City finance staff say water and storm funds can support a $6 million interfund loan while meeting 20% reserve policy

Acting finance and utility staff presented an analysis on Jan. 28 showing water and storm enterprise funds can support an interfund loan of $6,000,000 to the general fund while maintaining the city’s adopted reserve requirements and funding near‑term capital needs. The analysis, presented by Acting Director Dunscombe, used the adopted 2024 and 2025 budgets, the city’s capital improvement plan and the financial‑policy reserve target of 20% of operating expenses.

Staff explained the loan in the adopted budget was structured as $3.5 million from the water fund and $2.5 million from the stormwater fund, with no required repayment in 2025 and repayment beginning in 2026. The analysis compares each fund’s unrestricted net position to the combined requirement of a 20% operating reserve plus next‑year capital needs; staff concluded each fund would remain above its required level after making the proposed loan.

Council members asked clarifying questions about the reserve percentage, where loan repayments would appear in fund statements and the assumed timing of capital projects. Staff confirmed the 20% reserve level is defined in the city’s financial policy, that loan repayments flow back into the unrestricted net position of each enterprise fund when paid, and that the analysis intentionally excluded interfund loan receipts to stress‑test whether the funds could have supported the loan without those receipts.

Council member Chen said he appreciated the presentation and wanted the record to show the utility funds remain sound after the borrowing; other council members asked for follow‑up materials and schedule details for repayment and capital spending.