For the thrifty among us, money that is not spent on necessities is often stashed away in case of an emergency. The City of Jefferson is no different, routinely putting away unspent funds in its unreserved fund balance — a rainy day account — which can be used for one-time major projects.
But the May 22 tornado and this year’s record flooding has complicated that savings plan.
The city’s unspent funds have been managed fairly and spent when necessary, officials said, but the unknown disaster expenses have added questions regarding future years of savings.
Funding disaster expenses
The Fiscal Year 2019 general fund budget of $32.8 million includes $5.6 million, or 17.16 percent, in the unreserved fund balance. The City Council approved the budget in September 2018. The FY2019 budget covers Nov. 1, 2018, through Oct. 31, 2019.
Municipalities are required to set aside unreserved fund balances to deal with unforeseen situations and long-term financial planning, Jefferson City Finance Department Director Margie Mueller said.
The Government Finance Officers Association recommends a minimum saving of no less than two months of regular general fund operating expenditures or 17 percent each fiscal year.
The purpose of the reserve is to “provide guidelines to the City Council and staff for establishing, maintaining and performing an annual review of the minimum and target fund balance reserves,” Mueller said.
Unreserved funds can be used for unfunded federal or state mandate, economic downturns or revenue shortfalls. General fund reserves are appropriated for use by the City Council.
The city policy gives examples of when funds can be used including — large one-time costs, unanticipated budget shortfalls, to mitigate service impacts during a significant economic downturn or significant and unexpected loss of revenue, catastrophic events of natural disaster that threaten the safety of persons or property within the safety, or the city sustain unexpected liabilities created by federal state or other mandates out of the city’s control.
The city is working to hit the 17 percent unreserved fund target for FY2020, Mueller said. The FY2020 budget begins Nov. 1.
The Jefferson City Budget Committee approved the FY2020 budget at more than $65.1 million. The general fund budget for FY2020 is more than $32.9 million.
The final budget has not been approved.
The city met with department directors last week to discuss unspent funds they anticipate for FY2019, Mueller said. Those could be used to cover bills related to tornado and flood damage, she added.
“The unspent budgets that usually flow into the fund balance will be the source of funding for the disaster expenditures,” Mueller said. “We hope to stay at our 17 percent minimum fund balance, but the disaster expenses might cut into that. We’re not sure to what extent yet.”
City Administrator Steve Crowell said the city is currently paying bills from expenses associated with the tornado and flooding.
“The tornado and flood funding, we don’t have all of those costs,” Crowell said. “What we’re doing is — we’ve paid a few bills, but we’ve got funds that were technically just running in the red mark.”
As of Aug. 29, the city has spent nearly $193,000 on tornado expenditures and nearly $245,000 on flood expenditures.
Crowell said those costs are a “very small portion” of what the city expects to spend.
Expenditures have included $98,173 for repairs to stop/street lights during the tornado and $92,551 for trash collections during the flood.
Other expenses include street materials, equipment maintenance building and grounds maintenance.
Although some expenses were budgeted, such as gas and equipment for FY2019, the city will submit a report for reimbursement to the Federal Emergency Management Agency and State Emergency Management Agency.
“These numbers are only a very small slice of the very big, yet to be determined, pie,” Crowell said.
If the council does not wish to use unspent FY2019 funds on disaster expenses, Crowell said, there are other options.
“What that something else would be is the use of fund balances,” Crowell said. “Technically there are some other ways, but practically that’s the only thing to do.”
While city staff compiles the costs, Crowell said, he will make a decision on how payments are made.
The debris removal contract is one item the city has not received a final bill for, he said. At a Jefferson City Public Works Department meeting, an estimated $250,000 was mentioned as what that service could cost, he said.
“If we don’t spend all the money — and we better not — that hunk of money would go into the fund balance for next year,” Crowell said.
City Council decides how to spend unreserved funds. Expenditures from the fund are typically made in respect to keeping at least 17 percent in the balance, he said.
This year is different with the tornado and flooding, he said.
While the unreserved fund balance could help with flood- and tornado-related expenses, Ward 2 Councilman Rick Mihalevich previously said he is concerned the city will go below the 17 percent mark.
The FY2019 budget includes $5.6 million in the unreserved fund balance. This means the city has about 0.16 percent to spend before they would dip below 17 percent, Mihalevich said.
While having 17 percent is a comfortable amount for him, Mihalevich said the council will be “prepared to debate that percent and whether it’s the right size or not.”
The city’s unreserved fund balance policy states: “If the fund is required to be used or is not achieved, the city administrator and finance director shall present to the city council a strategy to meet the fund balance reserve level within two fiscal years.”
Tight budget year predicted
The city was preparing for a tight budget year before the disasters.
After the City Council funded four capital projects with the unassigned general fund balance and Sales Tax G in March 2018, an estimated $186,277 remained in the fund balance.
At a previous council meeting in March 2018, Ward 3 Councilman Ken Hussey said the council and department directors would need to remember that funding those projects means money would be tight in FY2018 that year and possibly in the future.
“We’re essentially going to go through this next budget year with $186,000 in flexibility in the fund balance,” he previously said. “We have to get comfortable with that, that it’s going to be a really tight year, (and) that if staff comes to us with some of these emergency expenditures, it’s not going to just be approved — it’s got to be, ‘Where did we cut to make up the difference?’”
In FY2019, the City Council funded two projects from the unreserved fund.
Those projects were approximately $75,000 for a snow plow in May and $49,365 for the Jefferson City Fire Department deputy vehicle with proceeds from the sale of the fire apparatus in April.
The city maintains a list of potential projects that could be funded by the fund balance. Those items currently include: 42 one-time funding capital projects including $7.9 million for police building renovation; $4.5 million for Jefferson City Airport tower; $4 million for Missouri River Port investments; more than $3.5 million for Fire Station No. 6 on Mission Drive; and $3.2 million for street improvement construction costs at Country Club Drive/Missouri 179/Capital Mall.
Of those 42 projects, 26 also qualify for funding through sales tax G or H, including central maintenance facility relocation, event safety improvements and overlay additions.
The list has not been updated since April, Mueller said.
The FY2018 year-end fund unreserved fund balance was more than $8.2 million, according to city documents.
In FY2018, the City Council funded: more than $1.2 million for Fire Station No. 2; $640,000 for the downtown streetscape and electric project; approximately $259,000 for Land Clearance for Redevelopment Authority reimbursement gap financing; $145,000 for a dump truck; $300,000 for city workers’ compensation; and $122,828.56 for four police vehicles with proceeds from the TracFone settlement.
In FY2017, the City Council funded three projects from the unreserved fund balance. More than $1.1 million for a fire apparatus lease payoff, approximately $100,000 for Columbia Airport air service guarantee participation, and $750,000 stormwater repairs and improvements.
In FY2016, the City Council funded a $300,000 sewer extension for Special Olympics of Missouri.
Prior to six years ago, the unreserved fund balances were not meeting the 17 percent savings.
Going into FY2013, city officials had described the year as a “budget disaster.” FY2013 began Nov. 1, 2012, and ended Oct. 31, 2013.
The city’s unreserved funds were low due to various supplemental appropriations approved throughout FY2012, former interim finance director Bill Betts told News Tribune in 2013.
He said the city typically had $3 million-$5 million in the fund balance since 2008.
To make up for budget shortfalls, the city approved more than $1.68 million in cuts for FY2013.
At the end of the FY2013, the unrestricted fund was more than $4.9 million but the city was still under the 17 percent threshold.
By FY2014, the year-end unreserved fund balance was more than $6.4 million, which was a little more than 22 percent of the budget. FY2014 began Nov. 1, 2013, and ended Oct. 31, 2014.
The unreserved fund balances for fiscal years 2010-17 were:
• FY2010 $4.5 million
• FY2011 $4.7 million
• FY2012 $4.6 million
• FY2013 $4.9 million
• FY2014 $6.4 million
• FY2015 $7.01 million
• FY2016 $8.8 million
• FY2017 $9.2 million
This year, reviewing the projected unreserved fund balances were important because of the natural disasters. If funds are spent, the city would have a challenging time keeping unreserved fund balances afloat.
In July, Mueller provided the Jefferson City Budget Committee with a five-year forecasting model of what the unreserved general fund would look like if the city spent all of its funds.
The FY2020 projected unreserved fund is $5.6 million, according to the sheets provided.
By FY2024, the projected unreserved fund could be $2.02 million.
Mueller also provided the committee with how the unreserved general fund would look if the city held back 4 percent of funds.
The FY2020 projected unreserved fund is nearly $8.26 million.
By 2024, the projected unreserved fund could be nearly $6.4 million.
The overall proposed mayor-approved budget for FY2020 is more than $65.1 million. The general fund budget for FY2020 is more than $32.9 million.