During a recent government meeting, the finance chair emphasized the importance of understanding the implications of a deficit budget and the distinction between recurring and nonrecurring costs. The chair noted that the municipality is currently facing a projected deficit of $2.5 million, primarily driven by increased expenditures outpacing revenue growth.

The meeting included a presentation to Moody's for a bond rating reevaluation, with results expected in the next two weeks. The finance chair explained the difference between two types of fund balance calculations: the Generally Accepted Accounting Principles (GAAP) fund balance, which is used for the Moody's presentation, and the budgetary fund balance, which is more relevant for forecasting and policy-making. The current goal for the budgetary fund balance is set at 16.7%, with an internal target of 25%.

Discussion centered around the anticipated slowdown in revenue from the public safety sales tax due to lower interest and inflation rates. The general fund is expected to see a revenue increase of over $1 million, but expenditures are projected to rise by more than $3.7 million. This imbalance is expected to reduce the fund balance percentage from 29% to 25%.

The board deliberated on strategies to address the deficit, including potentially reallocating funds from the public safety sales tax to alleviate pressure on the general fund. Concerns were raised about the implications of such a move, particularly regarding future capital projects and the need for a stable fund balance to maintain a good bond rating over the long term.

A proposal was made to transfer $1 million from the public safety sales tax to the general fund, which would provide a buffer while still maintaining a healthy fund balance. The meeting concluded with a reminder that any decisions made would impact the fund balance, and the board is committed to not falling below the established financial policy thresholds. Further discussions will continue regarding potential fee increases that could also affect the fund balance moving forward.