City considers setting up contingency fund
September 17, 2013
By Peter Clark
City Finance Director Diane Marcotte introduced plans for a city contingency fund during the Aug. 5 regular City Council meeting.
Previously discussed during Marcotte’s presentations to the council as a part of new financial policies to explore, she said a contingency fund could help prepare for major unexpected expenses as well as improve the city’s bond rating.
The introduction for the agenda bill explains the motivation behind the idea.
The established policies, “demonstrate to the public, the credit rating industry and prospective investors the city’s commitment to sound financial management and fiscal integrity,” it reads. “It is the staff’s recommendation that a component of maintaining a strong financial condition is the creation of a contingency fund.”
According to a summary, the fund would provide the city financial flexibility in the face of emergencies or sudden, unbudgeted needs without creating a large impact in services for citizens.
“A contingency fund is set aside for specific emergencies or unforeseen events compared to the operating reserve which ensures adequate cash flow for the day-to-day operations,” it reads. “It provides an external measure of financial strength to outside agencies and demonstrates the city’s commitment to a formalized financial reserve policy.”
In previous positions with other municipalities, Marcotte said she experienced massive utility crises, in which a contingency fund proved vital.
Beyond that, she explained how it was good financial policy to enact a fund in order to strengthen the city’s credit rating.
“Part of it is demonstrating setting the money aside in a contingency fund, rather than just having it there,” she said.
The council referred it to the Services & Safety Committee, which reviewed it during a Sept. 5 meeting, and was expected to return it to the full council Sept. 16.