12-A Referendum Position Res - Laserfiche WebLink

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EXHIBIT P (continued) 2. The City's Isset to liability ratio decreased by 44.5% in the year ending September 30, 2001. Total assets decreased by $677,895 and total liabilities increased by $825,199. 3. Cash coverage of general fund balance decreased from 32.4% to 18% for the year ending September 30, 2001. General fund cash balance decreased by $4,308,791. 4. Actual expenditures for fiscal year 2000 -2001 exceeded actual revenues by $2,470,698. 5. Total fund balance as a percent of expenditures dropped from 35.6% to 23.2% for the year ending September 30, 2001. 6. The appropriate fund balance level is related to more than the level of expenditures. Emergency contingencies, economic conditions, and other factors must be considered. The 5% rule quoted in the letter also states "...a larger balance may be warranted, particularly if budget revenue and expense are economically sensitive or otherwise not easily forecasted." The letter also states "... it seems reasonable... that a municipality would want to maintain a higher reserve level in uncertain financial circumstances, when the likelihood of drawing on the balance is greater." All of the general fund's primary revenue sources (property taxes, sales taxes, and franchise taxes are sensitive to economic fluctuations. That certainly describes our current situation. 7. The letter states that the City's credit rating is A2. Moody's Financial Service is quoted discussing this rating " Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future." Translation: the City is not a bottomless pit of money. In addition to the above updated financial information, the following factors should be considered. 1. The cost of the petition in the first year alone would be $507,627. This amount would increase each year. 2. Much of the general fund balance decrease was anticipated and planned for by management. In order to avoid a tax rate spike, general fund balance was allowed to grow in anticipation of the $2,609,419 spent on Fire Department stations and equipment. 3. Revenues for 2001 -2002 are expected to fall $762,318 below budget. Increased property tax values may provide some relief, but overall projected revenues for 2002 -2003 are expected to be approximately $500,000 below current year budget. 4. A certificate df obligation issue of over $6,000,000 is expected in September 2002 adding $485,000 to annual debt payments. 5. Any general fund balance lower than amount equal to two months operating expenditures is fiscally irresponsible. A three -month operating expenditure fund balance is preferred. Justification for this can be seen as recently as the December 2000 ice storm, which caused the City to spend approximately 1.7 million dollars that had not been budgeted. Even though partial reimbursement of these funds was available, the money had to be on hand to deal with the immediate situation.