03-15-1995 Steering Committee Meeting

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0 FUNDS AVAILABLE AT END OF YEAR O The amount of funds available at the end of the year is a good indicator of a municipality's ability to manage its funds. If a city does not properly manage its funds, and does not properly plan its expenses, it will end the year with a balance that is insufficient to continue normal operations, which forces it to borrow funds just to cover operating expenses. In January of 1992, the City adopted a financial management plan that addressed the amount of funds that need to be maintained at the end of the year. The amount selected by the City Council was 90 to 120 days of operating expenses. What this means is that the fund balance at the end of the fiscal year should be in a range that provides between 90 to 120 days of operating expenses. This number was chosen for two reasons. First, the largest single revenue source for the City is the collection of ad valorem taxes. These taxes are not due to the City until January 31. The City's fiscal year begins in October, therefore, the largest revenue source for the City is not due until four months of budget expenses have passed. During this four month period, operations must continue. The maintenance of this fund balance allows the City to continue its operations without having to issue Tax Anticipation Notes. The graph below shows the cumulative percentage of revenue collected in fiscal year 1994. 100 80 60 40 20 0 GENERAL FUND REVENUE COLLECTIONS PERCENTAGE COLLECTED9 BY MONTH CUMULATIVE PERCENT OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP MONTH ---PERCENT COLLECTED The second reason for the selection of 90 to 120 days of operating expenses as the target for the City's year end balance is for emergency purposes. Because of the City's proximity to the Gulf, we are susceptible to a hurricane at any time. While other Texas cities are prone to natural disasters, such as hurricanes and fire, their disasters are normally localized in a certain segment of their town. Those of us on the Gulf Coast can experience wide spread damage to our City that can take large amounts of financial capital to correct. As of September 30, 1994, the City of La Porte's Fund Balance was equal to 141 days of operating expenses. That balance was reduced to 92 days of operations after the payment for the hazardous waste settlement. The fund balance is budgeted to increase by 11 days, to 103 days, by September 30, 1995. ............�.w ...--- ........................ ........... .............. ........................ L.......... ................._................___................................. ............................................._...... ..... f 1 ........................... ................ . ............................................................................................................................................. i i r i ............. ............... ......I.................................................... ............... ................................... .......................................... ........................... OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP MONTH ---PERCENT COLLECTED The second reason for the selection of 90 to 120 days of operating expenses as the target for the City's year end balance is for emergency purposes. Because of the City's proximity to the Gulf, we are susceptible to a hurricane at any time. While other Texas cities are prone to natural disasters, such as hurricanes and fire, their disasters are normally localized in a certain segment of their town. Those of us on the Gulf Coast can experience wide spread damage to our City that can take large amounts of financial capital to correct. As of September 30, 1994, the City of La Porte's Fund Balance was equal to 141 days of operating expenses. That balance was reduced to 92 days of operations after the payment for the hazardous waste settlement. The fund balance is budgeted to increase by 11 days, to 103 days, by September 30, 1995.