City’s reserve fund reaches minimum levelPublished 5:46pm Saturday, October 26, 2013
FRANKLIN—For the first time since 2009, Franklin’s reserve fund is above the minimum level set by councilors.
City Manager Randy Martin said the decline started that year with the closing of the International Paper Mill and the subsequent downturn in the economy, both locally and nationally.
“Those two things combined to bite into the reserves substantially,” Martin said.
The minimum reserve is set at 15 percent of the city’s annual expenditures, which is approximately $22 million annually. The minimum reserve is approximately $3.3 million. He said that as of the October meeting, he city is about $500,000 over the mark.
“Through good financial management, with our departments being very frugal, and also improved revenues, collections, we have now met and slightly exceeded our minimum policy,” Martin said. “Being roughly half a million dollars over the minimum helps if financial obstacles come up, such as unexpected expenses or even opportunities.”
The rise started in 2011, he said, and by last year the city was approximately $300,000 below the minimum, but over the 2012-2013 fiscal year, the city was able to save approximately $800,000 toward this cushion.
Martin said having the cushion is good for several reasons, the biggest perhaps being in borrowing. A reserve can help pay for smaller projects, so that borrowing isn’t necessary, and it also helps with coming up with matches when applying for grants. Martin said those are criteria that financial institutions use in determining a city’s ability to borrow, and it can lower interest rates.
It also affects credit ratings given out to cities by financial institutions, including Moody’s Investors Service.
Specifically, he said the city got there by refinancing its debt to lower interest costs, frugal spending with its departments, switching auditing firms. Martin also said not to discount the improving economic conditions.
Several industries have located in Franklin over the past few years, which has created construction jobs, and that has helped with taxes on hotels and meals.
“We are starting to see new investment coming into our community,” Martin said, and he added that the construction jobs would be replaced by “longer term employees. We still have challenges, such as the unemployment rate, but the future is looking good.”
He said over the long term, he’d like to see the cushion raised to 20-25 percent of the annual spendings, or approximately $4,400,000 to $5,500,000.
“That’s more common for communities of our size,” Martin said. “And with our resources and budget, that’s where we need to be, but that takes time.”