HomeMy WebLinkAboutPACKET Town Board Budget Study Session 2006-10-03Administration
Memo
To: Mayor Baudek and Town Trustees
From: Randy Repola
Date: October 3, 2006
Subject: Budget Study Session #1
The documents included in this packet provide summaries of various General Fund
department budgets. Over the next four study sessions, we will review summaries of all
Town funds. As we start this process, I felt it useful to provide a general overview of the
parameters that we are working within.
As we finalize the 2007 & 2008 budgets, we are monitoring a couple of key values. The
primary metrics that we are watching are the fund balances in the General, Light & Power
and Water funds along with the bottom line impact in the Capital Improvement Plan (CIP).
By Session #2, we will have enough data to begin estimating the impact of the proposed
budgets on the General Fund balance as well as the potential impact on the CIP. However,
there are target values for the fund balances that are worth highlighting at the outset. The
Town has target fund balances for the General, Light & Power and Water funds.
In the General Fund we have sought to maintain a fund balance that is no less than 30% of
annual budgeted expenditures. In light of industry practice (see attached article by Len
Wood) and the fact that statutory requirements limit municipalities to low risk/low yield
returns, 30% may be a bit high. However, we would not advocate the use of fund balance
for annual operating expense and will only recommend further reduction in fund balance if
the appropriation is for capital investment or reinvestment (i.e. parking lot resurfacing,
Stanley Park renovation, etc.). You will see projects of this type during the upcoming study
sessions.
The utility fund balance targets are slightly less than that sought for the General Fund. The
target fund balance in both the Water and Light & Power utilities is 25% of operating
expense plus one year's depreciation. This target is a general industry standard and was
adopted based upon the advice of Black & Veatch (utility consultants) approximately 3
years ago. You will see the utility funds in session #3 (October 20`h) and can evaluate the
progress towards this fund balance goal.
Finally, the Department Heads will present their respective budgets. If the summaries
generate specific questions that you would like the Department Heads to be prepared to
answer, please let me know and we will make sure we are prepared with an answer.