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Mayor & City Council June 17, 1993 Page 2 2. Any remaining surplus will be transferred to the General Capital Improvement Fund to provide a source of financing for capital expenditures. It is further understood that $66,068 will be reserved in this fund to offset the possible elimination of Local Government Aid in any subsequent budget year. (This amount represents our 1993 allocation of LGA.) The benefits of this policy are as follows: * By providing a source of funding for non - financed interim construction costs, we reduce the potential for negative fund balances in our audit report. We provide a source of funding without additional taxation for future capital expenditures. We provide a one time source of funding to offset niimination of LGA in any given budget year which will minimize the. impact to our budget in that year. * By allowing surplus amounts to go to the General Capital Improvement Fund, we are providing an incentive for employees to expend their budgets wisely. By knowing that there will be a source of funding for future capital improvements, each department can help ensure that its capital expenditure needs will be met in the future. * We do not create un- designated fund balances which could be negatively perceived by the State officials. * Future tax levy impacts are lessened by providing a source of funding for capital expenditures that do not previously exist. I have briefly discussed this matter with the Auditors and it is my opinion that they will concur with this recommendation. By adopting this policy at this point in time, they can make the appropriate transfers as part of the audit adjustments which will then be reflected in the 1992 Annual Financial Report. Should you have any comments or questions regarding this matter, please let me know prior to Wednesday's meeting. JRH :kpv Page 6'