Money’s tight all over in Michigan these days, but it appears Oxford’s local governments still have plenty of cash in their fund balances.
It seems all of Oxford’s governments? general funds have healthy fund balances and as a result, different entities are using their extra money in different ways.
Some are putting their funds toward long, overdue projects. Some are giving their residents tax cuts.
Some are replacing old equipment.
And some are holding on to their money in anticipation of tougher times ahead.
According to Rana Emmons, a partner at the Plymouth-based Post, Smythe, Lutz and Ziel, Certified Public Accountants, as a ‘general rule of thumb? municipalities were advised to keep fund balances equal to about 15 percent of the budgeted expenditures for the following year.
‘It was used as an indicator of the health of the municipality ? how long could you pay your expenditures if you started losing sources of funds,? she explained. ‘It’s like their savings account.?
But in these dire economic times when municipalities are dealing with cuts in state revenue-sharing funds and decreasing local tax revenues as property values decline, there is no 15-percent rule of thumb anymore.
‘Right now, those rules are kind of out the window,? said Emmons, who’s firm audits Oxford Township’s books. ‘All the rules have changed with the current economic situation.?
‘I have colleagues in other firms that are saying the same thing,? she noted.
Now, the level of fund balance recommended ‘really is dependent on the situation.?
‘It really depends on the health and the size of the municipality (as to) how much they should keep in fund balance and also, what projects do they have on the drawing board for next year or even the next five years,? Emmons said.
If a municipality’s planning to build a new hall, fire station or any major capital project, Emmons said, ‘Then they need to have extra in their fund balance.?
How a government chooses to spend its general fund’s unreserved fund balance (i.e. monies with no outside, third-party restrictions on its use) is entirely up to its governing board.
‘It’s up to them to decide how much (fund balance) is enough,? Emmons noted. ‘If we (the CPAs) think it’s not enough, that’s when we start to get concerned.?
At that point, a CPA firm will usually start advising a municipality on a course of action to rebuild its fund balance, but again approval of such measures is up to the governing board.
According to Emmons, municipalities are ‘just starting to? dip into their fund balances to make up for decreased state and local revenues.
‘I think it will be more prevalent in 2010 and maybe even 2011,? she said. ‘I think a lot of municipalities will be eating into their fund balance in 2010.?
Emmons indicated the big ‘judgment call? among municipalities right now is how they’re going to use or not use their fund balance.
‘That’s what leadership is ? getting through the tough times,? she said. ‘I’mkeeping my fingers crossed here that they all do the right thing.?
What follows is a breakdown of the size of each government’s fund balance and officials? plans for the money.
Oxford Township
As of Dec. 31, 2008, the township is sitting on an audited fund balance of $2,163,779.
Considering the township’s general fund budget for 2009 is approximately $1.7 million, the municipality theoretically has enough in its fund balance to operate at its current levels for about 15 months without taking in any additional revenue.
However, back in April, township officials decided they wanted to maintain 25 percent of that as an unreserved fund balance, which amounts to $540,945.
Since then, they’ve allocated monies above that 25 percent for things such as roads and safety paths.
The township has already allocated $150,000 for road paving projects on W. Drahner, Ray and Oakwood roads.
Officials have also designated $380,000 for the construction of two new safety paths along W. Drahner Road.
Last week, the township decided to use approximately $324,000 of its general fund to fix all the road and drainage issues in the Elk View subdivision (see story “Twp. to pay 100 percent for road, drainage fixes in sub”).
Treasurer Joe Ferrari noted the township’s going to need its fund balance in the coming years as the state continues to cut revenue-sharing funds and local tax revenues decrease due to declining property values.
‘Hopefully, this will see us through the lean times,? he said. ‘We’re very fortunate past township boards have done a good job preparing for this.?
Village of Oxford
As of June, the village had a fund balance of $848,000, which represented 32 percent of the municipality’s budgeted general fund expenditures.
However, the municipality is planning to use $327,000 of the fund balance to balance the 2009-10 village budget.
Back in May, council members decided to use some of the excess fund balance to help reduce village residents? July 1 tax bill by 1-mill, which equals $1 for every $1,000 of a property’s taxable value.
This tax cut won’t break the village’s bank account because it will still have a fund balance of $521,000 or 20 percent.
Oxford Community Schools
The school district hasn’t received its audit for the 2008-09 fiscal year, but as of June 30, 2008, it had a fund balance of $4,893,736 or 13 percent of its budgeted expenditures.
‘The auditors always push for 15 percent,? said Tim Loock, assistant superintendent of business and finance. ‘When you get below 10 percent, then you’re looking at some potential cash flow problems throughout the year.?
Keeping a healthy fund balance is very important right now because, as Loock said, there are ‘so many unknowns with the state budget? that ‘we’re really into some unchartered waters.?
Most of the school district’s funding comes from the state in the form of a $7,500 per pupil foundation grant.
But there are fears that’s going to undergo some significant cuts in the near future.
‘A year from now things are going to dramatically change in terms of how schools are being funded,? said Superintendent Dr. William C. Skilling. ‘Right now, they’re anticipating a four-digit reduction in our foundation grant per student, which is a thousand-plus dollars.?
‘As we go into this new school year, the state is short $600 per student to fund schools,? Skilling noted. ‘Of that, $450 to $500 of it will be backfilled with the (federal) stimulus funds. So, that means the districts are going to lose probably in the neighborhood of more like $100 up to $150 (per student) and not feel the full effect of the $600.?
In 2010, that $600 per student shortfall will still be there while the state’s revenues continue to decline, which is going to increase the shortfall to $1,000 or more per pupil.
‘To put that in perspective, for Oxford, that means (a loss of) $4.5 million,? Skilling said.
Oxford Fire Department
The fire department is sitting on two hefty fund balances ? a $611,000 one for its fire/EMS operating budget and a $1,056,268 one for its Advanced Life Support (ALS) budget.
Plans are to use much of the fund balance to replace some older vehicles and as matching funds for some federal grants the department’s applied for.
Recently, the township board gave the department the go-head to solicit bids to replace Engine #1, a 22-year-old pumper truck. Fire Chief Pete Scholz estimated a new truck would cost approximately $500,000.
To pay for it, the department plans to use $400,000 from the fire/EMS fund balance and $100,000 from the ALS fund balance.
‘Every single year in our fire and EMS budget we put money aside for vehicle replacements,? Scholz said. ‘We’ve been trying to be efficient ? save the money up through our normal budget.?
Township and village voters rejected a $375,000 bond proposal in May 2005 to replace the aged pumper truck. It was voted down by 27 votes ? 1,652 to 1,625.
In 2010, the department plans to use some fund balance monies to replace the department’s oldest ambulance, in service since 2002.
Fire officials also plan to use monies from both fund balances as matching funds for the federal grants the department’s applied for.
From the fire and EMS fund balance, the department is expected to set aside $1,248 in order to receive a $24,950 fire prevention grant and $11,652 in the hopes of receiving a $221,398 grant for 30 new oxygen packs.
From the ALS fund balance, the department plans to earmark $100,000 for another federal grant, which could enable the construction of firefighter living quarters at the main station in the village.
Oxford Public Library
Operated through a pair of voter-approved millages with no expiration dates, the library has managed to accrue a fund balance of $1,215,420 on top of its 2009 budget of $1,269,630.
How does the library plan to use its hefty fund balance?
‘We’re looking at a number of things right now that would allow us to invest in capital improvements to the building,? said Library Director Bryan Cloutier.
Given the library opened in 1997, Cloutier indicated building improvements related to items that require replacement or repair due to age may be needed.
‘Once (money) becomes fund balance, it’s primary purpose is to be spent on capital improvements,? he explained. ‘You’re not supposed to use that fund balance to balance your budget every year. Otherwise, you’re considered living beyond your means.?
However, given the tough economic times and the anticipated decrease in tax revenues due to declining property values, the fund balance may be used as a life-preserver to keep library programs and services afloat.
‘In order to then maintain the quality of service that we are able to provide today, I foresee us probably having to tap into the fund balance to balance the budget,? Cloutier said.
Cloutier noted any use of the fund balance would be up to the six-member library board of trustees.
‘It’s entirely up to them if they choose to do that,? he said. ‘They may say reduce the expenditures to live within what is actually collected. But if we want to maintain the level of service we have today, then it is very much foreseeable that we would need to tap into the fund balance to do that.?