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Shelbyville council debates shrinking fund balance, ARP use and flood pump contingency
Summary
Council members and staff spent much of a May 23 budget workshop debating a proposed drawdown of the general fund balance, whether to use reserves for operations, and how $6.7 million in ARP funding and a planned flood-pump project affect the city's fiscal outlook.
Shelbyville council members and staff on May 23 focused on the city's falling general fund balance and whether the proposed 2025'26 budget appropriately uses reserves and federal ARP dollars.
Vice Mayor Christie, council member William and other council members pressed city staff about a multiyear decline in the general fund. Officials presented figures showing the general fund balance falling from about $23 million to $16 million and a proposed further drawdown to roughly $8 million over several years if the current plan remains unchanged. City Manager Scott McKay and Treasurer Kaye Parker explained that roughly $4.6 million of recent transfers out of the general fund were to capital projects and about $4 million reflected operating shortfalls in the proposed budget.
Council members asked whether the city was relying on remaining American Rescue Plan (ARP) funds to cover operating gaps. Staff said about $6.7 million in ARP funds are currently in the general fund and that roughly $274,500 has been spent directly on the flood-pump effort so far; engineers and consultants were paid out of that allocation. Staff also said some ARP money has supported the North Bridal Street project (about $1 million was cited), and that final installation bids for the flood pumps had not yet been received. Estimates for flood-pump installation ranged, in staff discussion, from roughly $3.0 million to $4.0 million, and council was told bids might not be issued until the fall.
Council members repeatedly emphasized that while state law allows use of reserves, good financial practice and professional advice (cited as recommendations from MTAS and independent consultants) favor maintaining several months of operating expenses in reserve. Vice Mayor Christie cited consultants who recommended about six months of operating expenses be retained as a best practice; city staff pointed out the city's own fund balance policy recommends a 20% general fund minimum and that the current proposal shows an estimated 24% for the coming year. Staff also noted that certain one-time revenues and grants — including ARP dollars and larger capital grants — can make the fund balance appear larger than recurring operating resources.
The discussion touched on several near-term capital and matching obligations that are driving transfers out of the general fund, including airport property purchases, sewer and street projects, and a proposed $770,000 local match for a $2.5 million airport terminal grant. Council members asked staff to provide a side-by-side of options: increase revenues, cut operating or capital spending, or some combination, and requested more granular projections for ARP balances, flood-pump bids, and the timing of revenue receipts that are shown in the proposed budget.
City staff scheduled a follow-up budget workshop for June 2 and said they would deliver updated cash-flow projections, clearer ARP accounting and options for reducing the projected fund-balance drawdown.
