Laserfiche WebLink
515 Little Canada Road, Little Canada, MN 55117 -1600 <br />(651) 766 -4029 / FAX: (651) 766 -4048 <br />www.eLlittle-canada.mn.us <br />MEMORANDUM <br />TO: Mayor Blesener and Members of the City Council <br />FROM: Shelly Rueckert, Finance Director <br />DATE: April 3, 2006 <br />RE: Reserve Analysis <br />MAYOR <br />Bill Blesener <br />COUNCIL <br />Jim LaValle <br />Rick Montour <br />Barbara Allan <br />John Keis <br />ADMINISTRATOR <br />Joel R. Pianson <br />Each year the State Auditor provides a report on financial information pertaining to <br />Minnesota Cities. The cover letter received with this year's report made special mention <br />of city fund balances (Exhibit A). You can see from the letter attached the State <br />Auditor's preference is that cities maintain reserves at 35% to 50% of current expenses. <br />At the end of 2004 our level of reserves stood at 68% while the average for all cities was <br />58 %. Given recent State budget woes, talk of levy limits, and prior State actions, we feel <br />we should make an adjustment to protect our reserve balances. <br />Attached is an analysis of our 2004 reserve balances (Exhibit B). The State considers the <br />fund balances for the General Fund and Special Funds as the "reserve balance ". The <br />current expenditures included expenditures in those funds along with the current <br />expenditures in Capital Projects Funds. The inclusion of the capital projects expenditures <br />actually helps us out in that it increases our total current expenditures and, thereby, <br />justifies a larger reserve balance. Even with that being the case, we are over the <br />suggested 50% limits by $565,155 in 2004. This could be readily solved by transferring <br />that amount to a capital project fund such as the General Capital Improvement Fund. <br />However, we would caution that this transfer not get absorbed into the CIP Budget, but <br />rather be held in a similar reserve manner. <br />Additionally, the City's current policy regarding General Fund reserves would require <br />modification because by definition it requires the reserves to be maintained at higher <br />levels than the State Auditor is setting the standard. <br />Finally, we would suggest using a 42.5% reserve standard, thereby being at the mid -point <br />of the State Auditor's suggested range. Also, since capital spending tends to fluctuate <br />year to year and this would allow us some room to absorb an <br />