Portsmouth City Manager Derek K. Allen continues to try to create ways in which the city can better manage its financial state of affairs. This time, he is proposing a resolution calling for maintaining sufficient reserves in the city’s enterprise funds by setting desired or recommended fund balance levels.
“The city of Portsmouth continues to recover financially and to make strides towards building a strong financial future for the city,” Allen said in correspondence to Portsmouth City Council. “There are and there will be many financial demands on the city and if strong financial management does not occur, the possibility of returning to financial distress is a very likely outcome.
“The enterprise funds, if not properly managed, could potentially recover since the city manager and/or city council control the rates for the utilities. However, once the income tax increased funding for our general fund is depleted, there will be no further recovery because the voters will not increase the income tax again anytime in the near future.”
Allen said the purpose of establishing fund balance levels is for everyone to recognize the difference between reserves and funds available for discretionary spending.
Allen suggested balances for the funds, including recommending a reserve of approximately $2 million in the general fund. The June 2016 balance in that fund was approximately $1 million. In the Street C.M. & R. fund, Allen recommends a reserve of $188,495. The June balance was $356,670.65.
In the city’s Insurance Fund, Allen calls for a reserve of approximately $1.75 million. The June 2016 balance in that fund was $64,444.85.
Two of the city’s funds are currently in the red and one of those has more than a $1 million deficit. That is the city’s wastewater fund, with a June 2016 balance deficit of approximately $1 million. Allen recommends maintaining a reserve of $947,859. The water fund shows a deficit of $85,099.42 for June 2016. Allen recommends a reserve of $738,338.
Allen said the resolution does not restrict spending blow the designated fund balance levels but demonstrates a commitment to try and attain those levels of reserve fund balance.
“This policy should not be just for the general fund but for all major funds. This is especially important that we have and demonstrate an ability to maintain these fund balance levels as we see pressure to expand staff, expand services and to grant employee raises,” Allen said. “This commitment will also be helpful as we move to be released from fiscal-watch designation from the auditor of state and as we move to make sure the city is financially stable enough to never return to this designation.”