Saturday, October 19, 2013

You Don't Deserve to be Misled: City Reserves

Some very bad, intentional, misinformation is being circulated today by email and on Facebook, about how the city manages it's savings accounts, otherwise known as reserves. "Reserves" are a fancy name for savings accounts and the city maintains 12 different ones. Each has a different purpose but I'll get to that below. 

In my view, the information being circulated is a very intentional twisting of the facts - maybe not quite a lie, but certainly "intellectually dishonest". I'm sad to read some of the people lending their name to it. 

In the email version of this, one part says: "In 2011, $31 million was placed in unrestricted reserves because the city charged you more in taxes than they spent." The email goes on to suggest that the city should use the money that went into those reserves instead to lower taxes.

So basically what it's saying is if we dumped out all our savings accounts (or didn't add to them) taxes could have been lower which is true - it's just very, very stupid. At the most basic level it's good financial management to put money away for things that you know you'll need down the road or to help out with unexpected financial expenses. This is what the city does with reserves. 

If that all makes sense to you then you can see how this info is twisting the facts and I'd encourage you to share this note with your friends using the share button below, or by copying and pasting this note in to an email to your friends. Don't feel you need to read any further. 

Below I'm going to give you some examples about the details of what our reserves are - because I believe you deserve to have actual facts. 

Every year the city makes planned transfers to our reserves (deposits into our savings accounts.) Each one of these savings accounts has a policy that says exactly what it is intended to be spent on and in most cases how we will decide to add money to it. These policies are all publicly available on the city's website here: Look at them for yourself.

An example of one of these "savings accounts" is the Cemetery Perpetual Care Reserve. 
• It's purpose is "to provide for the improvement, maintenance, management, control and operation of City cemeteries." The expenditure guidelines state that the reserve is to be used "or the upkeep of the cemetery once it has been closed for future interments." So yes, if we followed the suggestion in the email we could use that to lower your taxes next year but then there'd be no money to make sure the cemetery is cared for in to the future! 

We could also drain the Winter Stabilization Reserve. 
• It's there to "offset over-expenditures that may occur in the snow removal and ice control operating budget as a result of abnormal winter conditions." Of course if we did that and then had a big snow fall year this year we wouldn't have any money to call in additional contracted equipment or pay for overtime to keep staff on the road. What do you think? Maybe a good idea to have that savings account set up?

We could clean out the Financial Stabilization Reserve. 
• It's really our "if things get bad" fund - there to manage "any annual operating deficiencies." This is essentially a buffer for the city should we have an unexpected loss of revenue for any reason. It IS used to shelter you from big tax increases when unexpected things happen. For example we have used this fund this term to make up for losses of revenue that we had budgeted for. Specifically when the County ended their contract for fire services with the city and when Aquatera moved out of city hall and stopped paying rent. In 2011 those two items together took away $4 Million in revenue we were expecting but you didn't see it drive up taxes, or force us to chop services in a knee-jerk fashion - because we were able to draw on the reserve. 

I could go on but I think you get the point. Anyone telling you that the city should drain it's reserves to keep your taxes low is hoping that you won't think for yourself. Really the whole thing is shameful.


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