How much cash in the stash?

The only thing the city has used its general fund balance for in the past 25 years has been to help pay for capital projects — things like the 29 Road Bridge and the new police building, Grand Junction Financial Operations Director Jodi Romero said. Even when economic conditions began to worsen in 2009, “We did not use the fund balance for operations,” Romero said. “We cut expenses and had reductions in our workforce.”



There are guidelines for how much money local governments should have in reserve, but few statutory requirements other than the Taxpayer’s Bill of Rights mandate that they maintain at least 3 percent of their general fund budget.

Consequently, municipal and county governments in Colorado are all over the board when it comes to how much cash they keep in reserve, a study by The Daily Sentinel has found.

The amount of reserve on hand — or fund balance — is dependent on a variety of factors, from economic circumstances to TABOR restrictions to natural disasters.

For instance, the city of Pueblo projects $9.8 million in general fund balance at the end of this year, 13 percent of its anticipated expenditures for the year. That amounts to barely 1.6 months of reserves.

At the other end of the scale, Montrose and Garfield counties each maintain general fund balances of roughly 85 percent, more than 10 months worth of reserves.

“Each board should have an adopted policy, saying it is not comfortable going below a certain percentage,” said Chantal Unfug, former Mesa County administrator and current director of the Division of Local Government at the Colorado Department of Local Affairs.

“The city and county of Denver went down to about 8 percent a few years ago, and many people thought that was too low,” she added. “Some boards have 100 percent in reserve.”

The Government Finance Officers Association, a nationwide organization of people that does budgeting for government entities, issued best-practices guidelines that call for at least two months of general fund operating expenses in reserves.

There are no such guidelines for private businesses, local accountants say. How much cash is held in reserve depends on the type of business, the economic conditions and the individual proclivities of the business owners.

Some businesses keep little or no cash on hand, preferring to use lines of credit to meet short-term operating needs. Others are only comfortable when they have several months of operating funds in the bank, accountants say. Seasonal businesses may need more cash reserves to handle periods when there is little income.

LOCAL ENTITIES MEET GUIDELINES

The city of Grand Junction and Mesa County both meet the guidelines established by the Government Finance Officers Association.

Mesa County has a projected general fund balance for the end of this year of $11.3 million — 20 percent of its general fund operating budget of $55.7 million. That works out to 2.4 months of reserves.

Grand Junction has a projected end of the year fund balance of $19 million — or 30 percent of its general fund expenditures of $62.6 million, equal to 3.6 months of operating expenditures.

“We’ve ranged from 30 percent to 35 percent over the last 25 years,” Grand Junction Financial Operations Director Jodi Romero said. The City Council sets a minimum general fund balance, which is currently at $18.5 million.

The only thing the city has used its general fund balance for in the past 25 years has been to help pay for capital projects — things like the 29 Road Bridge and the new police building, Romero said.

Even when economic conditions began to worsen in 2009, “We did not use the fund balance for operations,” Romero said. “We cut expenses and had reductions in our workforce.”

Mesa County, on the other hand, has spent down its reserves over the past few years to keep from cutting services, said Marcia Arnhold, the finance director for the county.

In 2009, she said, the county had a general fund balance as high as 26 percent of a $71 million general fund budget — just over three months’ worth.

This year’s budget reflects far lower numbers. The $11 million fund balance projected for the end of the year is 20 percent of a general fund budget of $55 million.

“We have an internal policy that says we don’t want to get below 10 percent,” Arnhold added. “So far, we’ve been able to maintain a fund balance of double that.”

 

PUEBLO RESERVES LOW, GARCO’S HIGH

The city of Pueblo has also used its reserves to limit cuts to operating funds, to the point that the city’s fund balance has now dipped below what city policy sets as the minimum, said Deb Morton, the city’s finance officer.

“We’re lucky we’ve had the reserves we did to see us through the past few years,” she said. “But 1.6 months worth of reserves is not very much. We’re hoping our revenues will hold, but Pueblo’s economy is not really turning around.”

In Garfield County, the official policy is to maintain a much higher reserve.

“Our target is 45 percent, and we’re about double that now,” Garfield County Finance Director Ann Driggers said. “We do have strong fund balances, and we shift them to other funds if things come up.”

For instance, she said, money was shifted from several funds last year to the road and bridge fund to help pay for improvements to an important county road and to replace a bridge on the Colorado River.

Montrose County also uses its general fund balance to help shore up other funds in the county budget that may have temporary needs, Finance Director Cindy Bennet said. And separate funds, such as a public safety fund, receive transfers from the general fund.

In Colorado Springs, the general fund balance is projected to be 17 percent of expenditures this year, or a little more than two months worth of reserves. This despite the fact that a special GFOA study conducted last year for the city recommended Colorado Springs maintain reserves of at least 25 percent to help it cope with natural disasters such as wildfires.

“We’ve tried to adopt that standard, but just haven’t been able to do it so far,” said Charae Moore, budget manager for the city.

There are several reasons why Garfield County is able to maintain large fund balances. It’s no surprise that one of those is the energy industry.

“About 72 percent of all our property taxes come from the oil and gas industry,” Driggers said. “And about 80 percent of that is based on production. So a lot of our revenue depends upon the price of natural gas.”

But another big difference between Garfield County and Mesa County is that Garfield County has de-Bruced, meaning citizens of the county have voted to free county government from the revenue and spending limits of TABOR. Montrose County has also de-Bruced for everything but property taxes.

“So Mesa County can’t build up reserves as we do,” Driggers said.


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