General Fund Balance Policy 09 10 07CITY OF SHOREWOOD, MN
GENERAL FUND BALANCE
POLICY
Adopted September 10, 2007
CITY OF SHOREWOOD, MINNESOTA
GENERAL FUND BALANCE
POLICY
The City of Shorewood seeks to have a good balance its General Fund in order to have
sufficient reserves for cash flow purposes, for projects, and for unexpected shortfalls or
emergencies. The City acknowledges the State Auditor's recommendation that local
governments establish a formal policy on the level of fund balance that should be
maintained in the General Fund. In addition, establishing a General Fund Balance Policy
to assure adequate reserves indicates fiscal prudence and may confer higher ratings with
bond-rating agencies, which prefer to see very strong and healthy balances.
Goal
The goal of the City Council in establishing a General Fund Balance Policy is to ensure
the long-term economic stability of the organization by providing sufficient funds for
cash flow purposes, to accumulate savings for projects, and to have reserves for
unexpected shortfalls or emergencies, while providing a specific plan for increasing or
decreasing the level of fund balance as needed.
Objective
The objective of the City Council in meeting this goal is to ensure that the General Fund
Balance should be monitored annually to remain within a specifically defined percentage
range of 55-60% of next year's budget, and that methods are identified by this policy to
increase or decrease the fund balance to achieve this objective.
Procedures
1. General Fund Balance in excess of 60°Io
When the balance is greater than 60 percent, then the balance should be reduced
to 60 percent by using excess funds for specific one-time projects, acquisitions, or
transfers to capital funds. They may also be used to provide limited property tax
relief; for example, to maintain the property tax rate. The amount of those funds
in the undesignated balance should be reduced to 60 percent, but should not be
more than three percentage points of the amount above 60 percent in any one
year.
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2. General Fund Balance between 55°Io and 60%
If the undesignated balance in the General Fund falls between 55 to 60 percent of
the next year's budget, then none of the funds should be used for purposes other
than cash flow and contingencies.
3. General Fund Balance less than 55 °Io
If the undesignated balance in the General Fund falls below 55 percent, then the
undesignated balance should be restored by budgeting no more than two
percentage points annually until the 55 percent level is attained.
4. General Fund Balance less than 50 °Io
If the undesignated balance in the General Fund falls below 50 percent, then the
City Council shall take emergency action to restore the undesignated balance to a
minimum of 50% by budgeting the necessary amount annually (even if this
amount exceeds two percentage points) until the 50 percent level is attained.
Adopted by the City Council of the City of Shorewood this 10th day of September,
2007.
Approved:
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Chris Lizee, Mayor
Attest:
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Craig ~~`. Uawson, (:ity Administrator
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