General fund ends 2012 with surplus
January 3, 2013
By Christina Corrales-Toy
The city is expected to end 2012 with a sizable surplus in its general fund, after a year in which sales tax and development revenue came in higher than originally forecasted.
“Simplistically, a surplus is excess revenue over expenditures and so any revenue that came in over what we expended for the year is called a surplus,” Finance Director Chris Olson said.
Olson anticipates the city will have about $200,000 in surplus for the year, barring any major snowstorms, or unforeseen events, before mid-January.
A lot of the surplus can be attributed to increased development revenue, Olson said, but higher-than-expected collections from sales tax revenue also played a part.
“When I budgeted sales tax, for the last three years, it’s been pretty flat, and this year it’s definitely up, and also the state-shared sales tax is up,” she said. “So, that’s extra money that came in.”
Initially, Olson actually forecasted a shortfall, but in recent months the numbers have gone in the opposite direction, thanks to what she believes is a slow economic recovery.
“When I budgeted 2012, I budgeted revenue really conservatively, and I didn’t anticipate a recovery this year, and we did see a start of one,” she said.
Stable expenditures in 2012 also contributed to the hefty surplus, Olson said, though she does not expect that to remain the case, as the cost of police and fire contracts are among the expenses likely to increase in the future.
A lot of forecasting is figuring out what is trending, and as a finance director, it is Olson’s job to make an educated guess as to how the revenues and expenditures will pan out for the year.
“Somebody told me once, when you forecast revenue, you’re never right,” she said. “It’s either too high or too low. But you don’t want to be too conservative because nobody will program any projects. If you anticipate too much, then you have to put the brakes on because the revenue is not coming in.”
While the surplus bodes well for the city’s immediate future, Olson cautioned that future forecasts don’t look quite as rosy, with revenues held at a lower increase than the city’s expenditures.
“Something has to be done in the future,” she said. “We are kind of just day-by-day getting through, but we are healthy for the next couple years. It all depends on the recovery and our cost increases.”
At a November meeting, the City Council unanimously voted to move the 2012 surplus into the cumulative reserve fund, paying back $175,000 that was taken from the fund to help finance the move to the new City Hall.
Depending on how the rest of the year shakes out, $175,000 of the surplus will go toward the cumulative reserve fund; any money left over will remain in the general fund balance. If the surplus ends up being less than $175,000, the entire balance will go to the cumulative reserve fund.