By Greg Ellison
(March 25, 2021) The Berlin Town Council voted unanimously this week to approve a previously rejected general fund reserve policy.
Finance Director Natalie Saleh said no additional changes or adjustments were made to a draft version of the reserve policy discussed in detail during the mayor and Council meeting on March 8.
“No suggestions or questions were received,” she said.
Saleh said after the reserve policy was shot down last year by the council, the proposal was streamlined for FY22.
Employed as a benchmark, but not legally required, the reserve policy had been recommended by auditors PKS & Company and the Government Finance Officers Association.
Saleh previously explained the reserve policy would ensure the continuation of essential services should an emergency situation occur and cover losses that might be incurred in the general fund.
The policy states that reserve balances would be monitored to hedge against service disruptions for town residents.
In addition to improving bond ratings for Berlin, the reserve policy could also be deployed to provide sufficient cash flow to address revenue or expenditure fluctuations.
Policy guidelines recommend maintaining a $250,000 sum in the general fund to offset unanticipated costs from natural disasters or man-made emergencies.
In terms of debt service, the reserve policy proposes fund balances should be on par with related principal and interest charges.
Saleh reported that reserve policy debt service requirements would be about $310,000 for FY22.
Looking at assigned fund balance (committed to specific purposes), the reserve funding would need to retain 20 percent of the general fund operating budget to function as a stabilizing measure. That 20 percent would be about $1.1 million, Saleh said.
The reserve policy also includes $100,000 to finance large scale infrastructure projects or equipment.
Saleh previously told the mayor and council reserve fund totals are not budgeted but rather established as benchmarks to avoid tax increases or foregoing capital projects.
Mayor Zack Tyndall previously stated the immediate goal would be earmarking $1.1 million to provide budget stabilization.