City Council Meeting


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  H.1.       
Meeting Date: 04/19/2022  
Contact: Tracy Cormier, Managing Director of Financial Services

COUNCIL ACTION
Motion by Mayor Pro Tem Andre' Byrd with a second by Councilmember Crystal Chism to approve as presented, Motion passes 6-1.
AGENDA ITEM:
Consider an Ordinance amending the Fiscal Year 2021-2022 Adopted Budget related to utilizing excess reserve funds as identified by DeSoto's Fund Balance Policy including:
    i. $2,500,000 General Fund transfer to the Capital Improvements-City Fund for future costs associated with Hampton Road Redevelopment
    ii. $1,000,000 General Fund transfer to the Capital Improvements-Other Public Works Fund for additional street maintenance/repair costs
    iii. $500,000 General Fund transfer to the Capital Equipment Replacement Fund to purchase permanent and mobile speed radar signs
    iii. $4,000,000 Public Utilities Fund transfer to the Capital Improvements-Public Utilities Fund for the future renovation and construction improvements to the maintenance building at the Westmoreland Road Pump Station
    iv. $500,000 Drainage Fund transfer to the Capital Improvements-Drainage Fund for erosion control projects
BACKGROUND:
On November 2, 2021, the DeSoto City Council updated the City's Financial Polices to include an update to the City’s financial reserve policy. The policy establishes a minimum, target, and maximum fund balance amount to have on hand at the end of each fiscal year for the major funds. The policy also states that reserves in excess of the target levels may be allocated for one-time investments such as:
  • Transfers to Capital Improvement or Equipment and Vehicle Replacement Programs to enhance funding for capital purchases,
  • Funding accrued liabilities, such as debt service, pension, or other post-employment benefits (with priority being given to items that reduce operating expenditures in future fiscal periods), or
  • Appropriated to reduce the amount of future bond issuance.
In a case where the City falls below the minimum in a fund established by this policy, the Finance Director is required to prepare a replenishment plan to bring the City back into compliance and submit that plan to the City Council. Replenishment sources may include nonrecurring revenues, budget surpluses, expenditure reductions, or excess balances from other funds, where allowable.  
FINDINGS:
After a review of DeSoto's major funds at the conclusion of the FY 2021 Annual Comprehensive Financial Report, it was determined the following funds contained an excess of the maximum amounts outlined by policy:
 
FUND POLICY MAXIMUM AMOUNT FY 2021 AUDIT AMOUNT
General $20,729,287 $27,219,192
Public Utility $8,053,759 $14,718,943
Drainage $313,710 $1,363,402

Subsequently, during staff review, the Sanitation Fund was found to be below the established reserve policy requirement.
 
FUND POLICY MINIMUM AMOUNT FY 2021 AUDIT AMOUNT
Sanitation $584,153 $303,627

To correct the fund balance level in the Sanitation Fund, the following measures are outlined in the attached Replenishment Plan submitted to the City Council: 
  • Delayed hiring of personnel at the beginning of the fiscal year for savings in salary and benefits. 
  • Staff will also issue a Request For Proposal for services in FY 2022
  • Reduce transfer for equipment in FY 2023 (delay the purchase of a street sweeper)
  • Recommend rate adjustments for FY 2023, if needed. 
FINANCIAL IMPACT:
Based on application of the City's Fund Balance Policy and the utilization of excess funds, staff recommends that the following one-time capital expenditures be made:  

General Fund: 
  • Transfer $2,500,000 to the Capital Improvement Fund for the Hampton Road Redevelopment Project
  • Transfer $1,000,000 to the Capital Improvements Funds for Neighborhood Streets
    • Identified street repair projects include:
      • Hilltop Circle from and to Pleasant Run Road
      • Chalk Hill Lane from Polk to Street End
      • Trail Ridge from Pleasant Run to Street End
      • Elerson Road from Belt Line to Randolph
  • Transfer $500,000 to the Equipment Replacement Fund for the purchase of permanent and temporary speed radar signs and trackers 
    • Staff will prepare a policy for City Council consideration that regulates the placement of City-purchased permanent speed radar signs
Public Utility: 
  • Transfer $4,000,000 to the Capital Improvement Public Utility Building Fund to fund the replacement of the Public Utilities Maintenance Building at the Westmoreland Road Pump Station
Drainage Fund: 
  • Transfer $500,000 to the Drainage Capital Project Fund for erosion control on private property
    • Staff will prepare a policy in coordination of the FY 2023 Budget for the use of these funds to address cost-sharing on private property projects
RECOMMENDATION:
Staff recommends that the City Council approve the Ordinance amending the FY 2022 Adopted Budget to utilize excess reserve funds as identified in this Management Report. 
MANAGEMENT REVIEW
Attachments
Financial Summaries FY 2021
Exhibit A
Budget Ordinance
Sanitation Fund Replenishment Plan


    

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