Background:
The City established target fund balances to help ensure that adequate funds were held in reserve between years. This is a most critical practice for any agency that relies heavily on property tax so that ample cash is maintained to carry the agency into November when the majority of property tax revenues are normally received. The City has a diverse revenue funding system so that it is not as important to rely on a larger fund balance awaiting November's distribution from the County. However, the City does have many activities whose operations are dramatically impacted by weather, consumption or use, tourism and activities controlled by others that make it equally important to have sufficient fund balances in case of a downturn in predicted revenue streams.
Each year staff prepares the budget and looks to the fund balance target as revenues and expenses are balanced. Predictions of fund balances for the current, ensuing and future years are presented in the long-term section of the budget document as well as the policy in narrative format for each fund in the Appendix.
Please note that the timing of construction and financing activities can dramatically impact the actual performance as compared to the target. An example is issuing bonds in March to construct infrastructure for the next 2 to 3 years will artificially inflate the fund balance for a year or two. Also, target fund balances should be considered as minimums since there are no inherent problems with exceeding them, even for an extended time, but there may be operational short falls and possible reductions in bond ratings if the financial viability is jeopardized.
A budgetary tool that assists the City in carry over is Contingency. Most funds have a Contingency budgeted each year that helps to avoid budget law violations and is primarily there for unforeseen changes. The important point with Contingency is that any unused amount results in a larger fund balance carry forward to the next year. The city has been fairly successful in NOT using all of its Contingency budgeted however, as staff budgets more closely to the proposed activities and/or revenues outside our control fall short, more contingency is used and there is a greater chance that less will flow to the bottom line and carried forward.
Attached are a series of tables that show recent trends in the targeted and actual fund balances | 
