By Randy Kugler
City officials during this year’s budget meetings discussed the millions of dollars in the General Fund Unappropriated Ending Fund Balance (UEFB). The importance of the UEFB is in the fact that it becomes the General Fund beginning fund balance in the following fiscal year where it funds operating expenses until November when property taxes are distributed by the County.
Practicing Budgetary best practices is the foundation of transparency. City officials constantly remind us of the importance that they place on being transparent in conducting City business. Best practices as described by the Government Finance Officers Association (GFOA), states that a City should have a written policy to explain high unassigned General Fund balances that consistently exceed 30 to the 50% of annual operating expenditures. For the past 5 years, the General Fund beginning fund balance has averaged 108% of annual operating expenditures.
Apparently in as far as the General Fund UEFB and beginning fund balance, if simple transparency and adhering to best practices becomes inconvenient, you can substitute flexibility for transparency. The City admits it just has not had the time during the past 5 years to develop either a minimum or maximum fund balance policy. Having written policies that the public can review and comment on may constrain the flexibility that this Council apparently prioritizes over transparency. I contacted Councilor Hart to have him confirm the total dollar amount of unassigned reserves in this year’s proposed General Fund Budget. He was unable to answer the question but that didn’t prevent him from voting to approve the General Fund Budget submitted by the City Manager.
The City Manager provided a specific example of how this Flexible Transparency works using General Fund UEFB funds for future unknown infrastructure projects. She explained that since 2023 the City has known the 4th Street improvement project needs to be completed at a cost of approximately $600,000.
Sounds like there isn’t much unknown about this project. The City has a known project, the desired year of completion and the project cost. Had the City simply been transferring $200,000 of those unassigned dollars each of the past 3 years to the appropriate City funds in a straightforward and transparent manner describing the purposes of those transfers, the City would be discussing building this project this year rather than having those funds sitting in the General Fund UEFB with City officials highlighting it as an unknown project that they have no plans to move it towards construction. If you’re going to attempt to explain how something works, one should be better prepared to provide a supportive example that doesn’t contradict the point that you are trying to make.
The Council points out that a benefit of Flexible Transparency is the interest revenue the City receives from those unused funds sitting in the UEFB. Cities exist to provide its citizens with needed services and supportive infrastructure. The 30-50% threshold is viewed by the GFOA as excessive, indicating that City officials are over contributing to unassigned reserves rather than providing services. The Council needs to remember that they are elected to run the City of Manzanita, not the Bank of Manzanita.
Officials claim that General Fund revenue is insufficient and they lack the necessary funding to provide services or build projects. Flexible Transparency is just the vehicle needed to justify raising existing charges and creating new fees while simultaneously sitting on millions of dollars for which the City has no written policy explanations or identified expenditure plans. Highlighting the receipt of interest income as a positive benefit is a desperate effort to justify a lack of strategic budgeting.
Expect to hear the response from the Council and its supporters about all of the benefits of flexibility in maintaining millions of unused dollars currently in our Budget and how residents will be even more satisfied with City services once the City finds new ways to collect additional revenue from residents. The Council’s Revenue Confiscation discussions will no doubt be put on hold while the Council searches for a new City Manager. Residents should enjoy the break while they can.
