Board adopts updated fund-balance policy; aldermen flag long-term payout liabilities

The Board of Mayor and Aldermen unanimously approved Resolution 2025-34 Oct. 14 to revise the city’s fund-balance and reserve policy following recommendations from the state comptroller’s office.

Staff told the board the policy aligns other city funds with a 16.67% available fund-balance recommendation — roughly two months of operating expenses — and that funds currently not meeting the threshold would have up to three years to phase in the change. Alderman Robertson and others asked how the policy would interact with existing liabilities tied to employee leave payouts.

Finance staff reported the combined liability for sick and vacation time currently on the books is just under $3 million. Staff said the standard budgeting practice is to include anticipated payouts in each annual budget for employees expected to retire in the coming year; however, aldermen discussed the merits of setting a dedicated reserve to lessen year-to-year budget impacts if multiple large payouts occur at once.

Alderman Robertson and Alderman Evans recommended the finance committee consider a targeted reserve—one alderman suggested $500,000 as a starting point—while staff said the city would research mechanisms and report back in the midyear budget process. Staff noted GASB accounting recommendations and that some funds (hotel/motel, drug) already meet the comptroller’s recommendations while others (stormwater, State Street) do not.

The resolution passed unanimously; staff will return with options and a phase-in plan for funds that need to reach the recommended balances.