Facing potential budget challenges, El Paso city leaders are preparing to establish when they can tap into one of the city’s reserve funds – the pot of money known as the unrestricted fund balance.
The city doesn’t have formal guidelines outlining when or how it can use the fund – a “rainy day fund” not earmarked for specific purposes. While the city has grown the fund the past decade to about $135.5 million, or 83 operational days, budget policies only state the fund should have enough money to keep the city running for 60 days in case of an emergency.
Now, the city’s top financial officer is recommending that the City Council adopt a policy stating that the fund be used only for emergency expenditures resulting from catastrophic events or in the event of a major economic downturn – or for one-time capital outlay expenditures.
Restricting their use could deter the council from relying on the fund to balance the budget and could lead to tax increases.
“It’s just like your own household, right? You sleep better if you know you have some money stashed away in case of an emergency,” Chief Financial Officer Robert Cortinas told El Paso Matters. “The city is no different. We are a very large organization … so it’s important that we’re maintaining some reserves or some savings in case of emergency.”
The City Council in previous years has dipped into the reserves as a safety net to avoid increasing the tax rate. Cortinas said the policy instead could help ensure that the city is covered if expenses like the cost of utilities and construction rise or important federal grants for things such as public health programs like Women Infants and Children, or WIC are terminated.
But it also opens the door to use it for capital improvement projects such as repairing the Sun Metro bus maintenance facility that was damaged in a February explosion or even contributing the proposed deck plaza over Interstate 10.
The City Council approved using $7.5 million from the unrestricted fund balance to maintain a no-new-revenue tax rate for the current fiscal year, which generates the same amount of property tax revenue as the previous year on the same properties. The City Council in 2024 also approved using $5 million from one pot of money in the fund balance – known as the pay for futures fund – to offset the impact from police and fire pay increases approved in collective bargaining. Cortinas said although it was available, the city didn’t use it because it collected more overall revenue than expected.
The city’s Financial Audit and Oversight Committee on May 8 approved taking the recommended policy to the City Council, which would have the final say. The council is set to take up the proposed policy at its June 10 meeting. The timing is important as the city begins budget workshops in June before adopting its budget and tax rate in August for the 2026 fiscal year that begins Sept. 1.
“There’s no formal policy that the council has adopted in regards to our fund balance, and so it’s something we’ve been wanting to do for a long time – we want to expand it,” Cortinas said.
Area school districts including El Paso, Ysleta, Soccorro and Canutillo have significantly dipped into their rainy day funds in recent years creating deficits that are causing financial constraints and led to issues such as laying off dozens of teachers, offering financial incentives for teachers to resign throughout the city as well as the closing and consolidating schools.
The city’s proposed policy would also set a percentage that the city allocates for its reserves, and would allow for its use so long as it does not drop below a certain level.
Cortinas said the city has come a long way from 2014, when its unrestricted fund balance was at nine days of operational costs, or about $9 million. The fund is now at about $135.5 million – enough to keep the city government operating for 83 days.
State code does not require municipalities to have a reserve fund, but the Government Finance Officers Association recommends a 60-day reserve as best practice, Cortinas said, which is the city’s minimum baseline. A 60-day reserve for the city of El Paso amounts to about $102 million.
The difference in days means the City Council could potentially tap in to about $33 million for use, but Cortinas said he does not recommend that fund be considered outside of emergency purposes.
“The fund balance is exactly that – it’s reserves and savings for emergencies, not for balancing the budget,” Cortinas said. “If we can minimize the impact on taxpayers, and we’re at a level where we can use some of it, sure there’s nothing wrong with that, but not every year. That’s not best practice, and that’s not what the city should be doing year over year.”
Cortinas said the fund should be considered for emergencies that can stem from natural disasters such as the freeze in 2011, where multiple pipes burst in city facilities; financial hardships from something like the COVID-19 pandemic; or responding to a catastrophic event.
The proposed changes come at a time where the city is building several police and fire facilities through the voter-approved $413 million public safety bond and undertaking street repairs and park improvements under the $272.5 million community progress bond.
The city is also planning to expand the convention center, recently buying two buildings across the street from it for $4.8 million. And some city leaders have expressed interest in supporting the deck plaza over Interstate 10 in Downtown El Paso, though not all agree on how to pay for it.
“I think the policy is coming from a good place, where there hasn’t been anything set in stone on how we use that fund in case we have to use it,” said city Rep. Josh Acevedo, chair of the Financial Oversight and Audit Committee. “I think from what the historical thing that they’ve said is that they just kind of used it as needed.”
The recommended changes would maintain a minimum unrestricted fund balance of no less than 17% of operating revenues in the general fund. The city’s general fund, which stands at about $600 million this fiscal year, is mainly made up of property and sales tax dollars and covers operating costs for basic services such as public safety, streets and maintenance, and parks and recreation. The current unrestricted fund balance is about 23% of the general fund.
City Rep. Lily Limón said the city should not consider going below the current 83-day fund balance with financial uncertainty looming.
“I almost feel like in today’s economy, we’re living day to day, and it’s just so fluid that I feel we have no control of it,” Limón said. “So, I’m going to be extremely leery about saying, ‘Oh, take the 23 days and let’s go shopping.’ I’m saying – hold it close – hold it close.”
Acevedo said that while he does not think the city should rely on the fund balance regularly, the City Council may have to consider it again in the upcoming budget cycle.
“I think we’re going to have to do it again (draw down from the fund) this year whether we do a ‘no-new-revenue’ (rate) or not,” Acevedo said of having to offset any potential financial challenges stemming from tariffs and possible loss of federal funding in the upcoming budget cycle.
The other stipulation in the proposed policy is that any use of the fund balance would have to be approved by the City Council, as is currently in the City Charter. At the end of each fiscal year, the city manager would have to present if the reserve falls below the minimum of 60 days, or if it significantly exceeds the 60 day minimum.
The city manager would also have to present a plan on how to reimburse any funds that were used, or in order to meet the minimum 60-day requirement.
The post El Paso’s city government built a financial safety net. When should it be used? appeared first on El Paso Matters.
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