HomeMy WebLinkAbout10B - General Fund Transfer
MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
4646 Dakota Street S.E.
Prior Lake, MN 55372-1714
CITY COUNCIL AGENDA REPORT
MAY 21,2007
10 B
Ralph Teschner, Finance Director
CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING GENERAL
FUND TRANSFER TO THE SEVERANCE COMPENSATION FUND
Introduction
The General Fund balance for the City increased by $979,030 to $5,276,400
during the past year as indicated in the 2006 City of Prior Lake Financial
Report. This fund balance represents a net increase and takes into account
the final $500,000 Building Fund transfer authorized by the Council at mid-year
in 2006. In accordance with the City's Council's previous direction, we are
requesting specific designation of these funds.
Historv
The City Council has had a past 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.
Current Circumstances
The existing audited General Fund balance represents a reserve of 45% of the
City's 2007 operating budget. 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:
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%. One of the key Financial Performance Gold Standards that was
adopted within the 2030 Vision Statement is to maintain an optimum General
Fund reserve balance of 45%.
Although we have achieved this position which is consistent with both the State
and City Auditor's recommendation a contribution of $150,000 to the City's
Severance Compensation would be appropriate at this time to increase the
funding for the City's other post employment benefits known as OPEB. While
www.cityofpriorlake.com
Phone 952.447.9800 / Fax 952.447.4245
I
ALTERNATIVES:
REC'lMMENDED
MO:',ON:
the City does not fund any specific benefits for retired employees, other than
allowing those employees to participate in the group medical plans at their
cost, the City does carry a year-end liability of $523,051 for accrued vacation
and sick leave. The current fund balance in the Severance Compensation fund
is $212,888.00 which represents approximately a 41% funded basis. The
proposed $150,000 transfer would push the funded status to nearly 70%.
The City received an excess tax increment settlement from Scott County of
$114,969.05 which the Council on March 5, 2007 directed to be retained in the
City's General Fund subject to future needs as identified by the Council. The
Council can appropriate these dollars for economic development or for any
other purposes from the General Fund balance at its discretion.
Since the State Auditor established its position for governments to establish
severance compensation funds the City Council has approved the following
funding appropriations:
Year Amount
1992 $200,000
1996 $100,000
2002 $150,000
In an effort to stay within the 45% reserve guideline and to meet the City's
commitment of $400,000 for the county-wide 800 megahertz communications
system identified and scheduled in the 2008 Capital Improvement Program no
additional funding transfers are recommended.
A synopsis of the proposed utilization of the City's General Fund balance
would look like this:
General Fund Balance 1/1/07
less Severance Compensation Fund transfer
Remaining General Fund Balance
$5,276,400.00
<$150,000.00>
$5,126,400.00
This transfer would leave our General Fund balance at $5.13 million dollars.
This amount would represent a reserve of 44% that would be consistent with
the city auditor's recommendation of 40-50% and favorable to the present City
Council annual objective of 45%.
The following alternatives are available to the City Council:
1. Approve A Resolution Authorizing General Fund Transfer to the
Severance Compensation 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.
Alternative #1. Staff believes the remaining General Fund reserve is consistent
with the City's 2030 Vision element of "Strong Financial Management" and
reinforces our existing Aa3 credit rating.
I
ReVie1:t
Frank Boyles, ity, M
1. Resolution Authorizing General Fund Transfer to the Severance
Compensation Fund.
MOTION BY:
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
I
4646 Dakota Street S.E.
Prior Lake, MN 55372-1714
RESOLUTION 07 -xx
RESOLUTION AUTHORIZING GENERAL FUND TRANSFER
TO THE SEVERANCE COMPENSATION FUND
SECOND BY:
The City of Prior Lake's General Fund balance on December 31, 2006
increased by a net $979,030.00, after authorized transfers, to an amount of
$5,276,400.00; and
The General Fund balance represents a reserve of 45% of the City of Prior
Lake's current 2007 operating budget; and
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
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 for unfunded OPEB liability Severance Compensation Fund $150,000.00
Passed and adopted this 21st day of May, 2007.
{Seal}
YES
NO
Haugen
Erickson
Hedberg
LeMair
Millar
Haugen
Erickson
Hedberg
LeMair
Millar
City Manager
City of Prior Lake
www.cityofpriorlake.com
H:\AUDITlRes2007transfer.doc
Phone 952.447.9800 / Fax 952.447.4245