The rainy day fund, money to be used during a time when the city's revenue decreases so normal operations can continue, is part of the general reserve fund balance. It was started in 2020 with money that would have gone to capital improvement projects because the council predicted (correctly) that revenue would decrease because of the "unknown" of the pandemic.
The pandemic is not over and the economy is not healthy.
Looking at the highest inflation in four decades, gasoline close to $7 a gallon and another surge of COVID, most Americans are battening down the hatches. They are limiting expenses because costs are going up but the paycheck remains the same (if they're lucky).
Cities should also batten down the hatches for the same reasons.
Current 12-month projections indicate a net $1.7 million increase in city revenue, and this amount was transferred to the capital improvement program (CIP) fund recently. Projections inherently involve uncertainty.
In May, Mark Zandi, chief economist of Moody's Analytics, said he puts the odds of a U.S. recession in the next 12 months at "one in three" and "even odds over the next few years."
At a budget workshop May 31, the council discussed how to allocate the $1.7 million to their priority capital improvement projects, which includes Century House repairs.
Century House has been closed to the public for eight years. Residents aren't able to use the facility and the property continues to deteriorate. The $1.7 million recommended by staff for the project, which would not touch the reserves, would only slow deterioration of the 150-year-old building, not allow it to open.
Brown proposed moving $2 million from the general fund reserve to fully fund the project so it can be reopened.
The general fund reserve is projected to be 0.7% over the recommended maximum of 30% of the general fund operating expenditures. Arkin asked about moving 1%, or roughly $1.2 million, from the reserve to reduce the fund to under the maximum.
"Being a fiscally prudent city, we would not recommend (taking 1% from the reserves) because it's so close to the 30% and we haven't experienced the actual year yet," said Mahim Shah, the city's interim finance director. "It's so close to the 30%, we would not be recommending something like that."
Brown said 30% seems "really excessive."
"We are staring down at a recession, there is no doubt about that," Shah said. "At this point I do not feel (30%) is excessive."
Since the rainy day fund is going to be at zero in a few years, when all the funds are transferred back to the CIP fund over a three-year period, it should not be included in the reserve total. Without this money, the projected general fund reserve balance is 24.3% of operating costs, below the recommended target of 25%.
Going against the recommendation of the city staff and dismissing concerns of councilmembers Jack Balch and Kathy Narum, the council majority voted to move $2 million out of the rainy day fund and put it -- and $1 million redirected from another project -- to fully fund the $4.7 million necessary to reopen Century House.
This is the same council majority that earlier this year voted in a lesser district election map that the Weekly's editorial board speculated was to keep Balch from running against Testa this November.
With the bleak economic forecast, it is not fiscally responsible to take $2 million out of the rainy day fund for a non-necessity.
A vote Tuesday night will make the $2 million transfer official. If you agree this is not the right time, contact the council majority.
When Narum tried to explain the risk of taking money from reserves, Brown said she is "confident this economy is going to be pretty good for Pleasanton."
She's optimistic. Everyone else is grabbing umbrellas and heading to the hatches.
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