08-22-18 Personnel and Finance (#4)

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CITY OF SOUTH BEND I OFFICE OF THE CLERK Bend Cash Reserves Summary with is available in the City Clerk's Office. She went on, We have had a lot of good changes to it. It is emailed to you but it is going to give you a lot of answers to a lot of the questions you may have. We do talk about reserve requirements,why we have them and how we calculate them.The City of South Bend reserve requirements are set by us. They are based on best practices but I can actually assure you they are actually higher than industry standards. Most folks save a fifteen percent(15%)cash reserve in most funds.The City doesn't have anything really less than twenty-five percent (25%) cash reserve in any of our funds. So this report walks you through what it means to have cash reserves, why they are either there or the fund is negative, and then you can see on every single fund where we stand and what our actual cash balance is. Outstanding encumbrances or outstanding purchase orders are also reflected in this summary. A lot of the time we start the year and we will know we are going to spend$1,000 with Cintas. That is going to be our limit for the year so we put a purchase order in and that is called an encumbrance. So that sits out there even though we will eat away at it throughout the entire year, it goes on the beginning of the year. That is why we call out these outstanding encumbrances because it can sometimes skew the cash reserve a little by stating we don't actually have that money. We do, we are just going to spend it throughout the whole year. She went on, It also gives you our available cash, our reserve requirement and then it talks about the variance. Councilmember Broden brought it to our attention to call out those Funds every month that aren't meeting the cash reserve and so we did. We moved those up to the top so you don't even have to dig through to see if we are missing anything. We are calling it out and it is right here on the top. As far as deficit spending in the Funds that have come up, Parks is a great example of what is going on. So every year we do conservative budgets. We think we will get $1 million in from property taxes and we will spend it and then go to the next year. Typically, we don't want to come in and say we hope we will get $2 million and then only get$1 million. So we budget conservatively on the revenue and then we budget conservatively on our expenditures as well so we think we will spend$1 million but sometimes we might only spend$900,000. So at the end of the year we actually walk away with$100,000 and that goes into the cash balance and then we move onto the next year. But we've already budgeted conservatively for the next year so these cash reserves tend to pool up. In Parks you will see about a $2 million deficit spend in 2019 but you will see, too, at the bottom of the page (referencing the summary) we talk about these cash reserves. So we state our cash balance at the beginning of the year, what we intend to spend, our cash balance at the end of the year and then the line following that is our cash reserve requirement. She continued, You are going to see, for Parks, we don't follow that cash requirement because of what we've gotten in property taxes we haven't spent all of our budget so every year the money pools up. That allows us to do big projects every couple of years. This isn't normal as we typically try to do balanced budgets for Parks. We definitely have balanced budgets for the General Fund, COIT and EDIT and you will see that next week in our overview. Part of the reason you haven't received that overview yet is because we just received, last week, from the DLGF, finally, a very good estimate of what our Local Income Taxes (LIT)will be. Before that,they gave us all sorts of random numbers. Our team called the DLGF and spoke directly with their legal folks over there and they finally said the numbers that we have are appropriate. So next week, we will be able to bring you balanced budgets for those Funds. Hopefully this quick update encompasses answers to many of the questions that have been brought up over the past couple of weeks but I am happy to answer any other questions you might have now or later. Committee Chair White stated, Thank you for your update. EXCELLENCE I ACCOUNTABILITY I INNOVATION I INCLUSION I EMPOWERMENT 455 County-City Building;227W.Jefferson Bvld I South Bend,Indiana 46601 p 574.235.9221 lf574.235.91731TTD574.235.55671wvww.southbendin.gov 2