Summary
To: Finance Board
From: Stefan Massol
Date: 7/15/2021
______________________________________________________________________
Subject:
Title
Discussion of Acceptable Reserve Spending
Summary:
Finance Board will discuss the concept of reserve spending as it relates to capital purchases and improvements.
End
Body
Background/Problem Discussion: Goal D.4 of the Strategic Plan calls for "a strong, stable, and diverse financial position that is transparently communicated to the community". To properly measure and achieve this goal, objective D.4.1.1 requests that the Finance Board "develop a definition of deficit for purposes of the strategic plan and acceptable reserve spending such as treatment of non-operating transfers, capital purchases, and improvements".
Operating Costs:
Historically, the Town has refrained from the spending of reserves in the operating budget. Unforeseen operational costs resulting from major events such as Hurricane Irma or more recently the COVID-19 pandemic are the exception, and these costs are largely offset by state and federal grant funds, though the funding generally takes many months to actually replenish those reserves.
Non-Operating Transfers:
There are a limited number of non-operating transfers still included in the annual budget. There is an annual transfer to the Capital Equipment Replacement Fund from various departments in the General Fund, which is used to fund future capital equipment purchases for items such as vehicles, heavy equipment, and IT equipment. In the past, this was also how the Town saved for future HVAC purchases however after partnering with ABM the Town is no longer setting aside funds for future replacement of the HVAC system.
Operating Transfers (Admin Fees)
Additionally there are transfers from the Water Fund and Solid Waste Fund to the General Fund, intended to reimburse administrative expenses paid by the General Fund for services such as management, utilities, information technology, uti...
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