Communication from the Office of the Comptroller relating to a minimum fund balance policy.

Summary

This communication from the Office of the Comptroller discusses the strategic considerations and potential benefits of adopting a formal fund balance policy for the City of Milwaukee. The presentation outlines the purpose of such a policy, which includes demonstrating financial security, aligning with best practices, mitigating risks, ensuring stable tax rates, and meeting bond rating agency expectations. It presents two sample policies with different minimum balance requirements (16.7% and 10% of General Fund revenues) and details how these would have impacted the 2026 budget by limiting Tax Stabilization Fund (TSF) withdrawals. Challenges include current ordinance restrictions on TSF use for overruns or shortfalls, and opportunities involve exploring the elimination or revision of the TSF and the Public Debt Amortization Fund (PDAF) to immediately improve the city's reported fund balance. The Comptroller recommends adopting a policy but suggests it's premature until limitations on fund balance use are addressed, emphasizing that adherence to any adopted policy is crucial for bond rating agencies.

Citizen Impact

Adopting a fund balance policy could lead to more stable tax rates and better financial planning, potentially avoiding emergency budget cuts or unexpected revenue shortfalls that could impact city services. It also signals financial health to bond rating agencies, which can influence future borrowing costs.

Confidence

high