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City of Bloomington’s cash reserves exceed $ 23 million amid COVID-19 pandemic

Despite the pandemic-induced recession and millions of dollars in economic stimulus spending, the City of Bloomington ended 2020 with plenty of cash and held over $ 23 million in reserves in its major operating funds, parks and of rainy days.

City comptroller Jeff Underwood expects these reserves to decline somewhat over the next three years as the community tries to protect itself from the post-pandemic fallout. However, he predicts that reserves will remain well above the minimum recommended by public finance experts.

Bloomington City Comptroller Jeffrey Underwood is seen in 2017.

“I think the photo is beautiful,” Underwood told the Herald-Times.

This may, indeed, look even better than expected, as Underwood’s forecast excludes any benefit the city departments could derive from the $ 22 million the city received under the American Rescue Plan Act. While city leaders, including Mayor John Hamilton, have said they plan to use the COVID-19 stimulus money primarily on one-time spending to fix problems and prepare the city for growth, some of the dollars could be used to offset revenue from the declining pandemic.

In a recent presentation to Bloomington City Council, Hamilton said that as city leaders prepare for the 2022 budget, they need to think about how best to balance needs and opportunities, including housing, employment, public safety, infrastructure and quality of life while focusing on building a more inclusive and prosperous community.

The city won’t hold budget hearings until August, but will get important tax information as early as this month, including how much the state will allow the city to increase spending next year.

Underwood said that among all of the city’s departments, parks and parking lots saw the biggest drops in revenue from the pandemic as more people stayed home and didn’t have to pay for parking. or participate in sports events and tournaments organized by the parks department.

Despite these declines in income, the city has remained in a strong financial position thanks at least in part to its frugality since the 2007-2008 recession: in nine of the 10 years between 2009 and 2018, the city received more revenue. in general. funds he has not spent. The general fund pays for most of the city’s basic services, including the mayor’s office, engineer, animal control, and police and fire departments. About 77% of the dollars spent in this fund are spent on personnel costs, including salaries and wages.

In some years during this decade, the city spent almost $ 3 million less in its general fund than it could have done. In total during that decade, he spent about $ 16 million less than he received in income.

General fund spending has increased almost every year during this period, from just under $ 29 million in 2008 to just under $ 40 million in 2018. Spending has increased by an average of 3 , 7% per annum for the period, but income grew an average of 5.2%. It’s like a worker who gets an annual raise of $ 500, increasing his annual expenses by $ 300: the end result is a larger balance in the savings account.

The state does not allow government units to spend more than they generate, unless they can cover the extra expenses with reserves. However, doing it on a regular basis can backfire and put cities, towns, or counties in a bind. For example, overspending over time left Owen County officials with a $ 1.9 million deficit.

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Cash flow, disaster buffer

Public finance experts recommend that governments keep reserves for cash flow reasons and to prepare for possible income shocks from recessions or natural disasters.

Mike Mucha, Deputy Executive Director of the Association of Public Finance Officers, said the organization recommends that cities keep reserves of at least two months of spending, or 16.7% of annual spending, although cities prone to natural disasters such as floods, hurricanes or fires forest should consider a larger buffer.

On average, Mucha said, organizations keep reserves between 20% and 30% of their annual spend.

Underwood said that while the city has not formally adopted a minimum reserve balance policy, it has targeted 33%, essentially four months of general fund spending.

He said these reserves not only provide a buffer for recessions, but are also needed for cash flow reasons. The city is funded primarily by property taxes, but it only receives those dollars twice a year, right after people pay their property tax bills. At the start of the year, for example, government units have to wait several months before receiving their next property tax allowance. This means governments need to keep enough reserves to pay their bills before they get more property taxes.

According to a recent Underwood presentation to city council, the city’s reserves have remained above the minimum of 16.7% each year since 2013 and above the target of 33% each year since 2015. In fact, since 2017, the city’s reserves have hovered around 40% and in 2019 reached 44%.

Mucha said it’s certainly better to have too many reserves than not enough, but if cities provide adequate services, they shouldn’t just be hoarding money either. If the balance grows well beyond the city’s stated minimum recommendation or stated target, the city should use those dollars to improve services, fund capital projects, or lower its tax rate.

Underwood said he understood the concerns.

“We don’t want to have excessive reserves,” he said.

Hamilton recently told the county that while department heads hadn’t spent any money at the end of the year, half of that surplus usually went to reserves, with the other half going back, with approval. from the board, to the department for it to be spent on projects they otherwise could not afford.

Underwood said this approach encourages managers to spend their money sparingly, but also helps them benefit their savings.

“It worked out well,” he says.

Underwood said the city this year will likely end somewhere near 25% to 30% in reserve, although COVID relief dollars may push that number a little closer to its 33% target.

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While some of the effects of the pandemic are likely still unknown, Underwood said economic indicators made him more optimistic compared to last year. Property taxes don’t appear to be going down, he said, and income taxes will likely be flat or slightly higher than the year before. Suppressed consumer demand is also pushing food and beverage taxes up, and some economic segments have done very well over the past year.

Underwood said at the recent council meeting that the city’s tax plans could also be compromised by factors such as weather, state or federal law, rising material prices and rising health insurance costs. and fleet maintenance. Vehicle replacement, for example, could cost more than usual this year: USA Today, a partner of The Herald-Times, reported that a global shortage of semiconductor chips has contributed to soaring prices of second-hand cars.

City of Bloomington 2022 Budget Calendar

August 23-26: Council budget hearings

September 19: Deadline for submitting a notice to taxpayers of the proposed budget

September 29: First reading by the Council of budgetary and salary orders and official public hearing.

October 13: Final adoption of the budget and salary ordinances.


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