Fund balance level is a fiscal red flag for city

The Columbus Consolidated Government couldn't do anything about the economically crippling 2008 recession. Some of the unexpected expenses that have cropped up in various realms of city government probably weren't anybody's fault either. A multi-year series of seven-digit budget overruns in the Sheriff's Department certainly didn't help.

(That might be a separate story, but the budget hole it left is definitely not a separate problem.)

Whatever the various reasons and circumstances, and whoever is or isn't at fault for them, the city's shrinking fund balance is still the city's problem, and one the city is going to have to address.

As Columbus residents learned this week, probably with little surprise, the Consolidated Government's fiscal reserve has fallen below the 60-day level considered a credit dividing line for bond rating firms. The reserve is sort of a rainy day fund -- or until recently in our case a rainy two-month fund -- defined by how long a city can operate on it. At the moment, Columbus isn't rainproof for 60 days any more. (Before the recession, it was good for more than four months.)

Deputy City Manager and longtime finance director Pam Hodge told Columbus Council this week that late expenses in FY 2015 made it necessary for some departments to dip into the piggy bank, and there were insufficient surpluses in other areas of city government to offset those costs.

As Councilor Skip Henderson has observed more than once, "We're paying the rent out of our savings account."

Except that the balance in a private savings account doesn't affect the account holder's credit status. In this case, if the city's bond rating drops, it means it would cost the city -- meaning, of course, the taxpayers -- more to borrow money. It also means, Hodge warned, that if the city government has to tap the reserve much more, it could create a real problem early next year: "We are at the lowest that we can be and still meet payroll."

The upsides to the situation, such as they are, are that (a) this latest drawdown from the fund balance -- about $1.1 million -- was less than half of the city's cost overruns, because revenues were also higher than expected; and (b) since FY 2012 the city has borrowed substantially less from the fund each successive year.

But all that means is that the reserve has been shrinking at a slower rate. It's still shrinking, and apparently it can't shrink much more.

Mayor Teresa Tomlinson, not surprisingly, expressed frustration, saying that despite efforts to cut costs, "to see that the needle will not move in the right direction is disappointing."

City Manager Isaiah Hugley's prognosis, at least for the near future, was hardly encouraging. In the past, he said, "we've been able to look to the reserve to help balance the budget going forward we don't have that cushion anymore."

This story was originally published November 11, 2015 at 4:49 PM with the headline "Fund balance level is a fiscal red flag for city."