Webster Groves council adopts change to fund‑balance target, lowering floor from 50% to 35%

Webster Groves — The Webster Groves City Council voted unanimously June 3 to adopt a revised weighted fund‑balance policy that lowers the city’s reserve target from 50% of planned general‑fund expenditures (about six months) to 35% (about four months).

City Finance Director Gregory Donovan told the council the policy change is intended to give the city “greater flexibility” to consider one‑time capital projects while keeping a multi‑month cushion to smooth cash flow and respond to emergencies. “My recommendation is that we can take it down from a 50%, which is 6 months, to 35%, which is about 4 months,” Donovan said during a council work session.

Donovan framed the change against guidance from the Government Finance Officers Association and the city’s recent revenue performance. He said the GFOA recommends keeping at least two months of planned expenditures as a reserve but that local conditions should determine the appropriate level. “The recommendation is that you keep at least 2 months of your expenses,” Donovan said, noting that Webster Groves has more stable, recurring revenue sources than some jurisdictions.

Donovan described fund balance as the accounting difference between assets and liabilities (not strictly cash on hand) and said the city’s audited position has created a roughly $8 million gap between its current fund balance and the previous 50% target. He recommended the lower 35% target while leaving the policy’s stated purposes — a cushion for cash‑flow timing, emergency spending and credit quality — unchanged. He emphasized that excess balances should be explained and spent on one‑time projects, not ongoing operations.

Council members asked about implementation and oversight. Donovan said amounts held above the 35% floor would remain in the general‑fund balance until the city develops a plan to allocate them and that any spending above thresholds would still require council approval. Mayor Laura Arnold and council members said they want staff — including City Manager Dr. Peoples — to return with an itemized, multimonth plan showing candidate projects, timelines and the effect on reserves.

Donovan also reviewed the budget context: the city is projecting an operating surplus for the current fiscal year (he estimated about $850,000 at the time of the meeting) even though the proposed 2026 budget included a planned deficit of roughly $1.1 million. Donovan said much of the difference stems from conservative revenue assumptions, contingencies and timing of receipts and payments.

The council voted to adopt Resolution 2025‑26 (the new weighted fund‑balance policy) by roll call. All voting members present — Council Members Bliss, Franklin, Smith, Alexander, Hickson Shepherd, Hasslemeyer and Mayor Arnold — voted yes.

What happens next: Donovan and staff will prepare a timeline and recommended uses for balances above the 35% floor and bring those proposals to council for approval. The policy change does not alter legally restricted funds (for example, capital, stormwater or Prop W‑designated funds) and does not authorize any automatic spending.

“This is a plan to allow us to pause, think about projects, and then bring them to the council for approval,” Donovan said.

For the public: the council pulled the fund‑balance resolution out of the consent agenda so members could discuss it in public; the measure passed in the regular meeting that followed the work session.