Managing city finances is somewhat of a straight forward
proposition but there are some approaches we take that hedge our future to be
better prepared for fiscal impacts. The
city has established a Revolving Capital Fund.
This fund is used to store earmarked funds for future use. The fund is set up by category such as public
works or police. Each category then
carries its own balances. These balances
are used to purchase equipment for needs that are too expensive to do in a
single budget cycle. As an example we can budget an annual
amount, over a period of years, to be used to cover future public works
equipment purchases. Doing
this allows for a purchase when needed, with the city having cash and not
requiring debt for that expenditure.
Accomplishing this may seem complicated but it really works quite
easily. Each year a budget amount is
included for capital expenditures in each department. Most years there are some expenditures that occur
in these line accounts but the entire budget amount is not generally spent. The remaining balance gets transferred at
year end to the Revolving Capital Fund for the intended purpose. Not only does this provide for the
accumulation of funds, it also prevents the “use it or lose it” mentality. The opposite is also true in that if we spend
more than the budgeted amount; the remaining required funds come from the
Revolving Capital Fund.
At year end we transferred funds to and from the Revolving
Capital Fund. In addition to public
works and police we earmark funds for road improvements, land acquisition,
parks, administration, and future improvement among others. The total amount of fund transfers to the
Revolving Capital Fund at year end this year was $47,417.81. The total amount of funds spent from
Revolving Capital was $130,975.85. Keep
in mind in this case, if funds hadn’t been earmarked in this way, it would
have required a budget and levy about $84,000 more than was done. Using this approach the city is able to
smooth out the peaks and valleys of expenditures with limited impact on the
total levy.
