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•CITY OF SOUTH BEND OFFICE OF THE CLERK little bit later in the overview, as well as Denise is here to talk about it tonight and in more detail. But we are really trying to make sure that those allocations are controlled as they go out to the different departments. And then finally debt proceeds,just to highlight this as well. Debt proceeds looks like a fairly substantial increase from a percentage perspective. We did not budget for very much debt in 2019. And in 2020 we are not anticipating issuing any bonds and are not budgeting for issuing any bonds. That $4.3 million for debt proceeds is all capital leases. So actually, borrowing money to fund capital projects, things like vehicles, equipment, those kinds of things. He continued, Getting into a little bit more about the 2020 budget. One (1) of the things that I didn't mention but you guys probably all noticed is that in the 2020 budget the bottom line,revenue in excess of expenditures is about a$10.4 million deficit for 2020. First(1st) thing to note on that is it is less than our 2019 budget deficit of$32 million and there are good reasons why that deficit exists that we will get into now. The 2020 budget, it's important to realize it is balanced in what we call our General Plus Funds,which is our General Fund and our income tax funds. So,we have a balanced budget in those funds which drive the majority of the operations for governmental types of activities. So, it's really important that we have a balanced budget in there. So, the question logically becomes where did that $10.4 million deficit come from? And it's really largely driven byfour (4) things. There's a capital spend in reserve from wastewater. So that accounts for $3.4 p p million of that deficit. So,intentionally recognizing that we don't need to issue debt to fund capital in every instance. There are instances where it makes sense to fund capital investment from reserves. And we believe this is one (1) of those instances. So, we're going to spend down a little bit of our reserve on the capital waste water side. And then a targeted spend down of reserves in internal service funds. So, internal service funds are funds that serve the government, so, things like Central Services that are taking care of our vehicles, and our radio, print jobs, those kinds of things. Things like our health insurance fund. So, the fund that pays for employee medical costs on our health insurance. Funds that serve the internal government largely, and this is not true in every case, but largely it doesn't make sense to carry a large balance in those funds. There's no need necessarily to carry a large balance because the general rule of internal service funds is that you're going to allocate those costs out to all the departments. He went on, So, our health insurance for example is going to receive revenue unless we do some things like we did this year, and we'll talk about that. It's going to receive revenue equal to its expenditures every year because we're going to allocate all the costs of that fund out to the departments. So, the departments are going to reimburse the fund for its total cost. So, it makes sense to keep a certain amount of money in there in case costs are higher than we anticipate they will be, but there's no real need to keep a large balance in there. And over the past several years because costs have actually been lower than we anticipated, the balance in those funds has been growing. So,there's a good reason to actually spend down those Funds and get their cash balances more to where we would want them to be and not take that money from the departments in the current year. That's probably the biggest portion of that $4.3 million driving that $10.4 million deficit. So, those top two (2) items on there are very intentional decisions that the Administration made to try and make sure that we are making the best use of our cash on hand and not issuing debt when it's not necessary. The bottom two (2) are things that the Administration in better times maybe would not have entered into but revenue challenges are requiring us to spend down reserves in street maintenance funds and solid waste operations. Street maintenance funds, Laura just mentioned that we are transferring more money into our road maintenance funds- Motor Vehicle Highway and Local Roads and Streets- in 2020 than we did in 2019. EXCELLENCE ACCOUNTABILITY INNOVATION INCLUSION EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574.235.9221 f 574.235.9173 TTD574.235.5567 www.southbendin.gov 5