City Administrator Webb warns Hillsborough general fund reserves are far below policy targets

City Administrator Webb presented an overview of Hillsborough's fund reserve policy and recent trends, saying the city’s general fund reserve stood at about 4.8% using unencumbered cash divided by total expenditures. Webb said the policy, adopted in 2015, calls for a much larger cushion and urged the council to consider gradual adjustments rather than a sudden shift.

"So your policy says that your general fund will keep about 25% unreserved fund balance," Webb said, noting national guidance from the Government Finance Officers Association suggests about 60 days (roughly 16.5%). He walked the council through three-year averages across general and enterprise funds and explained the effect of transfers into the general fund: "In '23, you are moving about 700,000. In '26, you're expected to move almost $1,200,000 into the general fund." Webb warned heavy reliance on transfers can depress general-fund reserves.

Council members asked whether sales tax from increased repair activity (hail-related repairs) would materially raise revenue; Webb and others explained sales vs. use tax distinctions, and that many repair jobs may not generate the sales tax windfall officials expect. Council discussion turned to options the city has to rebuild reserves: reduce expenditures, change utility-rate structure, or raise property taxes (mill levy). Mayor (role) emphasized public engagement: "we have to ask the people we represent, what do you want?" as the council weighs trade-offs.

Webb recommended setting an initial reserve goal nearer the 15% range and moving incrementally toward stronger reserves while formalizing transfer and rate policies so budgeting is more predictable. The council did not take immediate action but signaled interest in earlier-than-usual review of utility rates as part of the budget process.