×

City spending draws down reserves

Barney

The City of Minot ended 2016 with $35.2 million in cash reserves, but spending from those reserves is occurring at a problematic rate, according to City Manager Tom Barry.

“There’s a lot of money being spent out of our reserves to balance the budget. That’s a huge problem because that’s not sustainable,” said Barry, who has been advising the council on ways to reduce that spending.

Barry said he plans to develop a series of budget workshops in late April or early May for council members, council candidates and the public. Late April is when the city will begin developing a proposed 2018 budget to present to the new council to be elected in June, and the workshops will provide information associated with that process.

Mayor Chuck Barney said the council is not waiting for the 2018 budget to begin making spending adjustments.

“It’s not a gloom and doom situation, but we need to prepare as a city for what’s going to happen four years down the road, five years down the road, whenever it is, making sure we are being fiscally responsible,” he said. “I think it’s critical we do it now, we do it early, so we can prepare and plan and make sure we do this right. We are just trying to be proactive.”

Barry

With that in mind, an ad hoc sales tax committee is looking at how sales tax dollars are allocated. That committee is taking a break until potential legislative funding for flood protection becomes more clear this spring.

The council decided at its last meeting to go ahead with intersection improvements at 16th Street and 31st Avenue Southwest rather than postpone the project a year as had been suggested because of tight city finances. However, council members also asked for more information to get a handle on where the city is sitting financially. At the council’s request, Barry recently prepared a financial spreadsheet showing cash balances.

The 2016 spreadsheet showed $96.4 million being held in city coffers, although all but $35.2 million was committed to projects, bond payments or was required to be held in reserve.

City ordinance requires the city keep in reserve one month’s working capital, or an amount equal to one month’s average expenditures. That comes to about $8.9 million.

Barry said the standard accounting recommendation is to have a 90-day reserve, or $27 million in Minot’s case. From that perspective, $35.2 million is not an abundance, he stated in a memo to the council. He added more than $19 million of the cash on hand is sales tax funds restricted for economic development, improvements, infrastructure and community facilities.

Most of the money in cash reserves at the start of this year was held in restricted accounts, such as the water and sewer account, airport or sanitation. Money from those accounts can’t be spent for outside purposes. Less than $1.1 million sat in general fund reserves, the most flexible account.

At the end of 2016, Minot had $419,793 in cash reserves in its emergency fund. That is long gone and then some. The account was drained by snow removal costs that have tallied $1.5 million so far this winter.

“Now we are gobbling up street department funding as well, which means less to go around for street repairs for the spring and summer,” Barry said

In addition, the city has future obligations such as the Northwest Area Water Supply Project, flood control and pension liability. Barry also listed plans for a $30 million new city hall and future bonding of about $20 million a year on average.

“We have watched our debt increase over the last four years,” Barry said. This year’s bonding is $27 million.

Each year the money the city must set aside to pay off debt rises. Not only does that eventually become unaffordable, but Minot could reach a point where the city reaches a cap on the amount of debt it can take on, Barry said. The city has a fair amount of capacity left at $130 million in total debt, but that debt often is extended over longer terms of 15 to 20 years, which adds to cost and the commitment burden, he said.

“The idea that we can finance our way, through debt, out of this problem is not realistic because there’s only so much debt the city can take on,” he said. “At some point, you have to say, ‘How much can we afford here?'”

Barry added the amount of sales tax dollars available for property tax relief is less than in the recent past. Although sales tax revenue spent on infrastructure or facilities reduces the property taxes that otherwise would be needed, sales tax collections are down not just for property tax relief but overall. In the case of property tax relief, reserves already have been spent to maintain a steady level of mill levy reduction.

“From all this data, what we can see is that the city has got a financial situation it has to work through here,” Barry said. “We can’t continue to build big projects and commit funds to enormous obligations like NAWS and flood control and then drive down property taxes and other taxes and expect to be able to finance it all.”

Minot’s current council and particularly the new council to be elected in June will be faced with guiding the city through these financial times.

“They are going to have to make some hard choices,” Barry said. “Quite frankly, those hard choices probably should have been made some years ago.”

Newsletter

Today's breaking news and more in your inbox

I'm interested in (please check all that apply)
Are you a paying subscriber to the newspaper? *
   

Starting at $4.62/week.

Subscribe Today