Crystal Thomas
The State Journal-Register
The Springfield City Council voted 6-3 Tuesday to set a minimum amount for the city’s fund balance in hopes that a credit-rating agency would look kindly on the act.
Last year, Moody’s Investors Service knocked down the city’s general fund credit rating two notches, though it is still four notches higher than “junk bond” status. Mayor Jim Langfelder informed aldermen the city had its annual surveillance call from Moody’s Tuesday and would most likely get a report next week.
For the last 10 years, the city’s current internal policy was to keep the fund balance between 8 and 15 percent of the year’s total operating budget, according to Langfelder.
In years past, the city council has voted to spend down the reserves, or the year-end fund balance. This year, the city is expected to have a 12 percent fund balance, which translates into about $14.4 million. The new ordinance sets the city’s minimum at 8 percent of the city’s expenses. The fund balance is calculated by subtracting the city’s liabilities from the city’s assets.
When the city has low general fund balance, it has to borrow from other city funds for cash flow. Julie Zolghadr, the city’s fiscal services supervisor, said there has been times in the past, that in 260 business days, the city has had negative cash flow for 200 of those days. To make payroll, the city passively borrows $2 million from other funds, which credit rating agencies disapprove of, according to Zolghadr.
Ward 2 Ald. Herman Senor, Ward 1 Ald. Chuck Redpath and Ward 7 Ald. Joe McMenamin voted against the ordinance.
McMenamin asked to hold the ordinance so aldermen could see the city’s internal policy. “We need more information on the consequences of the ordinance,” McMenamin said.
If the city wanted to spend the year-end fund balance, it would have to take a vote.
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Joe McMenamin for Ward 7 