STABILIZATION FUND - FUND 108
Introduction The City Council and staff are committed to maintaining the service levels that the citizens and council consider to be minimum and necessary to “Keep Desoto Beautiful” and to attract economic development that will not be affected by economic recessions, natural disasters and slowdowns. As a result of strict budget monitoring, one-time revenues and restructuring departmental resources, the City has been able to achieve general fund reserves that have exceeded the 60-day reserve requirement policy. Additionally, establishing a General Stabilization Fund would accomplish the following objectives for the City: • Insulate the General Fund programs and current service levels from large and unanticipated one-time expenditure requirements; • Insulate the General Fund from any revenue reductions due to a change in state or federal legislation, adverse litigation or similar unforeseen actions; • Temporarily insulate General Fund programs and current service levels from slower revenue growth that typically occurs during an economic recession; • Fund emergency, one-time unanticipated expenditures or to offset unanticipated revenue fluctuations occurring within a fiscal year; • To reserve funds for one-time expenditures to restore prior service levels; • Decreases the need for any short-term borrowing, which would be a positive indication of the City’s financial health and economic stability. Policies This reserve is not intended to be used because General Fund expenditure growth exceeds normal revenue growth. The Stabilization Fund will be budgeted every two (2) years and appropriated annually to avoid the need for service level reductions in the event an economic downturn causes revenues to come in lower than budgeted. In addition, funding levels of the Stabilization Fund will be reviewed during periods of economic stagnation to avoid reductions in operating service levels. The City of DeSoto’s current policy requires that we maintain a 60-day reserve or 16% of budgeted expenditures within the General Fund each year. In addition to this reserve, the City has established a Stabilization Fund with a target to achieve a minimum balance of 10% of General Fund’s budgeted revenues. Each year, the amount to be appropriated will be proposed by the Audit and Finance Committee (AFC) and recommendations forwarded to City Council for approval. Once the targeted balance is obtained (10% of the current budgeted General Fund revenues), the fund will be reviewed by the AFC to determine the optimum balance for future years.
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