The Royal Palm Beach Village Council next week will continue its discussion about whether to tap into about $400,000 of the village’s unassigned funds to balance next year’s budget.
At a meeting last month, Councilman Jeff Hmara asked that the idea be discussed further out of concern about drawing the $400,000 from the $73 million the village has in reserves from the sale of its water utility to the county. That money had been intended to be a perpetual fund, not used for the day-to-day operation of the village.
During the July 5 workshop, village staff explained that due to changes in governmental fund accounting requirements, the previously budgeted 25 percent emergency reserve will not be necessary as long as the unassigned reserve is 25 percent of the year’s general fund budgeted operating expenditures. As a result, the village was able to release about $5 million previously held in reserves, and put it in the five-year capital plan.
The $32 million operating budget also proposes to use a little over $400,000 of the released dollars to balance the budget. That is the item Hmara requested more discussion on at the Aug. 16 council meeting.
“With the unassigned fund balance, we are able to accomplish both what was set out initially as the intended use of the sale price, plus interest accumulated over time, which was to cover the debt service of Commons Park, and also to allow for a transfer of funds every year as a supplemental revenue to support operating funds within the village,” Hmara told the Town-Crier this week.
However, he is concerned about developing a dependency on the unassigned fund in order to continue to avoid raising the tax rate while delivering the same levels of service.
Council members were told last month that they would be able to continue the same levels of service at the current tax rate, including an estimated $400,000 a year for the maintenance of the soon-to-open, 160-acre Royal Palm Beach Commons Park.
“That needs to be maintained, and even though I think the village manager did a really good job of finding some significant offsets by outsourcing [maintenance of] seven smaller parks and saving about $100,000, there is still [a likelihood] that we’re going to have to rely upon some amount of that unassigned fund balance to be able to balance the budget with the increased expenses,” Hmara said.
Council members were relieved to hear during budget discussions that the $400,000 revenue shortfall was considerably less than had been originally estimated because more revenue than expected came in.
“That was certainly good news to us, but every dollar that we take from that unassigned fund balance is a dollar less that we’re going to have available for other applications, emergency situations or whatever it might happen to be,” Hmara said. “Eventually, and this was a greater concern, we are going to wind up eating into the principal.”
Hmara suggested that rather than tap the unassigned fund, the village might consider transferring from the capital fund.
“When I looked at the capital improvement program and the budget for it in 2013, I noticed that there was a plan to carry over almost $800,000 from 2013 to 2014,” he said. “I was told it is where the capital improvement program is funded year after year. It’s similar to a homeowners’ association where you contribute so much to that reserve every year to be able to replace the roads, to be able to replace the roof, and be able to do all those capital improvements.”
Hmara said he is glad to hear that a number of experts believe the economy might be recovering, with home values and the tax base on their way back up, coupled with new opportunities such as Aldi’s planned regional distribution center.
“We are perhaps at a turning place close to the beginning of better times,” he said. “We’re $400,000 away from not having to touch that unassigned fund balance at all.”
Hmara wants to know what the impact would be of carrying over something less than $400,000 in the 2013-14 capital fund rather than the $800,000 budgeted, thereby eliminating the need to reach into the unassigned fund balance at all this year.
“That’s based on an expectation that in a year or two, we’re going to be in a much better financial condition, which means we won’t have to rely on the unassigned fund balance,” he said.
At least one council member would prefer to keep the capital improvement plan the way it is.
“Our capital improvement plan is our commitment to the future development of the village,” Councilwoman Martha Webster said. “If we are going to set forth a five-year capital plan, that plan is only as good as the fact that we have put the money behind it to fund it.”