May 23, 2019

City sets goal for undesignated funds> Ellsworth moves to create stable financial image

ELLSWORTH — City councilors set limits Monday on how high and how low the city’s fund balance can go.

They adopted an ordinance which requires that they maintain the undesignated fund balance at between 7 percent and 12 percent of the previous year’s budget. The move will allow the city to maintain a stable amount in that fund, presenting a stable financial image when the city seeks to issue bonds for major capital projects, according to Michelle Beal, the city’s deputy treasurer.

“The bond rating services look at a number of things when they establish a bond rating; this is one of them,” she said. “If you get a good bond rating, you get a good interest rate when you borrow money. We have a good fund balance and I’d like to keep it that way.”

The city’s fund balance, which is created generally through unexpected revenues such as an increase in excise taxes and from unexpended budget lines, is now about $1 million, Beal said. That figure is not exact, she said, because auditors are still reviewing the city’s 1999 fiscal year accounts.

The new ordinance requires that if the fund balance exceeds 12 percent of the previous year’s budget, the council must establish a designated reserve account for the overage.

It also allows the council to draw the account down below 7 percent to respond to an “unexpected municipal event.” Beal noted that when the city had to close its landfill dump, it used undesignated fund balance dollars, and it took years to build the account up again. Under the new ordinance, the councilors would have to adopt a three-year plan to replenish that account before voting to draw it down below the minimum amount.

The majority of the councilors approved of the measure.

“The one thing I like about this,” said Councilor Gary Fortier, “is that it makes any action dealing with the fund balance come before this meeting to be voted on.”

He added that if the fund balance exceeds the 12 percent limit, councilors could establish a reserve account to reduce taxes. Beal qualified that statement, noting that since the fund balance is not official until after the municipal audit is complete, the reserve account could only be used to adjust the next year’s budget.

Councilor Stephen Beathem had some reservations about the new ordinance.

“I believe in everything this ordinance is trying to do,” he said. “I believe the city should have a healthy fund balance. But I believe this takes away the ability of the council to adapt to the economy of the time. And I can’t support it for that reason.”

Beal suggested that the fund balance will always be based on the municipal budget.

“The budget should move with our economic abilities. As the budget moves, so will the fund balance,” she said.

Councilors adopted the new ordinance by a 5-1 vote with Beathem opposed. Councilor Fred Garland was not present.

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