Current Circumstances The following three contribution transfer requests are recommended by Staff from the General Fund to the specific designated funds outlined below: 1.) As a result of the fire that destroyed the city's jet-vac last year, we were only able to recover approximately 50% of the value ($237,000) of the newly replaced 2002 Sterling vehicle as a result of depreciation. Appropriating a $100,000 contribution 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 H: IAUDITlAgenda2002transfer. doc AN EQUAL OPPORTUNITY EMPLOYER transfer to the Revolving Equipment Fund will restore our projected funding level. 2.) The Severance Compensation Fund was initially established in 1992 in response to an audit recommendation to establish a dedicated fund to offset the city's compensated absence liability for accrued vacation and sick leave on the books. Over the course of the past few years a number of long-term employees have retired which has reduced this fund balance. Transferring $150,000 would reestablish the original position of this designated fund that provides a partial offset to the current liability. 3.) In an effort to provide adequate funding for future city hall construction, a $750,000 transfer from the General Fund to the Building Fund is recommended. Similar allocations in the future would allow for the issuance of lower lease purchase bonds, thereby minimizing the property tax levy under state imposed levy limitations. A synopsis of the proposed utilization of the City's General Fund balance would look like this: General Fund Balance 1/1/02 less Equipment Fund transfer... less Severance Fund transfer... less Building Fund transfer... Remaining General Fund Balance $4,354,441.00 <$100,000.00> <$150,000.00> <$750,000.00> $3,354,441.00 As indicated above, the City's General Fund balance would be reduced by an overall amount of $1,000,000.00. These transfers would leave our General Fund balance at $3.6 million dollars. This amount would still represent a reserve of 44% that is comparable to the auditor's recommendation of 45-50% and favorable to the present City Council annual objective of 30%. AL TERNA TIVES: The following alternatives are available to the City Council: 1. Approve A Resolution Authorizing Fund Transfers to the Revolving Equipment Fund, Severance Compensation Fund and the Building Fund. 2. Approve a portion or all of the available $873,000 to specific expenditures or fund reserves as identified by the Council. 3. Maintain 100% of the excess reserves within the existing General Fund balance. RECOMMENDATION: Staff would recommend Alternative #1. The remaining fund balance would still be above the established minimum 30% threshold. Staff believes the uses are consistent with the City's overall strategic plan H.IA UDITlAgenda20021ransfer.doc RECOMMENDED MOTION: REVIEWED BY: Attachments: H:IA UDITlAgendal002transfer.doc and does not compromise our financial strength to an extent that our A2 credit rating would be jeopardized. Motion to approve A Resolution Authorizing Fund Transfers to the Revolving Equipment Fund, Severance Compensation Fund and the Building Fund. 1. Resoluti -xx Approving Fund Transfers to the Revolving Equipment Fund, Severance Compensation Fund and the Building Fund. RESOLUTION 02~ II S il?INNESO~~ SOLUTION AUTHORIZING GENERAL FUND TRANSFERS TO THE VERANCE COMPENSATION FUND, BUILDING FUND AND THE REVOLVING EQUIPMENT FUND MOTION BY: LL SECOND BY: J? WHEREAS, The City of Prior Lake's General Fund balance on December 31, 2001 increased by $873,180.00 to an amount of $4,354,441.00; and WHEREAS, The General Fund balance represents a reserve of 56.8% of the City of Prior Lake's current 2002 operating budget; and WHEREAS, It is the decision of the City Council to review, on an annual basis, the availability of such reserves and to allocate these. funds in a manner that would best serve the community on a long term basis; and WHEREAS, It is recognized by the City Council that it is in the best interest of the City to maintain a strong General Fund reserve as financial protection for unexpected emergencies and expenditures that would require contingency funding. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, that the following appropriation transfers from the General Fund balance are hereby authorized as follows: Purpose Fund Transfer Amount 1. Stabilize funding level 2. Offset compensated absence liability 3. Reserve capital for new city hall facility Revolving Equipment Fund Severance Compensation Fund Building Fund $100,000.00 $150,000.00 $750,000.00 Passed and adopted this 15th day of July 2002. Haugen Gundlach LeMair Petersen Zieska YES X Haugen Gundlach ~ LeMair Petersen Zieska NO )( {Seal} City Manager City of Prior Lake 16200 Eagle Creek Ave. S.L Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 H:\A UDITIRes2002transfer.DOC AN EQUAL OPPORTUNITY EMPLOYER