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City: Fund balance level OK
Despite $600,000 being removed

Thursday, May 1, 2014

By MICKEY POWELL - Bulletin Staff Writer

Taking another $600,000 out of reserve funds will not significantly harm city finances for the coming fiscal year, according to a Martinsville official.

The city’s fund balance should have about $3 million in unassigned funds when the fiscal year ends in June 2015, said Finance Director Linda Conover.

“That still meets our fund balance policy” of having unassigned funds equal to about 10 percent of general fund expenditures, Conover said.

As it was presented, Martinsville’s proposed budget for the new fiscal year that will start July 1 reflected a total of about $28.8 million in general fund expenditures.

The fund balance basically is the difference between assets and liabilities. It can loosely be described as revenues minus expenditures. Reserve funds make up much of the balance.

A report prepared by Conover showed the city expected to use $2,023,159 in reserve funds to balance the fiscal 2015 budget.

In recent votes, however, Martinsville City Council decided to take a total of roughly $600,000 more in reserve funds to remove a proposed water/sewer rate hike from the budget proposal, give city schools an extra $150,000 and make up for revenue lost through a plan to keep businesses with yearly gross receipts of less than $100,000 from having to pay business license taxes.

Conover on Wednesday had not yet tallied exact figures. Yet the additional $600,000 would increase the amount of reserve funds necessary to balance the proposed budget to roughly $2.62 million.

The report shows the city projected having $3,877,365 in unassigned funds — money that can be used to pay one-time, unexpected costs — outside of utilities when fiscal 2015 ends. Subtracting about $600,000 from that figure would leave about $3.28 million in the non-utility unassigned funds in the fund balance.

It also would reduce the city’s overall fund balance from about $15.8 million to about $15.2 million.

Conover said she plans to fine-tune the projections and present an updated report to the council during its May 13 meeting.

Along with unassigned funds, the fund balance also includes assigned funds, such as meals tax revenues that have been used in the past to pay school and capital project costs, plus committed funds, such as money that eventually will be put toward the city’s share of Commonwealth Crossing Business Centre’s development costs.

Also, the balance includes a non-spendable category that includes items in the city’s inventory, such as new water meters and electrical lines not yet installed, that have value but are not actual money.

Asked why such items are part of the fund balance, Conover said, “Hey, that’s GASB’s (the Governmental Accounting Standards Board) rules, not mine” and like other local governments, “we follow their rules.”

Money in the fund balance also is used to maintain cash flow during months in which the city does not get enough revenue to pay all of its bills that come due in those months. When more money eventually comes in, what was taken to pay the bills is put back into the balance, officials have said.

City officials have said that the city cannot continue using reserve funds to balance budgets forever because reserve funds eventually will run out.


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