City Reserves: A Bit of Back Story

Comparing city reserve funds is not necessarily an easy task: every city has its own way of divvying up the dollars, so there's a risk of comparing apples and oranges.

But it struck me as worthwhile to get a ballpark figure of what each city has in the bank: the savings account generated from revenues that pay for things like police, fire, libraries and parks.

It was interesting to talk to the city finance folk. They are, after all, real people!

I posed what I thought were fairly straightforward questions: What is your general fund? What is your reserve fund? And therefore: your reserves are equal to what percent of your general fund?

Gary Ameling of La Mesa was very open and willing to talk about his city reserves, even though they just happen to be the lowest in the county: 5 percent. Maybe if his city council hears that, they will be more cautious about pulling on reserves to solve a budget shortfall. If they fall any lower, the credit rating agencies are likely to start paying attention to La Mesa.

Then there is Leslie Suelter of Coronado, which has a fantastically healthy reserve fund, the biggest in the county: more than 100 percent of the annual operating budget. Mind you, she's including money the city's been saving for years to build a new hotel. Other cities might have squirreled away that capital funding in another account. She was anxious that if it came out on air that Coronado had such a big reserve fund, state officials might hear about it and want a cut!

Some, like assistant city manager Mark Delin of Del Mar, spent more than 45 minutes talking to me on the phone before I got the answer. The numbers were all there in the pages of the budget that he directed me to on the web. But for some reason he did not seem to want to actually say the numbers to me over the phone. Maybe he didn't realize I cannot legally record him without asking his permission first.

This automatically made me wonder. The city has a serious case of falling revenues from tourism and sales tax, as well as serious obligations to finance the purchase of some ocean view property for a park. If revenues head further south and credit freezes over, this city's books may be hard to balance.

Sometimes I question why I took on a project about budgets. But budgets are not just about numbers. They're also about personalities. And they provide a road map to either a bright future or potential disaster.

Comments:

Thank you for bringing these facts to your listeners attention. You hit the nail on the head by pointing out the fact that financial rating agencies use reserves in determining the health of a public agency. Without a strong rating by them then borrowing becomes problematic and a drain on operating expenditures, not to mention the ability to begin capital projects.

Rather than spending time digging through budget documents and interviewing managers to assess their fiscal soundness, consider asking them when they were last rated by one of the major rating agencies and what rating they received. The length of time since their last rating and the grade they received will provide a snapshot of an agencies fiscal health, how well they are managed and how they perform relative to their peirs.

Christopher from La mesa

February 10, 2009 at 4:43 pm

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Sorry Chris. The rating agencies have a real bad record AND they rate the likelihood that the city won’t pay back their loans. They don’t rate the wisdom of the pension benefit system of a city.

Cardiffer from Cardiff

March 20, 2009 at 5:19 pm