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Lynchburg staff outline fund-balance policy, $28.3M unassigned projection and tradeoffs for FY26 capital decisions
Summary
At a May 6 work session, Lynchburg City Council reviewed the city's fund-balance policy and a proposed FY26 projection showing an 11.7% unassigned general fund balance ($28.3 million) and discussed tradeoffs between using those dollars for capital projects vs. preserving reserves.
At a May 6 budget work session, Lynchburg City Council reviewed the city's fund-balance policy, the FY26 proposed unassigned general fund balance projection and how one-time funds could be applied to capital projects or maintenance.
Staff explained the city's financial policy: “The city will maintain an unassigned general fund balance equal to a minimum of 10% of general fund revenues with a goal of 15% as the city strives to grow incrementally each year subject to revenues available,” a staff presenter summarized. The city's proposed FY26 budget shows a projected unassigned general fund balance of about 11.7% of revenues, or $28,300,000, with $9,000,000 of that forecasted as transfers to capital funds for projects in the capital-improvement program.
Why it matters: The unassigned fund balance protects the city against revenue shocks, supports bond ratings and provides one-time funding capacity. Changing the budgeted percentage—or using more of the unassigned balance—would create one-time funds available to cover capital priorities without bonding, but would reduce the city's cushion and could affect future debt capacity and ratings.
Council options and tradeoffs Staff said council could lower the budgeted unassigned balance to the policy minimum (10%) and free up roughly $4.1 million in one-time funds in FY26; staff also detailed how additional adjustments could make about $9 million available for capital uses in the proposed budget. Councilmembers explored the possibility of using one-time funds to pay for pool or library projects cash rather than bonding. Staff cautioned that diverting cash from planned maintenance and PayGo commitments could create a maintenance funding gap in subsequent years.
Council members also debated longer-term strategy. Councilman Ferraldi advocated shifting more projects to PayGo and reducing borrowing over multiple budgets, paired with consumption-tax approaches to raise dedicated revenue, and asked for sunset clauses on temporary levies. Several council members emphasized the need to identify recurring vs. one-time needs, preserve critical maintenance funding, and weigh impacts to bond ratings.
Staff process and next steps Staff said the FY26 proposed budget assumes an unassigned general fund balance of 11.7% (about $28.3 million) and that council could elect to change that level at adoption; staff outlined how such a change would create one-time funds but would reduce the city's margin of safety. Council asked for scenarios that show the effect of lowering the balance and reallocating funds to specific capital projects while maintaining required reserves.
Ending Council directed staff to return with scenario analyses; no formal vote was taken at the work session.
