Minnesota Cities Magazine
More from Jul-Aug 2016 issue

Ask LMC: Fund Balance Recommendations from the OSA

Illustration showing tall stacks of gold coinsCity Finances
Q: How big should the city’s fund balance be?
LMC: The Office of the State Auditor (OSA) offers two criteria for cities to consider when establishing a fund balance policy and assigning fund balance dollars. The first is that the unrestricted fund balance in the general fund and any special revenue funds be equal to 35 to 50 percent of general fund operating revenues. Cities may set aside a portion of their fund balance as a rainy day fund to help them through emergencies like cuts to state aids or natural disasters. This is similar to families aiming to set aside enough funds to cover three months’ worth of bills should household income drop due to illness or unemployment.

The second OSA criterion is that the unrestricted fund balance should be no less than five months’ of operating expenditures. Cities receive their two largest sources of revenue—the property tax and state aid distributions—twice each year. Like individuals and businesses, cities have monthly bills and expenditure needs. Fund balances are used for day-to-day cash flow for the five to six months of city operations until the next property tax and state aid distributions. The full document outlining the OSA position is available at http://bit.ly/1TLxo6j. For more information, read the League resources on fund balances at www.lmc.org/fundbalance101 and www.lmc.org/fundbalancepolicy.

Woman looking through binder of papersData Practices
Q: Are city employees entitled to view their employment files?
LMC: Under the Minnesota Government Data Practices Act, an employee can review information about him- or herself once every six months (unless a dispute is pending or additional data is collected). The exception would be any data that is classified as confidential, such as possible complaint data that may name another employee. A city may require the employee to pay the actual costs of making copies, but often cities do not charge employees for copies of their own files. For more information, read the LMC information memo at www.lmc.org/personnelfiles.

Q: When is the last day to create and provide notice of a ballot question for the November general election?
LMC: This year, it is Aug. 26, 2016. The city clerk must provide written notice to the county auditor at least 74 days before every municipal election. The notice must include the date of the election, the offices to be voted on, and the title and language for each ballot question. The Office of the Secretary of State’s website includes example ballots at http://bit.ly/1U4mBqA. State law governs whether a city can hold a local election on a particular topic. For statutory cities, state law explicitly gives local voters the authority to vote on certain topics. Without specific legislative authority, city councils may not hold a special election. For more on this topic, read the LMC information memo at www.lmc.org/specialelections.

Illustration of a tornado with the words Safety
Q: Can a city hall be designated as a storm shelter?
LMC: To be labeled a storm shelter, certain criteria in Minnesota Rules, chapter 1370 must be met. Check with the city’s fire chief to find out whether the building meets the criteria in Minnesota Rules, chapter 1370.

Some cities use a label such as “Severe Weather Shelter” because their building does not meet the definition of storm shelter under the rules. Even if city hall doesn’t meet the criteria, it is better than the alternatives (e.g., mobile homes, campers, tents). If the rating is made clear to those who might use the city’s building in poor weather, then potential liability is minimized. Read the criteria at http://bit.ly/1TpgbQG.

Got questions for LMC?
Send your questions to choffacker@lmc.org.

Read the July-August 2016 issue of Minnesota Cities magazine

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