Thursday morning Roanoke City council heard recommendations for changes to Roanoke’s reserve and debt policy. The Director of Finance, Ann Shawver presented policy changes that would shore up lagging reserve funds. The policies are one measure that a bond-rating agency uses when sniffing out a municipality’s financial health.
Among the recommendations was one item that has been an illusive goal for many years – filling the Budget Stabilization Reserve (BSR) to “full pond.” Shawver recommended changing the policy’s measure of “full pond” from 8% of revenue to 10% of revenue. She also recommended referring to this fund as the Undesignated Fund Reserve.“ This fund would only be used if the absolute worst happens and cash was needed immediately,” said Shawver.
The city’s financial advisory firm, Public Financial Management Group in Arlington, calls the BSR the “Economic Downturn Reserve,” said Shawver. It would not be used unless revenues dropped at least 1 ½ percent below budget as the city moved through its fiscal year. The BSR or Economic Downturn Reserve would top out at 2% of revenue.
The balance in the BSR (Undesignated Fund Reserve) as of June 30, 2010 is $19,278,522 or 7.61 % of revenue.
To boost the reserve immediately Shawver proposed combining fiscal year 2010’s Undesignated Fund balance of $4.9 million to the reserve. This would bring the Undesignated Fund balance to a healthy 9.5% of revenue. “This will be a little more consistent with how other local governments and rating agencies view it,” said Shawver.
The self-insured reserve is antiquated. It ran at a deficit for FY2010 to the tune of $1 million. Measures will be taken to better fund the reserve to reflect actual claims exposure.
The debt policy was also on the table for change. The policy for capping the city’s debt at 5% percent of assessed value of real estate was recommended to be further restricted to 4%. It would include personal property values as well. The debt policy will remain at 10% of the General and School Fund expenditures. It exceeded the policy for FY2010 at 10.2%.
In addition Shawver recommended accelerating debt retirement from a 50% minimum reduction to a 60% reduction in the ten-year timeframe.
Shawver stressed the importance of adhering to a municipality’s financial policy as a measure of a city’s commitment to financial soundness.
The three rating agencies are Moody’s, Fitch and Standard & Poor’s. Moody’s noted earlier in the year that the city’s fund reserve levels were below the national average.
Adding $250,000 to $500,000 per year will fully fund all reserves within ten years with the possibility of adding yearend surpluses for an added boost.
Posted By Valerie Garner
Categories: Finance, Politics, Roanoke City Politics
Tags: budget, city_council, city_debt