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On April 15, Karina Brasgalla from Economic and International Development made a presentation to City Council recommending a contribution of $35 million toward the construction of a Deck Plaza over Interstate 10.
She suggested the City could draw from capital assets, the Texas Economic Development Fund, or a general obligation bond to be put to the voters.
But now we learn there may be a more nefarious solution: Raid the fund balance!
The City’s unrestricted fund balance is the so called rainy-day fund that is intended to be used for emergencies and critical budgetary shortfalls. The Government Finance Officers Association recommends that taxing entities maintain a minimum of 60 days of operating funds in reserve.
When Joyce Wilson left her position as City Manager in 2014, the City’s unrestricted fund balance had been depleted to only 9 days, but thanks to staff efforts over the last several years, it now stands at a healthy 83 days, corresponding to $135,546,670 or 22.6% of the General Fund Budget.
This reserve cushions the City against financial shocks, protects its excellent bond rating, and reinforces business confidence in the fiscal health of our municipality.
But item 16 of the agenda for this coming Tuesday calls for creating a new unrestricted fund balance policy that would set the minimum threshold at 17% of the General Fund Budget, or $101,937,978 in current terms.
Obviously, this change sets the stage for City Council to raid the fund balance to the tune of $33,626,692, which is the difference between 22.6% and 17% of the General Fund Budget.
That figure is very close to the $35 million the City wants to commit to the Deck Plaza project. What a bizarre coincidence!
Just in case anyone thinks we are making this up, page 12 of Tuesday’s presentation specifically states the unrestricted fund balance may “provide resources for one-time capital outlay expenditures” in addition to addressing emergencies or budget shortfalls.
Given that the City is just about to begin its series of annual budget workshops and, so far, there has been no clear indication of where it is going to find $35 million, raiding the unrestricted fund balance will be the obvious strategy.
We predict that City Manager Mack and CFO Cortinas will not recommend expending money from this reserve for capital outlays, yet the language of the proposed revisions to City policy specifically authorizes precisely that.
City Council will pounce on this fund like mice converging on a slice of cheese!
If the City insists upon looting $33.6 million from its own rainy-day fund, they should use it to lower our property tax (as the Mayor promised) or earmark it for streets.
But that is not going to happen.
We feel pretty certain that one or more members of City Council (probably Alejandra Chavez of District 1) will soon make a motion to reallocate $33.6 million from the unrestricted fund balance to the Deck Plaza project, which will run nine figures over budget.
Welcome to the world of Renard Johnson and his financial backers.
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