By Harry Gatjens
Did you know the City of Edmonds has a $2 million rainy-day fund?
It’s prudent for cities to put a little money aside in the event of an emergency, but in the case of our city, almost no one seems to know about our fund.
As you know if you’ve been following my occasional column on My Edmonds News, I’m a fairly new member of the Levy Committee (examining whether the City needs to have a levy for its future expenses), and in the course of our study, questions came up about our City’s reserve funds.
How much is there? Where is it recorded? What it is for?
Well, it turns out the City has two different reserve amounts. The first is a normal operating cash reserve to handle shortfalls in ready cash. Think of this as keeping a larger-than-needed amount in your checking account, so if a paycheck or rental income is late, you don’t end up overdrawn. The standard operating reserve amount for cities recommended by the Government Financial Officers Association (GFOA) is one to two months’ normal expenditures. In the case of Edmonds, one month’s expenditures are kept in reserve.
The second reserve fund is the emergency fund, set aside in the event of a catastrophic event. The balance in this account is presently $1,927,600. It is not for use in financial emergencies, but rather for acts of nature such as earthquake, flood, or other natural disasters.
So, where is that fund? Is it real money, or only on paper? Does it grow or earn interest?
The money in the emergency fund is real, but it’s not kept in its own separate account. It is invested, together with all of the other excess funds managed by the city, in a state-run investment pool. The emergency fund itself doesn’t grow, because the City Council has set the reserve at a specific amount. Any earnings made by investing this amount are paid into the general fund for use by the city as regular income for normal expenses; the emergency fund stays consistently at $1,927,600. It is called a “set-aside,” and the income it provides for the City reduces the amount of tax the City needs to collect from its citizens.
Would it be better to increase the emergency fund by keeping each year’s interest in the fund so total investment earnings grow each year?
That’s a matter of opinion. If you’d like to share yours, please do. You can email your City Council member with your ideas, or maybe come share them with me at “Coffee with Citizen Harry,” this Thursday morning at the Chanterelle restaurant, 9:30 a.m.
If I know more about what you’re thinking, then I can do a better job for all of us as a volunteer on the Levy Committee. The coffee at Chanterelle is good, and if you’re there by 9:30, the first cup is free.