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•CITY OF SOUTH BEND I OFFICE OF THE CLERK
<br /> Committee Chair White asked, Is there a certain percentage that cities are asked to look at in terms
<br /> of the cash reserve? I know there is nothing set.
<br /> Mr. Parker replied, There's nothing set legally. The State doesn't give any guidance. There is
<br /> guidance that the Government Finance Officers Association provides, particularly with respect to
<br /> the General Fund. So, the General Fund, what they say is you should have at least two (2)months
<br /> reserve. So, 2 months of expenditures, that would be one sixth (1/6). We're pretty significantly
<br /> above that. On an overall basis, and you'll see when we get there to the policy, after the General
<br /> Fund, our minimum cash reserve, by policy, is above that.
<br /> He continued, So that's the good news. We're doing very well, our cash position is kind of right
<br /> where I would want us to be from a comparison to other cities. The sort of,potentially not as good
<br /> news is the cash balance projection. So, if no action is taken, and we've put up slides like this
<br /> before, this is if we don't do anything to try and manage our expenses, so we talked about in the
<br /> second (2"1) budget educational series about how we are making changes and we are prioritizing
<br /> spending to try to make sure this doesn't happen. But if we were not to do that and we were going
<br /> to continue to spend at the level that we have been,this is sort of what our cash balance is projected
<br /> to do (referencing a slide in the presentation) That orange line is a projected, so 2018. The blue
<br /> line is what you've seen before. The orange line is the projected cash balance. We went from$288
<br /> million down to right around $200 million by 2024. That is not a position that we want to be in.
<br /> So, this is something I think is important for all Council Members, and for members of the public
<br /> as well,to realize this is not what we want. This is not what we're intending to do, and it's not what
<br /> would be in the City's best interest.
<br /> He went on, So,because of that,we are making changes and we went through a lot of those changes
<br /> in the last budget educational series. You'll see and hear more of those as we get into the 2020
<br /> budget hearings about what we are doing to try to make sure this doesn't happen. We are trying to
<br /> maintain the reserves at the levels that they have been. That gets into cash reserve requirements.
<br /> So, cash reserve requirements, to the point we made earlier; there is no State Law that mandates
<br /> how much cash we need to have on hand, and that's why you see such a wide variation in terms of
<br /> the different cities in Indiana and how much cash they do have. But we have put the policy on
<br /> ourselves to maintain a minimum level of cash, in these funds, to ensure that we have the ability
<br /> to meet our expenses going forward. So, the first (1St) question is what's the purpose of reserves?
<br /> Really the purpose, I'll give you a couple different purposes, but the most important one is to
<br /> prepare for future fiscal challenges. So, again, as I said, the cities that were more towards the
<br /> bottom of that list, as times get more difficult than they have been in the past few years, property
<br /> values don't continue to rise, if they start to go down, incomes start to go down, tax revenues start
<br /> to go down overall, those cities are going to have to make more dramatic decisions than the cities
<br /> that have the reserves and are able to weather the storm a little bit better.That's the most important
<br /> reason.
<br /> He continued,Not just that,but future fiscal challenges include things that are unforeseen. Things
<br /> that come up that we don't expect; we have a flood that destroys some property that we own, and
<br /> we need to have money on hand to make sure that we can rebuild that property. Things like that.
<br /> We need to have reserves on hand to make sure the future fiscal challenges are being able to be
<br /> met, and not just challenges, but future fiscal obligations. So, going back to the capital assets that
<br /> I was talking about earlier,we have capital assets that are needing to be repaired and replaced, we
<br /> need to make sure we have reserves on hand to be able to do that. It may need to be used so that
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