Committee recommends raising Middleton's reserve target to 25%–40% and lowering contingency to 0.5%

The Middleton Finance & Personnel Committee on Aug. 5 voted to recommend that the City Council amend the city's fund-balance policy to raise the target reserve and reduce the budget contingency.

Bill, a city finance staff member, told the committee the Government Finance Officers Association recommends a minimum of two months (16.7%) and said the city currently runs near the top of its existing 16.7%–33.3% range. "I'm recommending that you consider increasing that range to 25 to 40% approximately, roughly 3 to 5 months of operating expenses," Bill said, adding that Moody's has flagged fund-balance levels as a factor in credit opinions.

Committee members discussed trade-offs between keeping larger reserves and funding planned projects. One member said higher construction and materials costs seen in recent bids increase the appeal of larger reserves; another asked whether a fixed contingency target matters if budgets routinely scale it back during development. Bill said staff could present the contingency as a policy target while retaining flexibility at budget time.

Sennaro moved the committee's recommendation to council: (1) increase the general unassigned fund-balance target from 16.7%–33.3% to 25%–40% of the subsequent year's budgeted expenditures and (2) decrease the annual general-contingency target from 0.67% to 0.50% of budgeted expenditures. The committee seconded the motion and advanced the recommendation by voice vote.

The change is advisory to council; the committee also asked staff for additional scenario modeling and indicated a future agenda item will address the city's debt-management policy. Bill said he will provide further data on liabilities and Moody's metrics ahead of the council review.

Next steps: the committee is forwarding the proposed amendments for formal consideration and possible adoption by Middleton City Council at a future meeting.