HomeMy WebLinkAbout5H - General Fund Transfer to Building Fund
MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
16200 Eagle Creek Avenue S.E.
Prior Lake, MN 55372-1714
CITY COUNCIL AGENDA REPORT
MAY 15,2006
5H
Ralph Teschner, Finance Director
CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING GENERAL
FUND TRANSFER TO THE BUILDING FUND
Introduction
The General Fund balance for the City increased by $426,541 to $4,297,370
during the past year as indicated in the 2005 City of Prior lake Financial
Report. This fund balance represents a net increase and takes into account
the $283,639 Building Fund transfer authorized by the Council at mid-year in
2005. In accordance with the City's Council's previous direction, we are
requesting specific designation of these funds.
Historv
The City Council has a standing resolution that supports 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 40% of the City's 2006 operating budget.
Current Circumstances
As indicated in the Management letter the Minnesota Office of the State
Auditor has classified cities unreserved fund balance levels into the following
four categories:
Extremely low
low
Acceptable
ModerateIYooo.hIg!:Li
Hi h
000000"_000_..9
Very high
Extremel'tooo.h.ig h
Under 20%
21 - 34%
35 - 50%
51 - 64%
65 -100%
101 -150%
Above 150%
It appears from the classification descriptions that the State Auditor's Office is
taking the position that an appropriate fund balance should be in the range of
35 to 50%. In an effort to stay within this guideline and to provide the final
scheduled contribution for the citv oolice station/citv hall construction, a
$500,000 dollar transfer from the General Fund to the Building Fund is
recommended.
A synopsis of the proposed utilization of the City's General Fund balance
would look like this:
www.cityofpriorlake.com
H\l-\UDIT\A.genda2006transfer.doc Phone 952.447.4230 / Fax 952.447.4245
General Fund Balance 1/1/06
less Building Fund transfer...
Remaining General Fund Balance
$4,297,370.00
<$500.000.00>
$3,797,370.00
ALTERNATIVES:
This transfer would leave our General Fund balance at $3.8 million dollars.
This amount would represent a reserve of 35% that is lower than the city
auditor's recommendation of 40-50% yet favorable to the present City Council
minimum annual objective of 30%.
The following alternatives are available to the City Council:
1. Approve A Resolution Authorizing General Fund Transfer to the
Building Fund.
2. Approve an amount for specific expenditures or fund reserves as
identified by the Council.
3. Maintain 100% of the excess reserves within the existing General Fund
balance.
RECOMMENDED
MOTION:
Alternative #1. The remaining fund balance would still be above the
established minimum 30% threshold. Staff believes the use is consistent with
the City's overall strategic plan and does not compromise our financial strength
to an extent that our Aa3 credit rating would be jeopardized.
Rij by:
Frank B es Cit
1. Resolution Authorizing General Fund Transfer to the Building Fund.
16200 Eagle Creek Avenue S.E.
Prior Lake, MN 55372-1714
RESOLUTION 106-xx
RESOLUTION AUTHORIZING GENERAL FUND TRANSFER
TO THE BUILDING FUND
MOTION BY: SECOND BY:
WHEREAS, The City of Prior Lake's General Fund balance on December 31, 2005
increased by a net $426,541.00, after authorized transfers, to an amount of
$4,297,370.00; and
WHEREAS, The General Fund balance represents a reserve of 40% of the City of Prior
Lake's current 2006 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:
1. The recitals set forth above are incorporated herein.
2. The following appropriation transfer from the General Fund balance is hereby authorized
as follows:
PurDose Fund Transfer
Amount
Reserve capital for new city hall/police facility Building Fund
$500,000.00
Passed and adopted this 15th day of May, 2006.
YES
NO
Haugen
Dornbush
Erickson
LeMair
Millar
Haugen
Dornbush
Erickson
LeMair
Millar
{Seal}
City Manager
City of Prior Lake
www.cityofpriorlake.com
H:\AUDIT\Res2006transfer.doc
Phone 952.447.4230 / Fax 952.447.4245