
But the financial windfall is over. Three years of spending could reduce the reserves available for emergencies to $116.5 million by the end of this year. This would be below the minimum recommended level of two months of expenses, or $158 million. This $116.5 million estimate by BGR is conservative and may be on the low side. Still, the City’s reserves are declining, and a continuation of this downward trend could return the City to its pre-pandemic history of insufficient reserves.
The public has a keen interest in the City maintaining adequate financial reserves. For one thing, they help avoid cuts to essential services and increases in taxes or fees during financial crises. A reduction in the City’s reserves also could lower its credit rating, driving up taxpayer-funded borrowing costs for capital projects such as street improvements.
For residents concerned about the state of City services, adequate reserves and a realistic picture of City finances are a starting point for improvement. They are essential for coming up with a budget that reflects citizen priorities and ongoing needs, such as street and drainage maintenance.
It was beyond the scope of BGR’s report to conduct a full assessment of the state of the City’s finances. In February, the finance department sounded alarms that “spending is out of control” and “financial instability is imminent.” Meanwhile, the City’s Chief Administrative Office, which develops and manages the budget, does not view the situation as dire or unstable. Having these conflicting internal assessments of whether the City has a major financial problem is itself a major problem. How can the City make effective budget decisions if policymakers cannot agree on what the underlying data are telling them?