Rochester adopts fund balance policy

November 16, 2018

Rochester City Council on Monday, November 12, adopted a new fund balance policy that sets reserve targets on various city funds.

 

Rochester Finance Director Anthony Moggio said the policy was created by both the city's budget subcommittee and city administration in conjunction with best practices of the Governmental Finance Officers Association, the Michigan Municipal Treasurers Association and other Michigan communities. The policy is intended to ensure long-term financial planning and ensure cashflow availability. Further, the city, which already has a high credit rating, receives some credit rating benefits by having a formal policy in place.

 

Moggio said the policy is intended to be reviewed on an annual basis. 

 

"As we move into goals and objectives, we can have discussions on where money will go," he said. "This starts the process for multi-year budgeting and helps in maintaining a good credit rating.

 

Council unanimously approved the policy.

 

Under the new policy, reserves must meet a certain percentage of annual expenditures from that fund. For instance, the policy calls for a general fund reserve of 40 to 50 percent of expenditures, while the current fund balance is about 55 percent. Other funds included in the policy (and current balance percentages) include: capital projects fund reserves of 20 to 25 percent (currently 637 percent); facilities and grounds fund balance of 60 to 70 percent (currently 0); revolving equipment fund balance of 40 to 50 percent (currently 27 percent); healthcare fund balance of 35 to 40 percent (currently 0); major streets fund balance of 60 to 70 percent (currently 62 percent); local streets fund balance of 60 to 70 percent (currently 106 percent); water and sewer capital fund balance of 25 to 30 percent (currently 29 percent); water and sewer operating fund balance of 25 to 30 percent (currently 24 percent); and auto parking fund balance of 30 to 35 percent (currently 32 percent).

 

"The budget subcommittee did put a lot of work into this through the process," said councilwoman Ann Peterson, who served on the committee. "The city has been given good direction and this will be that rolling target every year looking at goals and objectives. It's a good baseline to start, and we looked into the real important things to make sure we have enough money."

 

Councilwoman Nancy Salvia concurred that the policy makes good sense for the city.

 

"It comes down to the best use of tax dollars and the balance of responsibly planning for our future," Salvia said.

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