by Bradley Parsons
Staff Writer
The City Council is planning to pay for budget shortfalls from an $18 million reserve account rather than rely on investment strategies proposed by the mayor, the Council’s auditor said Tuesday.
In his proposed budget, delivered to the Council in July, Mayor John Peyton said new investing and borrowing policies would return about $15 million to the City. The budget depended on that money to help close a $40 million gap. Council auditor Richard Wallace said during last week’s Blue Ribbon Financial Commission meeting the Council was hesitant to commit potential dollars to definite needs. During Tuesday’s meeting, Wallace said the Council could use the money from the reserve account instead.
“We don’t want to press the administration from going from zero to $15 million in one year,” said Wallace. “Since this is new to the City, we want to be cautious; we want to wade in slowly. We’re not going to recognize that revenue.”
Instead, Wallace said the investment money would replenish the account. He said the fund, which he termed a “Lite Rainy Day fund,” could be carried over to next year.
“If it [the new investment strategy] brings in $18 million we’re in good shape, if it brings in $12 [million], then it will still allow the mayor to embark on the programs and services he desires,” said Wallace.
For Peyton, winning Council approval for his investment policies has been an essential step toward getting his budget passed. Council’s use of the account could remove the policies as a hurdle.
Finance Committee chair Warren Alvarez said the account resulted from pooling interest from several trust funds. He said money from Peyton’s investments would be reported quarterly and used to refurbish the account.
“This is the way we’re heading,” said Alvarez. “We’re not going to spend money before we get it.”
If Peyton’s policies pan out, Council president Lad Daniels said surplus funds could be set aside for projects left out of this year’s budget. For instance he said a $6 million trust fund could be set aside for economic development.
Daniels said use of the account represented a more prudent approach.
“If you want to become a hero, you should underestimate your revenue and overestimate your expenses,” said Daniels. “If things come out the way you plan you’re OK, and if you end up with more money then you thought, then you’re a hero.”
Interim Chief Financial Officer Walt Bussells said during the Blue Ribbon meeting that the ordinance authorizing the new financial approach would create “higher levels of transparency” for City investments and borrowing. He said he didn’t see the need for mandatory review. However, both Wallace and Alvarez said Council approval for the new policy would likely include quarterly oversight.
“This is something new; it’s not something that a lot of cities do,” said Wallace. “The Council wants to follow the administration’s lead, we just don’t want to be embarrassed from losses.”