by CHRIS ROGERS
How much the city of Winona should spend from its savings became a topic of debate last week, as the City Council reviewed City Manager Steve Sarvi’s proposed budget for 2022.
The city faces a bit of a difficult financial situation next year. Even though the draft budget includes a five-percent hike in the property tax levy, city officials had to make tough cuts elsewhere, including reduced funding for road repair and the elimination of six vacant staff positions, ranging from a police investigator to a street maintenance worker. Also, the draft budget is not balanced, but relies on spending $500,000 from the city’s general fund reserve.
The general fund is one of several reserve funds the city has, and according to the city’s latest audit, at the end of last year it held just over $5 million in available cash not earmarked for upcoming projects.
“So the proposal is to take about 10 percent of our reserve dollars and spend it on daily operations?” City Council member Steve Young asked, with a touch of incredulity. For Young, the situation was like a family using their savings to buy groceries for the month. It’s something a person could do in a moment of need, but it’s not sustainable. “The concern is, absent a crisis, we’re spending our savings account on daily operations,” Young said.
Sarvi said the city had included reserve spending in previous years’ budgets, as well, but was laying the groundwork to phase out the practice. “That number has been higher and lower in previous years,” Sarvi said. According to the city’s adopted budgets, the city budgeted to spend $300,000 out of general fund reserves in 2021 and $492,000 in 2020. Before that, city budgets did not include such reserve spending.
“What we’re trying to do as part of our plan is to bring that number down significantly from what that was and to get that to zero,” Sarvi said. “But what we’re recommending is not to do this all in one year.” He said city staff would work with financial consultants this fall to set a policy for how much money should be kept in reserve.
Describing his service on the boards of nonprofit organizations, Young said, “There’s always that temptation: ‘Hey, we’ve got this savings account; let’s move it over and spend it on operations.’ But you really wind up getting in trouble when you do it.”
“That’s why we’re trying to stop doing that,” Sarvi responded.
“Well, then let’s stop doing it,” Young rejoined — as in stop immediately and eliminate the reserve spending from next year’s budget.
“The cuts we would have to make —” Sarvi started. He argued the city should leave the reserve spending in the budget for now and develop a policy for how much money to hold in reserve. “Once we’ve got our heads around what that number is, let’s attack this through a combination of reductions in services, in costs,” he said.
That appeared to satisfy Young, and he cast a preliminary vote in favor of the draft budget, adding that he’ll keep tabs on the issue.
The general fund reserve is just one of numerous reserve funds the city has, and the city is far from broke. In total, the city — including the Port Authority — has nearly $70 million in the bank or investments, according to the city’s 2020 audit. However, the general fund is the only reserve fund that the city can spend on whatever it needs, whereas most other reserve funds may only be used on qualifying expenditures. The city has over $22 million in its water and sewer funds, for instance, which may only be spent on water and sewer infrastructure. Of the city’s other more flexible reserves, the equipment fund is running low — with just $89,000 left unspoken for, down from $1.5 million at the start of the year — but the facilities and infrastructure funds have a combined $6.7 million, Finance Director Jessica Wojahn told the Post last month.
While Young and City Council member Michelle Alexander have challenged staff’s proposed reserve spending, some other council members have made the case that the city shouldn’t keep an excessive amount of cash sitting around either. “Obviously we want money in there for emergencies, so we don’t want to drain it or anything, but obviously since that is taxpayer money, we should use it for projects that benefit our taxpayers,” council member Eileen Moeller said during a discussion of using reserves to fund street repair. She added, “I don’t feel great about hoarding taxpayers money and not using it.”
“If that rainy day fund gets too big, then we are losing out on opportunities to use it,” Mayor Scott Sherman echoed.