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Finance committee hears fund-balance outlook, advisor says city is in solid fiscal shape
Summary
City financial staff and outside advisor presented fund-balance history and projections; officials said the city's operational fund sits near $19.3 million after statutory adjustments, supports a double-A rating, and that one-time emergency spending (including a possible $500,000 church repair) is generally appropriate from reserves.
The New London Finance Committee heard a detailed presentation on the city's fund balance and credit-rating considerations from David McBride (director of finance) and Mark Chapman (financial advisor).
David McBride walked the committee through spreadsheets showing a nominal fund-balance figure of about $24.7 million for fiscal 2024 and explained routine adjustments (board of education non-lapse funds, accruals, stabilization funds) bring an operational figure "to arrive at a $19,300,000 number." He said that after those adjustments the city is above its formal 16.67% fund-balance policy and described the city's reserve position as "in solid shape."
Mark Chapman, the city's financial advisor, placed the numbers in a longer-term credit context, reviewing the city's ratings history and noting that rating agencies weigh reserves, financial performance, management practices and debt. Chapman advised that "one-time expenses" are an appropriate use of fund balance in many cases and explained bonding may be preferable for large capital needs when statutes permit.
Councillors asked whether using reserves to pay for a $500,000 emergency repair to a local church would harm the city's rating. Chapman replied a $500,000 draw would not materially affect the rating if it is a one-time emergency expense and the city replenishes reserves later. Staff also explained options to replenish reserves through future surpluses and emphasized multi-year planning to meet policy targets.
Why it matters: The presentation framed near-term decisions about using reserves for emergencies and capital projects. Councilors pressed for clarity on when to bond versus when to use reserves, and staff said they will continue to monitor reserve levels and recommend replenishment strategies.
Next steps: Staff and the advisor will remain available as council considers any requests to use the fund balance for emergency repairs or capital projects; the committee asked staff to report back on plans to replenish reserves as part of the budgeting process.
