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Finance staff flags 2.5% asset‑maintenance reserve requirement tied to audited property value
Summary
Finance staff advised supervisors that under the county's asset maintenance replacement policy, beginning the fourth budget year after adoption the county should set aside 2.5% of net book value of depreciable real property into an assigned reserve; that amount would be about $867,017 based on FY24 audit figures.
Madison County finance staff told the Board of Supervisors that the county’s Asset Maintenance Replacement Policy will require setting aside an assigned reserve equal to 2.5% of the net book value of depreciable county property beginning in the fourth budget year after the policy’s adoption.
The point matters because setting aside that 2.5% reserve will reduce the county’s unassigned fund balance available for operating uses and could influence how much the board relies on pay‑as‑you‑go funding versus debt financing.
Miss Warren (finance staff) explained the policy language adopted in April 2021 and showed figures from the FY24 audit. Per the policy, “beginning in the fourth budget year after the adoption of these policies … the county will provide for major maintenance of its facilities each year with a goal of reinvesting or setting aside for future use 2.5% of the replacement value of County facilities.” Using FY24 audit figures for buildings and equipment (net of depreciation), staff calculated that a 2.5% reserve would equal $867,017. Miss Warren also noted the policy allows counting specified operating maintenance and capital appropriations toward that 2.5% target (for example, $100,000 of maintenance in facilities operating budget reduces the net new reserve required).
Staff told supervisors that the 2.5% set‑aside does not replace the board’s 18% unassigned fund‑balance target; the 18% rainy‑day requirement remains a minimum for unassigned balance. Miss Warren recommended the board could (a) defer formally moving the amount into assigned fund balance until the FY25 audit is complete, (b) set it aside now out of available unassigned fund balance, or (c) propose modifications to the financial policy when staff presents an update.
Board members asked clarifying questions about whether the 2.5% is additive to the 18% rainy‑day policy; Miss Warren confirmed it is separate and would be accounted for in assigned fund balance. Supervisors and staff discussed how facility operating maintenance and known capital projects could be counted to help reach the 2.5% target without an immediate additional appropriation. No policy change was adopted at the meeting.
Ending: Staff will include the 2.5% calculation in the FY25 audit presentation and will include options for the board to (a) set the amount aside, (b) defer action until the FY25 audit is final, or (c) revise policy language in a future financial‑policy update.
