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Financial advisers recommend raising county reserve policy to 13% and adding targeted reserves
Summary
Jennifer Derickson, senior vice president at Davenport, told the Government Operations and Fiscal Policy Committee that an updated reserve study recommends raising the county's reserve policy from 10% to 13% of adjusted governmental revenues by creating a 2% risk mitigation reserve and a 1% capital reserve.
Jennifer Derickson, senior vice president at Davenport, told the Government Operations and Fiscal Policy Committee that an updated reserve policy study finalized in March recommends increasing the county's policy level from 10% to 13% of adjusted governmental revenues by creating two new reserves and eliminating a mandatory annual contribution to the revenue stabilization fund.
The recommendation keeps the county's current combined target for the unrestricted general fund balance and revenue stabilization fund but replaces the mandatory annual transfer to the revenue stabilization fund with a 2% risk-mitigation reserve and a 1% capital reserve. Davenport also recommended that if any of the reserves fall below their targets, they be replenished to the targets within a three-year period, a practice the firm said rating agencies now emphasize in credit reviews.
Davenport updated figures to reflect audited fiscal 2024 results and included them in the committee presentation. The firm showed the county's combined reserves peaked above the 10% policy in 2021 and remained above it through fiscal 2024, at about 15.9% of adjusted governmental revenues in the audited numbers. The county fiscal plan included in committee materials projects reserves dropping to roughly 13.5% at the end of fiscal 2025 and to about 11.2% in fiscal 2026 under current assumptions.
The presentation noted the Government Finance Officers Association (GFOA) recommendation that local governments maintain a minimum reserve equivalent to two months of operations; Davenport illustrated the county's reserves under both AGR and general fund denominators to compare with that best practice. Davenport also described how the new reserves could be funded and how they could be used, and suggested that the county formalize the replenishment timeframe to align with credit-market expectations.
Council President Stewart and council staff asked Davenport to add an updated PowerPoint to the committee packet so that the recorded materials would match the numbers presented. Committee members did not take action on the recommendations at the meeting; the session was a presentation and discussion.
