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The City has adopted a fund balance policy that establishes a minimum unassigned General Fund balance <br /> of between 35.0 percent and 50.0 percent of the subsequent year's budgeted revenues and transfers or a <br /> minimum five months of expenditures and transfers. The following graph presents this ratio for the last <br /> five years compared to this policy: <br /> Fund Balance as a Percentage of Expenditures <br /> Year Ended December 31, <br /> 65% <br /> 60% <br /> 55% <br /> 50% <br /> 45% <br /> 40% <br /> 35% <br /> 30% <br /> 2021 2022 2023 2024 2025 <br /> t Fund Balance Policy Maximum 50.0% 50.0% 50.0% 50.0% 50.0% <br /> --X--Fund Balance Policy Minimum 35.0% 35.0% 35.0% 35.0% 35.0% <br /> f-Unassigned Fund Balance r 62.5% 62.5% 60.8% 49.3% 50.0% <br /> As the graph illustrates, the City has been following this policy by maintaining a year-end fund balance <br /> above the 35.0 percent minimum required in the policy. <br /> A government, like any organization, requires a certain amount of equity to operate. A healthy financial <br /> position allows the City to avoid volatility in tax rates;helps minimize the impact of state funding changes; <br /> allows for the adequate and consistent funding of services,repairs, and unexpected costs; and is a factor in <br /> determining the City's bond rating and resulting interest costs. <br /> A trend that is typical of Minnesota local governments,especially the General Fund of cities,is the unusual <br /> cash flow experienced throughout the year. The City's General Fund cash disbursements are spread <br /> relatively evenly throughout the year, other than the impact of seasonal services such as snowplowing, <br /> street maintenance, and recreation activities. Cash receipts of the General Fund are quite a different story. <br /> Property taxes comprise about 61.5 percent of the fund's total annual revenue. Approximately half of the <br /> City's annual property tax levy is collected and remitted to the City by the end of June and the rest by <br /> December. Consequently, cities depend on the resources this fund balance represents to provide adequate <br /> cash reserves to finance their everyday operations between these collections. <br /> -11- <br />