City Piggy-Banks Money

Creates Emergency Fund

— The city now has a $4 million reserve fund for emergencies.

The City Council voted Tuesday to create the emergency reserve fund, taking it from money formerly earmarked for specific projects.

By The Numbers

Springdale Capital Improvement Program Fund Balance

Reserved money and unreserved balance as of Sept. 30

Don Tyson Interchange — $14.51 million

Johnson Road improvements — $2.50 million

Park land acquisitions — $1.85 million

CID and fitness buildings renovation — $981,507

All other projects — $419,866

Money available for projects — $605,143

Total fund balance $20.87 — million

Source: City Of Springdale

The council voted several years ago to set aside $5 million per year from the city’s Capital Improvement Program fund to pay for the interchange at Don Tyson Parkway and Interstate 540. When city voters approved a bond sale of up to $71 million, that reserved money was freed for other projects.

The reserve money can only be used for operations and maintenance of city infrastructure. All expenditures must be approved by the council.

“This will increase our comfort level to be able to handle whatever comes up,” said Alderman Mike Overton. “This is for unforeseen emergencies.”

The type of emergency could be a drop in tax revenue, similar to what occurred during the economic slowdown, or for the cleanup after a weather-related event, such as the 2009 ice storm that knocked out electricity for up to five days in parts of the city, said Mayor Doug Sprouse.

“This is a true reserve,” Sprouse said. “It’s not just extra cash flow.”

Glen Plumlee, a Springdale resident, said he has no problem with the reserve.

“I think it’s good to have something for a rainy day,” Plumlee said. “Who knows what will happen to us in the future?”

The bond program includes $42.7 million for street improvements. The top project to be funded by the bond sale is the interchange, with an estimated cost of $25 million.

The bonds will be repaid with revenue from a 1 percent sales tax. The tax was first approved by voters in 1993.

The interchange reserve reached $14.9 million by the end of October, according to Wyman Morgan, city director of administration and financial affairs. Even with creation of the new reserve fund, money not committed to projects in the improvement fund will climb by more than $10 million, he said.

“The bond issue created a golden opportunity to start the reserve fund,” Sprouse said.

The idea for a reserve fund was first discussed almost 10 years ago, Overton said. At that time, the council had concerns about cash flow, when large, annual bills would have to be paid.

The city pays insurance on its buildings and vehicles once a year, Morgan said.

“Twice a year, you have three payrolls a month,” Morgan said. “That can be a big expense if you haven’t allowed for it.”

The city has built up its general fund balance in recent years, Morgan said. The general fund has a balance of $5.3 million that is not committed to any bills, he said.

“If we have a cash-flow problem now, it’s because we didn’t move enough of our short-term investments over to our checking account,” Morgan said.

Earlier discussions on the amount to be reserved centered on the general fund budget, Overton said.

“We talked about making it a percentage of the yearly budget or a specific amount,” Overton said. “I didn’t care which.”

The creation didn’t come about until council members looked at the bond program repayments. The first year of bond payments will be $400,000. The income from the city’s 1 percent sales tax, which backs the bonds, is projected to be $10 million in 2012, Morgan said.

If sales tax revenue fell drastically, the payment could be made from the reserve fund.

Alderman Brad Bruns suggested setting the reserve fund at the amount that would cover the bond payment.

“We’re getting all our infrastructure needs from the bond program,” Plumlee said. “I think a reserve is a good use of this money.”

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