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The city of San Diego is slated to plug an additional $31.9 million into its depleted emergency reserves, the fruits of a fiscal year 2006 budget that ended with higher-than-expected revenues and lower-than-planned expenditures.
In total, the city closed fiscal year 2006, which ended June 30, with $31.9 million more than was budgeted. The money will be funneled into the city’s emergency reserves, replenishing the $21 million the city had to extract during the tumultuous fiscal year to cover unforeseen legal and consultant fees – many of which were tied to city’s financial crisis and related investigations.
The city’s fund had dipped precipitously low to only 2.5 percent of its annual budget in May. According to a report from the city’s Independent Budget Analyst, the influx will bring the city’s reserves up to $44.8 million, or 4.2 percent of its general budget. The city began fiscal year 2006 with reserves of 3.9 percent.
While reserves are one of the quieter of the city’s financial problems, they are a major measuring stick used by credit agencies to gauge how a municipality would survive a cash-flow shortage or a natural disaster.
This from a story I wrote about the city’s reserves in May:
Credit rating agencies consider reserves of 5 percent average, the blue ribbon committee recommended reserves of 7 percent to 10 percent, and the city’s new chief financial officer wants to get to 8 percent soon.
The IBA’s report says the city’s general fund fared fairly well this year, considering that it was able to increase its reserves during a year with so many unbudgeted expenses – including part of the cost of a $20.3 million private investigation into city finances. The report notes that there are new challenges next year. Read about some of them in a budget analysis I wrote during this year’s budget season.