KFP: Kinston fund balance continues to climb

by David Anderson
Kinston Free Press

Increases in revenue in recent years, along with efforts to control spending, have helped push the city of Kinston’s general fund balance above 20 percent, which is where city officials want to be in terms of having cash reserves on hand.

“We are in a good, healthy fund balance,” Interim Finance Director Catherine Gwynn told the City Council recently. “Being conservative like I am, I would like to see a little more, but I certainly think the council is within the comfortable, healthy fund balance that it needs to be.”

Gwynn announced the city’s general fund balance for the 2011 fiscal year, which ended June 30, stood at 23.18 percent of general fund expenditures.

Cities of similar size to Kinston have general fund balances that are about 40 percent, but Kinston officials feel comfortable with a balance of 20 to 25 percent.

“We do not want our fund balance around 40 percent because we don’t need it to be there,” Mayor B.J. Murphy said. “This is taxpayers’ money, and I’m of the opinion that the taxpayer can spend that other 17 percent better than we can. It does make sense that we hover around 20 to 25 percent, though.”

The general fund is primarily funded by property tax revenue, and supports functions such as public safety and recreation.

The N.C. Local Government Commission recommends municipalities not let their fund balances go below 8 percent, which gives them enough cash to meet one month of expenses.

Councilman and Mayor pro tem Will Barker – who will step down after his term ends this year – said the LGC regularly sends Kinston letters reminding it that N.C. cities of similar size, which have their own electric systems, have fund balances above 40 percent.

“If you’ve got larger than a 25 percent fund balance, I think you’re in a position where you’re holding on to more taxpayer money than you should, absent (saving for) a large project,” Barker said.

In recent years, Kinston’s fund balance has been as low as 10 percent, but it has climbed in the past three years as revenues increased, thanks to a hike in the property tax rate, as well as a countywide property revaluation in 2009, and the addition of major taxpayers to the city’s tax rolls such as Sanderson Farms.

The city has also worked to hold down spending by cutting some positions from the workforce, and delaying major purchases and capital projects, but municipal officials have also added some positions and funded projects such as building two new fire stations.

Gwynn reported that $401,418 will be appropriated from fund balance for the 2012 fiscal year – $170,100 will be used to balance the general fund budget, and the remaining $231,318 will go toward the fire stations.

The city’s budget has also grown significantly in the past few years, from $88.5 million in the 2009 fiscal year to $99 million for 2012.

Barker said personnel costs for salaries and benefits continue to be an issue affecting city spending, especially with health care costs increasing.

He expects it will continue to be difficult to balance the budget, and cautioned against using savings to support major projects.

“You can’t take all this fund balance and start spending it, because it will be needed to balance future budgets,” Barker said.

 

David Anderson can be reached at 252-559-1077 or danderson@freedomenc.com.