Agenda Packets - 1990/08/20 - Laserfiche WebLink

Home Browse Search

•ity of Mounds View,Minnesota Management Report,Page 18 We recommend that the City strongly oppose this method of targeting aid reductions to cities for the following reasons: 1. The proposed targeting would penalize those cities which do practice sound fiscal management. 2. The proposed targeting would encourage less responsible fiscal management. This would result in financial crisis for individual cities and ultimately affect the bond ratings of all Minnesota cities including the City of Mounds View. 3. The targeting program would be virtually impossible to administer on a fair and equitable basis because financial management practices and fund structures are not consistent or easily comparable among cities. What may appear to be a low reserve balance of a city's General Fund may be an adequate reserve balance for such city. Examples are as follows: • Transferring monies from the General Fund to other funds for capital acquisitions or anticipated acquisitions. • • The use of Special Revenue Funds to account for basic services such as police,fire and other. • The use of Internal Service Funds for compensated absences and other purposes. • The reservation of General Fund balance for cash flow,compensated absences,etc. • Transferring of reserved balance amounts to other city funds. 4. Many cities have established reserve policies and made significant fiscal management decisions based on the established/targeted reserve policy. The effectiveness of such planning and fiscal management would be severely hampered(if not destroyed) by reserve balance "raiding"by the State. 5. The State is possibly seeking to pass its financial crisis onto local government. This would be a temporary solution to apparently poor fiscal management at the State leveL 6. The potentially lost reserve balance could diminish the city's bond rating and potentially deplete a city's reserve balance pledged to secure debt service requirements. The State has made significant attempts to improve the "equitable distribution" of State aids to cities over the past two years. The success of the action to date is questionable. The proposed otion to "raid"reserve balances of cities would be a clear message that the objective of the State is i. f equity among cities. The objective would be to control the local decision making process as it relates to financial matters. This would result in an erosion of the independence and effectiveness of city government. Additionally, such actions could eventually affect the bond ratings of all Minnesota cities.