Town banks millions in unspent funds - Tucson Local Media: Pima Pinal

Town banks millions in unspent funds

OV general fund has more than 40 percent in its reserves

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Posted: Monday, May 17, 2010 11:00 pm | Updated: 8:09 am, Thu Mar 24, 2011.

The proposed budget currently under consideration at Oro Valley Town Hall totals $113.5 million, including capital and operating expenses.

Of that total, the general fund makes up the largest portion at $25.7 million in expected spending for the 2011 fiscal year. The general fund includes the operating budgets of town departments that provide core services, such as police, parks and development services. 

Council budget policy requires the maintenance of a general fund reserve of 25 percent. That policy goes beyond the recommendations of the Government Finance Officers Association, which advises governments should maintain a reserve fund of 10 percent of the general fund.

Oro Valley currently has more than $10 million in general fund reserves, equal to more than 42 percent of the fund. The size of that reserve fund, relative to the proposed expenditures, has raised some question about whether the town should use some of that money to maintain current service levels or provide cost-of-living adjustments for town workers.

"I'm not sure the government should be in the business of building bank accounts," said Councilwoman Mary Snider.

Snider said the annual growth of town reserve funds was a concern, especially in light of continued economic challenges and the possibility of governmental service cuts.

"By current town policy, that money is out of reach for any recurring costs," Snider said. "I don't know if we can continue to perpetuate that model."

The council's budget policies say the town should dip into the reserves only to pay for one-time expenses.

That would leave reserve funds off limits to supplement town services like the Coyote Run transit service, which lost a significant amount of its funding from the state for next year. With state support gone, there are few options other than to cut transit services in half. The current budget proposal reflects that austerity.

In addition to the general fund reserve, Snider pointed out that the town has more than $1 million in bed tax money sitting in a reserve fund.

Across all town funds, more than $35 million sits in reserve, but much of that money has limitations on how it can be spent.

For example, money taken in impact fees can only be spent on the infrastructure improvements they are charged for, such as roadway impact fees only being spent on roads.

But not all council members see a problem with the amount the town has in savings.

"I think the policy is very good that money has to be spent for one-time improvements or one-time expenditures," Mayor Paul Loomis said.

Loomis said the current reserve level of more than 40 percent needed to be maintained and that stipulations to not use the money for ongoing expenses keeps the town in good financial position.

"Eventually, you're going to drive down the contingency," the mayor said. "I think that having a relatively large contingency will allow us to weather the storm if that storm happens."

That's what Councilman Bill Garner thinks as well.

Garner said the 25 percent policy is simply a minimum, and that the fund standing at a much higher level isn't a problem. In fact, he said maintaining a greater amount of reserves would protect the town in the event of a calamitous event or further reductions in state support.

"The issue is the uncertain times we face right now," Garner said. "The days of us having money rolling in like it grows on trees are over with."

The council last year approved a nearly $600,000 reserve fund expense to supplement town worker salaries and avoid laying off employees.

Garner opposed the move that Loomis initiated. That money ultimately was never spent because savings were realized in other areas, including a voluntary severance program that 30 employees took advantage of.

There has been some talk of using reserves to provide bonus for town employees in the fiscal 2011 budget.

Garner is worried about dipping into the reserves on items like salaries because they constitute recurring costs.

"If we aren't protective of out money," Garner said, "we could end up bankrupting the town."

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