THE JOURNAL & TOPICS NEWSPAPERS | WEDNESDAY, MARCH 19, 2008
Des Plaines Wants To Keep More Cash On Hand To Avoid Borrowing
Des Plaines City Council's recent decision to increase the General Fund balance requirement may be just the first in a number of hikes in the next few years.
Aldermen earlier this year agreed to increase the minimum amount of money it keeps in reserve as dictated by the city's General Fund. In the 2008 city budget, the General Fund total is $55.8 million. Under a requirement adopted by the city many years ago, 10% of the General Fund must be kept in reserve. This year, however, at the urging of Acting City Manager Jason Bajor, the 10% minimum was increased to 12%. That meant that the city must keep on hand more money within that fund.
According to a Nov. 24, 2007 memorandum written by Bajor, city staff recommended increasing the fund balance minimum to "a target of 15% in successive budget years." The memo explained that in 2007, the General Fund balance was drawn down due to the Aug. 23 storms, land acquisition and late payments received from the state. That, said Bajor, "left the city in the position of having to borrow money and incur additional expenses to cover its financial responsibilities." City Council agreed to borrow $5.5 million which it was able to pay back within a short period of time.
Bajor told aldermen in the November memo that increasing the minimum requirement may help improve the city's bond rating which will be helpful when the time comes to borrow large sums of money to pay for the building of new police and fire stations. A better bond rating translates into more favorable interest rates.
"This point is especially relevant given the City Council's consensus decision to move forward with the public safety facility projects that could total over $80 million during the life of the debt," Bajor wrote.
Increasing the city's 2008 General Fund requirement from 10% to 12% would call for an additional $1.08 million which would increase the total balance requirement from $5.53 million to $6.64 million.
That money would likely come from local property owners in the form of real estate taxes.