Agenda - Council Work Session - 06/10/2014

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GENERAL FUND The City's General Fund accounts for the financial activity of the basic services provided to the community. The primary services included within this fund are the administration of the municipal operation, police and fire protection, building inspection, streets and highway maintenance, and culture and recreation. The graph below illustrates the change in the General Fund financial position over the last five years. Fund balance and cash balance are typically used as indicators of financial health or equity, while annual revenue is often used to measure the size of the operation. $10,000,000 $ 8,000,000 $6,000,000 $4,000,000 $2,000,000 2009 General Fund Financial Position Year Ended December 31, 2010 2012 2011 Fund Balance 1 I Cash Balance Revenue 2013 The City's General Fund cash and investments balance (net of interfund borrowing) at December 31, 2013 was $6,872,395, a decrease of $38,526 from the previous year. Total fund balance at year -end was $6,771,394, an increase of $46,111 from the prior year. The stability of the General Fund's financial position is greatly attributed to the City's "Fund Balance and Excess Revenue Policy" as well as the general budgeting policies. These policies have allowed the City to provide funding for equipment replacement and recurring capital maintenance programs without disrupting the General Fund's financial position. This is an important factor because a government, like any organization, requires a certain amount of equity to operate. The amount of required equity increases as the size of the operation increases. Increase in the size of the operation is natural, caused by such things as inflation, population growth, desired increases in services, and — something which has impacted cities significantly in recent years — mandated increases in services and administrative requirements. The graph above shows the decrease in 2010 cash and fund balance is largely due to the City's change in its fund balance policy, which was amended to require 50 percent of the following years' adopted budgeted expenditures. Prior to 2010, this requirement was at 60 percent. The City transferred the amount above, the 50 percent required, in accordance with the fund balance policy, thereby decreasing the ending balance when compared to the previous year. Generally, a healthy financial position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and can be a factor in determining the City's bond rating and resulting interest costs.