IF CITY RESERVE FUND ISN'T RIGHT, CHANGE IT

Certainly, city leaders such as council members Richard Eggimann and Jay Purcell must keep close watch on Cape Girardeau's financial stability.

So they were well within their rights to raise a question about how the city keeps its emergency reserve fund.

There's some cause for concern. The city was briefly out of compliance last year with its own charter's provision that 15 percent of the total city operating budget be in the fund.

That situation has been corrected. Currently, the city has $4.9 million of the $32.8 million operating budget in reserve.

But the way city finance folks keep the fund is a little different than the way most of us would do it.

Eggimann and Purcell make the point that most reserve funds are pots of money set aside in separate accounts for rainy days. For the city, a rainy day would be when the council declared a state of emergency, most likely due to a natural disaster.

The city's reserve fund isn't all in cash, city manager Michael Miller explains. Some is anticipated state and federal revenue. And finance director John Richbourg says some of these emergency funds flow in and out of city coffers.

An annual report explains where the reserve money is available in each of the city's funds. Taken together, the total comes out to that 15 percent unencumbered balance the city would use in a crisis.

Eggimann observed during last week's council meeting that, if his emergency money were combined with the rest of personal funds, he might be tempted to spend it. He recommends building up a separate cash reserve a half-percent at a time.

Our city's finance staff should be more disciplined than to spend the reserves. The city's legal counsel hasn't found any problems with the current charter interpretation. And Miller, the city manager, says the coming budget year is going to be extremely tight -- not a good time to create a separate fund.

And perhaps the revolving nature of the emergency fund is what allows it to be at a very generous 15 percent of operating expenses. By comparison, the state requires school districts to have only 3 percent of their operating budgets in reserve, though 10 percent is recommended.

But if Eggimann and Purcell aren't satisfied, they need to look past percentages to simple addition. That math would decide whether they have enough votes to change the city's handling of reserve funds to the way they'd like it to be.

Unless they're willing to make such a move, there isn't much use complaining about the way the reserves are kept.