City Council Increases Financial Buffers

By CITY OFFICE OF COMMUNICATIONS
December 13, 2011

The Falls Church City Council adopted a resolution last night to increase the City’s fund balance from 12 to 17 percent and to establish a Capital Reserve Fund for the General Fund and the Utility Funds to provide for continued investment in capital infrastructure. 

“These actions are part of the City’s efforts to develop more robust long range financial planning capability,” said Finance Director Richard LaCondrè.   “These fiscal policies are developed to guide both short-term and long-term fiscal strategies.” 

The City Council last adopted fiscal policies in January 2009.  Until FY2008 the City maintained an undesignated fund balance well above the policy target which enabled the City to use that excess funding to support the Capital Improvement Program.  Due to the recent economic downturn and revenue shortfalls, the fund balance was drawn down below policy levels and resulted in a significant curtailment of the Capital Improvement Program.    The new fund balance level of 17 percent represents approximately two months of expenditures. This action will mitigate the impact of revenue shortfalls and economic downturns affecting assessed real estate values and other local tax revenues.

Establishment of a Capital Reserve Fund for the General Fund and the Utility Funds will provide for continued investment in capital infrastructure. The current policy of using surplus fund balance to fund “pay as you go” capital projects makes those projects a lower priority than other items in the operating budget. This new policy establishes a minimum level of effort utilizing both current revenues as well as fund balance appropriations to address both “pay as you go” and debt service funding. This type of policy will also make absorption of new debt service for capital projects less difficult.

For more information, contact CFO Richard LaCondrè rlacondre@fallschurchva.gov or 703-248-5092.