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Finance director tells Edgewater charter review board why 15% reserve is maintained
Summary
The city finance director explained that the charter's 15% reserve applies to operating funds (general, water, sewer, stormwater, refuse), that amounts above 15% are discretionary, and that bond covenants and debt-service coverage require legally restricted cash holdings.
Finance Director Bridget Bass briefed the Charter Review Board on March 17 about the city's reserve requirements and how those interact with bond covenants.
"We have our 1st, budget workshop in June," Bass said in response to questions and then clarified, "We've got the 15% charter. All of our, we have a pooled cash investment ... we show that through our general ledger system as reserved for or restricted for certain amounts that are legally restricted." She said the charter requires a 15% reserve based on operating funds and that the reserve applies to the general fund and the proprietary utility funds (water, sewer, stormwater, refuse).
Bass told the board the city shows roughly $4,614,371.70 in the 15% operating reserve and that bond covenants impose additional legal restrictions requiring cash available for debt-service coverage. She described industry guidance of approximately 180 days of coverage for debt service and noted that covenant requirements can amount to 16–66% of next year's loan payments, in some cases representing a figure in the order of $1.2 million depending on the issue.
When asked whether the board should change charter language regarding the 15% reserve, Bass advised caution. "We would not want to go less than 15% in our reserve," she said, and emphasized that amounts above the charter floor are reviewed and adjusted during budget workshops and rate reviews.
Board members said they welcome additional documentation at future meetings and were encouraged to attend the upcoming budget workshop for more detailed explanations of reserves, rates and capital needs.
