Memo for fiscal year 2020, updated 2019-03-28

[Archived] Question #57: Unassigned/uncommitted fund balance is projected at 10.57% at the end of FY 2019. Our target remains 5.5%. Is staff’s position that this is an appropriate level for this fund balance?


Unassigned/uncommitted fund balance has now increased from 9% of General Fund Revenues at the end of FY 2017, to 10.28% at the end of FY 2018 to a projection of 10.57% at the end of FY 2019. Our target remains 5.5%. Is staff’s position that this is an appropriate level for this fund balance? If so, does staff believe the target ratio should be adjusted? (Mayor Wilson)


The City’s General Fund Balance includes different components:  Spendable and Unspendable or Reserved.  Within the Spendable portion there are three different levels:  Spendable, Committed and Assigned.  Unspendable Fund Balance is City reserves which cannot be used for any other purpose.  Either the funds are already obligated for a specific purpose, such as encumbered for an authorized contract or the resources are not in a spendable form, such as inventory.

Spendable Fund Balance are resources that City Council can use to fund unforeseen, unbudgeted, one-time needs.  Within Spendable Fund Balance, Committed and Assigned funds have been designated for a specific intended purpose, such as natural disasters, incomplete projects or future capital budgets.  Although these are the stated intentions, Committed and Assigned fund balance can be used for any purpose, should circumstances change.  The remaining Spendable Fund Balance has no designated purpose and is available for one-time uses.

Prior to issuing debt for capital projects, the City obtains ratings from rating agencies (Moody’s and S&P), to provide would-be investors with an independent evaluation of the investment risk.  One of the factors that contributes to this rating is the Spendable General Fund Balance as a percentage of General Fund Revenues, or more simply - how able is the city to withstand a sudden change in economic condition through reliance on reserves.  One of the few negative comments the City received in its ratings analysis related to its low percent of reserves compared to other jurisdictions who hold the highest ratings (AAA/Aaa).

For the past 5 years, a deliberate effort has been in place to raise the Spendable Fund Balance ratio from 10.1 percent in 2013, when the Uncommitted/Unassigned ratio was 5.6 percent, to today’s ratio of 16.4 percent, with an Uncommitted/Unassigned ratio of 10.28 percent.  By returning surplus revenues and unspent budget authority to Fund Balance, the City has been able to address the concerns of the rating agencies and improve the overall Spendable Fund Balance ratio.  Identifying the surplus funds as Uncommitted/Unassigned has helped achieve this goal while minimizing the volatility of identifying future spending designations, appropriating those designations and then replenishing Fund Balance each year.  The chart below comes from the Statement of Estimated Fund Balance section beginning on page 9-1 of the FY 2020 Proposed Operating Budget.

The current 5.5% target provides City Council with the maximum flexibility to respond as needed to unexpected resource requirements, while maintaining an overall fund balance policy.  It should be noted that City Council has several policies in place to ensure an appropriate level of fund balance, including limitations on the number of years that fund balance can be used to offset spending and the number of votes required to use fund balance (a super majority).  Staff does not recommend making any changes to the targets for Fund Balance at this time, but to monitor the situation for a few more years before considering raising the target percentage.

BM 57 - Object 1

Printable Version

Back to Budget Memo archive index

© 1995–2022 City of Alexandria, VA and othersPrivacy & LegalFOIA Requests