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Council debates ‘waterfall’ carryover policy; asks administration for 60‑day analysis after split vote
Summary
Council debated changes to the city's carryover ("waterfall") policy — including raising reserves from 16.7% to 17%, splitting the bottom bucket and whether to base reserves on expenses instead of revenues. An amendment to change the reserve formula failed; the council ordered an administration analysis within 60 days.
Council members spent extensive time debating proposed changes to the city’s carryover, or "waterfall," policy and whether to change how the general‑fund reserve is calculated.
The administration proposed updating the stabilization‑funds policy to raise the reserve target from 16.7% to 17%, create a $500,000 special‑events bucket, split the waterfall’s bottom bucket 50/50 between infrastructure/capital projects and a new housing and economic‑development reserve, and expand allowable uses for the infrastructure reserve to include equipment and IT.
Council members Walsh and Owens offered a motion to change the reserve calculation to an expenditure‑based method (rather than revenue‑based) and to hold the carryover contribution at 2% instead of increasing it to 2.3%. Walsh said the change would free roughly $8.26 million to allocate to housing and infrastructure. "We need to ask ourselves how we build our reserves — based on expenditures or on revenue," Walsh told colleagues.
Administration officials and several council members cautioned that shifting the policy without detailed analysis could affect the city’s credit profile. Director Webb noted 16.7% aligns with Government Finance Officers Association guidance and explained that while the quantitative rating effect might be limited, the qualitative components of bond ratings could be affected; Webb said the city’s current Moody’s rating was Aa2 and that a reduction in reserves could degrade qualitative assessments.
When Walsh and Owens offered a friendly amendment and put the motion to roll call, the amended motion did not carry. The council then voted to ask the administration for a detailed analysis of the Walsh/Owens proposal and related bond‑rating implications within 60 days; that request carried on roll call. The vice mayor also proposed removing a capital‑only restriction on the waterfall's final bucket so council could use funds for operating needs; that motion failed on roll call after opponents warned it could create recurring operating obligations using one‑time carryover dollars.
Council members who opposed the immediate policy change said they were open to revisiting the idea after the administration provides scenario analyses showing impacts on reserves, ratings and pension funding. The administration agreed to include comparisons to peer cities and scenario‑based stress tests in the requested report.
