The Chatter:
You may have heard that .... In the past the “undesignated fund balance” was set aside to
cover six months of expenses. It got mixed in with SPLOST funds and now covers only two
months of operating expenses. Hurricane season is here – what will we do if we have an
emergency?””
The Reality:
Historically, the “undesignated fund balance” has never been equal to six months operating
expenses. Past councils allowed these funds to be co-mingled with SPLOST funds in an
attempt to maximize investment income for the city.
Our current CFO has corrected this problem, separating about $1 million dollars from the
fund, leaving $1.6-1.8 million dollars in this undesignated fund.
While having six months in reserve may be a noble goal, our research indicates that the city
has never had that much in reserve.
In the article BENCHMARKING AND MUNICIPAL RESERVE FUNDS:
THEORY VERSUS PRACTICE the authors state: Various "rules of thumb" are commonly used
to evaluate the adequacy of a local government’s unreserved, undesignated balance. A
commonly cited standard is five per cent (5.0%) of annual operating expenditures. Others
argue that the standard should be anywhere from one month’s operating expenditures
(roughly 8.3% of budgeted operating expenditures) to three months’ expenditures (about
25%)........
Local government managers, in interviews and conversations, frequently refer to three
months general fund expenditure being a guide for a local government's general fund
balance.
Some would argue that taxing our residents to create a fund that may never be used is poor
fiscal policy. The physical assets of the city are covered by GIRMA insurance and FEMA.
Equally important, what is one council’s “undesignated fund” can be the next
council’s big capital project. Having too large an “undesignated fund” may not be in the best
interest of the City.
Sound Fiscal Management
Written by Mayor Jason Buelterman
Prudent management of taxpayer dollars is one of the most important tasks of a governing
body. Cities and counties around our country began to see a significant decline in tax
revenue when the real estate market began a precipitous decline in 2007 and after the
financial markets collapsed in late 2008 and early 2009. Many local governments, having
stretched their resources too thin and having failed to plan ahead, have been forced to cut
essential services, lay off police and fire fighters and/or raise taxes. Because Tybee was
careful with its spending and conservative in its estimates of revenue, our City has been able
to avoid these measures while at the same time actually increasing the amount of
undesignated and unreserved cash.
Here are the facts:
The chart below shows the amount of money the City had in its “Undesignated/Unreserved”
fund at the end of each fiscal year from the start of the recession to present day. This chart
is based on AUDITTED BANK STATEMENTS.
What is the “Undesignated/Unreserved” fund?
This fund is money that the City has in the bank that is not earmarked for certain projects and
that doesn’t have any legal restriction on how it can be spent. For instance, the proceeds
from the “Special Purpose Local Option Sales Tax” (or “SPLOST”) can only be used for
capital improvement projects that were on the ballot when the SPLOST was approved county-
wide by voters a few years ago. Therefore, the Undesignated/Unreserved fund doesn’t
include SPLOST funds. In other words, if a hurricane slammed into Tybee, we would not be
able to use the SPLOST money to pay for our payroll or for getting our city services back up
and running. Our Undesignated/Unreserved fund is what we would have to use in the case of
an emergency.
Where did we stand prior to the start of the national recession in 2007?
As you can see from the chart below, in 2007, our City had exactly $1,480,935.54 in our
“Undesignated/Unreserved” fund.
Where do we stand NOW?
As of 2011, we have $1,484,601.80 in the Undesignated/Unreserved fund.
It should be noted that the total listed for 2007 INCLUDED funds that the City had been
setting aside for beach renourishment. (We have set aside $150,000 a year since 2004).
We now have about $600,000 IN ADDITION to the $1,484,601.80 listed below
The City actually has slightly more money in the Undesignated/Unreserved account than we
had when the economy started to go south in 2007. We also anticipate that when this year’s
audit is complete in a few weeks, we will be able to add to this total because we have been
carefully managing our finances and spending less money.
I am very proud of our City Council members, past and present, our City staff and our
volunteer-based Audit Committee for their hard work in making sure that Tybee’s finances
stand on solid ground in the midst of the worst economic conditions since the Great
Depression. It is something we should all be proud of as a community.
Yr Ending Undesignated/Unreserved
6/30/2011 1,484,601.80
6/30/2010 1,340,512.22
6/30/2009 860,637.33 FT note: 2008-09 Council
6/30/2008 828,185.17 FT note: 2008-09 Council
12/31/2007 1,480,935.54
The 2010-11 City Council has been fiscally responsible by reducing City spending and continuing to reduce operating costs. |
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| Historically The “Undesignated Fund Balance” has not been Equal to Six Months Operating Expenses. |
| Money Matters |
Around this time, every couple of years, folks on Tybee Island are bombarded with all kinds of
myths, misstatements and downright wrong information. This is usually related to local campaigns
and is generally an attempt to create issues where there may be none.
In an attempt to address some of the current topics that are out there, Forever Tybee
members have researched and compiled the following information, the myths and the truth.
The Chatter:
You may have heard that .... the City’s staff is “spend happy” and that the City is in financial
trouble because of it.
The Reality:
The reality is that in just a few short years, the city’s spending, as shown in the general fund, has
decreased from more than $11 million to about $9.3 million.
Significant capital projects, some put into place by previous councils, such as the Public Safety
Building (new police department) and specific infrastructure projects, have been put on hold in
recognition of the down economy and reduced tax revenues.
Budgets have been reduced. Due to operating efficiencies, revenues for the city have increased
in a number of categories.
Hotel/motel taxes are up because the city is pursing private rental homes and collecting the taxes
that are due. Parking fine revenues are up due to collection efforts. Old water bill debts are being
chased and collected.
The city is not broke and under the 2010 -11 Council operating costs have been reduced.
By exercising good fiscal policy, the City Council and staff has been able to avoid incurring
additional debt.
The recent concern over the city’s financial position was caused, in large part, because the 2008-
09 Council voted at its November, 2009 meeting to change the campground status from an
enterprise fund to the general fund. When they made this change it moved the debt and revenue
from the Enterprise Fund to the General Fund. This made it appear on financial statements as
though the City suddenly had a higher debt than in past years.
Several long term debts will be paid off in the near future (18 to 24 months – there are several
loans that expire at different dates within the next 2 years.).
The 2010 -11 City Council has chosen not to undertake new projects that would increase debt.
myths, misstatements and downright wrong information. This is usually related to local campaigns
and is generally an attempt to create issues where there may be none.
In an attempt to address some of the current topics that are out there, Forever Tybee
members have researched and compiled the following information, the myths and the truth.
The Chatter:
You may have heard that .... the City’s staff is “spend happy” and that the City is in financial
trouble because of it.
The Reality:
The reality is that in just a few short years, the city’s spending, as shown in the general fund, has
decreased from more than $11 million to about $9.3 million.
Significant capital projects, some put into place by previous councils, such as the Public Safety
Building (new police department) and specific infrastructure projects, have been put on hold in
recognition of the down economy and reduced tax revenues.
Budgets have been reduced. Due to operating efficiencies, revenues for the city have increased
in a number of categories.
Hotel/motel taxes are up because the city is pursing private rental homes and collecting the taxes
that are due. Parking fine revenues are up due to collection efforts. Old water bill debts are being
chased and collected.
The city is not broke and under the 2010 -11 Council operating costs have been reduced.
By exercising good fiscal policy, the City Council and staff has been able to avoid incurring
additional debt.
The recent concern over the city’s financial position was caused, in large part, because the 2008-
09 Council voted at its November, 2009 meeting to change the campground status from an
enterprise fund to the general fund. When they made this change it moved the debt and revenue
from the Enterprise Fund to the General Fund. This made it appear on financial statements as
though the City suddenly had a higher debt than in past years.
Several long term debts will be paid off in the near future (18 to 24 months – there are several
loans that expire at different dates within the next 2 years.).
The 2010 -11 City Council has chosen not to undertake new projects that would increase debt.
| Forever Tybee Candidate Parties in the Park coming on November 4, 5, 6 |
| The following chart clearly demonstrates the contrasts in revenue and expense by the 2008-09 City Council and the 2010-11 City Council. |
Spending by the
2008-09 Council
2008-09 Council
Spending by the
2010-11 Council
2010-11 Council
| The "Undesignated Fund Balance" |