Uncertain economic times have caused many Americans to follow the time-honored advice to save for a rainy day.
Uncertain economic times have caused many Americans to follow the time-honored advice to save for a rainy day. Now Ashland's city government is looking to build up its own financial reserves.
But a city of Ashland's effort to put more money into savings could come with painful consequences, such as cuts to services and city staffing levels, as well as tax and fee increases. While average people set aside money in checking and savings accounts, the city of Ashland keeps its financial reserves in the form of contingency funds and ending fund balances.
Contingency funds can be used in a fiscal year for unexpected expenses.
Ending fund balances are not supposed to be spent, but instead are supposed to carry over to the next fiscal year. However, they can be tapped for emergencies.
Ashland Finance Director Lee Tuneberg proposed earlier this month to increase both the city's contingency funds and ending fund balances. The move, which has to be approved by the Ashland City Council, would shape the entire budget for the coming fiscal year that begins on July 1.
"I think in theory I support it," Councilor Eric Navickas said. "Everyone is learning this lesson the hard way to put money aside in case of crisis. We're seeing this on a personal financial level. But I'm reluctant to immediately increase ending fund balances and contingency funds."
Navickas said while increasing the city government's savings is important for financial security, it could lead to service cuts and tax increases. He said he would rather see the savings increases phased in over several years.
The Ashland City Council set a goal in 2009 to improve the city's fiscal health. Tuneberg's recommendation to increase the city's savings rate is part of meeting that goal. The city has had trouble in recent years meeting the targets it sets for itself regarding the amount of money to keep in ending fund balances. Tuneberg has warned for years that ending fund balances are not only dipping below their target amounts, but that without changes, the balances will fall into the red in the future.
"We've all seen the projections for most of the funds going negative," Councilor Russ Silbiger said. "I've been a very strong advocate that ending fund balances are met and that we build a budget around that. We've not always done that. To me it's a necessity to meet those numbers."
Most recently during the spring 2009 budgeting process for the current fiscal year, the City Council and Ashland Citizens' Budget Committee allowed some ending fund balances to go below their target amounts.
Even eating into savings didn't stop the council and committee from having to cut city staff and increase property taxes to make up for a budget shortfall.
Silbiger said Navickas' idea to phase in the proposed increases in the city's saving rate is worth exploring.
"I certainly don't want to raise taxes and fees if we can help it," Silbiger said. "We've cut services and staff down. The room to maneuver is getting smaller and smaller."
Until the Ashland Finance Department comes back to the City Council with figures for the coming fiscal year's proposed budget, councilors won't know what the real impact of increasing contingency funds and ending fund balances would be, Silbiger said.
At Ashland Fire & Rescue, Fire Chief John Karns said he can see both the pros and cons of the city boosting its savings.
He is not only the fire chief but the city's emergency manager. In the event of a disaster, he would help the city recover and rebuild its infrastructure.
Oregon budget law allows the city to use money in ending fund balances to deal with disasters.
"We do have a need for a larger budget at the fire department, but the city has a need to build up its ending fund balances," Karns said.
Two years ago, the fire department lost its fire inspector to budget cuts. In 2009, the department only avoided losing three more employees because the Citizens' Budget Committee and City Council agreed to raise property taxes.
The fire department has worked to bring in more revenues through steps like raising ambulance fees and starting a fee-based business inspection program run by the fire marshall and firefighters.
For the coming fiscal year, Karns plans to ask city officials to restore the fire inspector position.
But even though the fire department is bringing in more money, its chances of getting its fire inspector back are reduced if the city diverts more money into savings.
Karns said he supports the idea of the city building up its ending fund balances, but is waiting to see what the impacts might be.
"It's going to be a balancing act," he said.
Staff writer Vickie Aldous can be reached at 479-8199 or email@example.com.