Reserve fund limits city's options

Cape Girardeau has more than $6 million in the bank set aside for a rainy day. But the Emergency Reserve Fund, which is required by city charter, is costing the city in other areas.

"It's not a bad thing, it's just a big sum of money to maintain and keep fully funded," said city manager Doug Leslie.

The money comes from a charter amendment passed in 1996 in the wake of record floods that hit the area in 1993 and 1995. The voter-approved amendment requires Cape Girardeau to keep a sum equal to 15 percent of its total budget on reserve at all times.

Architects of the requirement believed it would allow the city to survive on its own for about two months in the event of a crippling natural disaster.

And it's only meant for the big stuff.

The fund is accessible in the event of an emergency and must be approved unanimously by the city council and the mayor. Emergency is defined as a "condition beyond the control of the city," resulting in a "significant loss of revenue," and is meant to be "narrowly construed."

But few other Missouri cities have such a heavy financial burden on their budget, say city staffers, and feeding the fund has had reverberating consequences.

The fund grows every year as the city budget grows. In the fiscal year starting in July, the city will put $110,140 into the fund.

At the same time, Cape Girardeau has a mere $4,438 available for one-time only costs. That figure is down from about $15,000 the previous year.

"Basically our operating revenues are covering our operating expenses and we don't have anything to provide for capital expenditures out of the general fund," said city finance director John Richbourg.

Both Leslie and Richbourg took pains to explain that they are not making a value judgment on the fund. Having the fund could help the city survive a catastrophe, but it does have consequences, they say.

The money "is competing for other needs in the general fund. It could be additional police or fire personnel or inspection people. Any number of budget needs could be funded," said Leslie.

"It's a bit of a challenge to keep it funded at that 15 percent level because as the budget grows, you've got to add to that."

Cape Girardeau's lack of financial flexibility comes at a time when unexpected costs are piling up at unprecedented rates.

Last year, claims for employee health care rose 23 percent to $2.3 million. Additionally, the passage of Proposition B by voters last November increased the minimum wage of all employees.

That increase will cost the city $65,000 this year. The city will recoup those costs through increased fees at city parks and pools.

"I think the things that impact us cost-wise have been so dramatic and more numerous than you'd hope to ever see and have seriously eroded our margins. We're going to have to see some changes. We can't continue with 15 to 25 percent health-care costs annually, that has to change," Leslie said.

And rightly or wrongly, the city is reliant on sales tax revenue for the lion's share of its budget. This year's receipts from the 1 percent sales tax in Cape Girardeau are expected to be $8.74 million, or about 44 percent of the money budgeted for the city's general fund.

That's a growth of 3.5 percent, which is good, but not great.

"A really good year on sales tax proceeds would help a lot in terms of increasing the cushion," Leslie said.

tgreaney@semissourian.com

335-6611, extension 245