McMinnville officials will be considering starting a rainy day fund during the Board of Mayor and Aldermen meeting Tuesday night. Money will be added to the fund at the end of each fiscal year.
City administrator David Rutherford informed officials last month that, with a projected ending balance in 2012 of $2 million, the city’s cash flow problem has been minimized.
He encouraged them to begin saving to help prevent cash flow problems due to emergencies or shortfalls in the future.
“It is now time for the board to begin building a rainy/ stormy day fund to deal with unknown emergencies,” Rutherford said. “It is proposed the board set aside $250,000 at the beginning of the next fiscal year, July 2012.”
The goal for the city is to have $1 million in funds to be used only for real emergencies from natural events. Money will be added to the fund at the end of each fiscal year, provided the city ends the year with more than what is needed to begin the next year.
Under consideration Tuesday night will be a Fund Balance Policy which states:
“The Fund Balance Policy is intended to provide guidelines during the preparation and execution of the annual budget to ensure sufficient reserves are maintained for unanticipated expenditures or revenue shortfalls. It also is intended to preserve flexibility throughout the fiscal year to make adjustment in funding for programs approved in connection with the annual budget.
“The Fund Balance Policy should be established based upon a long-term perspective recognizing that stated thresholds are considered minimum balances. The main objective of establishing and maintaining a Fund Balance Policy is for the city to be in a strong fiscal position that will allow for better position to weather negative economic trends.”
The Fund Balance consists of five categories:
• Nonspendable — Funds that cannot be spent due to their form or funds that legally or contractually must be maintained intact.
• Restricted — Funds that are mandated for a specific purpose by external parties, constitutional provisions or enabling legislation.
• Committed — Funds that are set aside for a specific purpose by the city’s highest level of decision making authority (board).
• Assigned — Funds that are set aside with the intent to be used for a specific purpose by the city’s highest level of decision making authority or a body or official that has been given the authority to assign funds. Assigned funds cannot cause a deficit in unassigned fund balance.
• Unassigned — Excess funds that have not been classified in the previous four categories. All funds in this category are considered spendable resources.
It will be the responsibility of the financial director to report all fund balances appropriately in the city’s financial statements. Balances must be reported to the board within two months of the end of the fiscal year.
Tuesday’s board meeting begins at 7 p.m. Resolution No. 1848 is the measure to set the Fund Balance Policy.