7. Cash Reserves GoalCity of Kalispell
Post office Box 1997 - Kalispell, Montana 59903-1997
Telephone (406) 758--7709 Fax - (406) 758-7758
REPORT TO: Mayor and City Council
FROM: James H. Patrick, City Manager
SUBJECT: Cash Reserves Goa
DATE: July 1,. 2008
BACKGROUND: The Mayor and Council requested a formal recommendation on the appropriate cash
reserves the City should maintain.
As Council is aware, the cash reserve changes from year to year depending on the total amount of the
budget since it is a percentage of the budget. Cash Reserves are necessary not only for emergency
funding of unforeseen expenditures, but it assists with the cash flow since the City receives periodic
revenue payments throughout the year. The goal of many Cities is to maintain between 12 and 18
percent of the budget in cash reserves with the standard being approximately 15%. Any more than this
and the perception is that the City is over taxing the citizens. Less than this and it becomes difficult to
meet unforeseen events and circumstances as well as meet the cash flow needed throughout the year.
l also discussed with Council the five year budget projection of a three and four percent inflation rate
compared to a revenue stream that is becoming more and more solely dependent on the State cap of
of the rate of inflation averaged over the last three years. Given the unpredictability of the economy, it
is extremely difficult to project more than two years. if growth, especially in the commercial and
industrial sectors, continues to slow or stop, our tax revenues on which we rely will not be sufficient to
cover inflationary increases in the budget. other major issues, like the decision concerning
consolidation of dispatch, could significantly affect our budget as well. The budget issues and depleted
cash reserves are affecting all major cities in Montana and many other cities across the United States.
The 2008-2009 budget proposes increasing Street maintenance fees, building fees and recreation fees
while reducing some personnel positions. It also proposes a Parks Maintenance District to help pay for
about two thirds of the parks budget.
RECOMMENDATIONS: By motion, Council establish a City goal of reaching and maintaining a 15% cash
reserve.
Respectfully submitted,
James N. Patrick
City Manager