The Hicks-Hudson administration left $3 million in Toledo's general fund at the end of 2016 hoping it would help the city get a better bond rating and save with lower interest rates, the city's law director told city council Tuesday in a written statement.
Council President Steven Steel on Aug. 14 said the city closed the books on 2016 with a $3 million transfer from its capital improvement fund to its general fund. He questioned if the move was necessary and said it should be moved back.
The transfer increased the general fund balance to a higher-than-needed amount, he said.
During an Aug. 14 committee hearing, acting Finance Director Peter Rancatore told Mr. Steel the transfer was made because the general fund balance "was rather low," but he acknowledged the fund balance would have still been in the black without that $3 million. He stopped his explanation when Chief of Staff Mark Sobczak approached the podium to speak privately with him. Mr. Rancatore then told councilmen they would get a written explanation.
City Law Director Adam Loukx on Tuesday -- 15 days after the councilman's question -- said the city has attempted for years to "improve its overall financial picture by creating a reserve and improving its [general fund] balance."
The Hicks-Hudson administration was authorized last year to transfer up to $11 million from the capital improvements budget to the general fund. The city has made such transfers since 2010 when voters approved granting that ability so the city could use money generally meant for things like street repair and use it for things like police and firefighter salaries.
"Fortunately, increased revenues and decreased costs as compared to projections reduced need for the transfer in the full amount authorized," Mr. Loukx said. "By the time it was recognized that 2016 was, from a fiscal standpoint, more positive than predicted, $9 million had been transferred pursuant to the authorization of the annual appropriation. Six million of that amount was transferred back to the [capital improvement fund] during the closeout process."
He said the law did not require the city to reimburse the capital improvement fund.
Additionally, 50 percent of any money left in the general fund at the end of the year must be moved into the city's rainy day fund, Mr. Loukx said.
The city's 2016 Comprehensive Annual Financial Report showed the general fund balance was $15,754,000 at end of 2016. Of that, $1,158,000 was listed as "nonspendable;" $3,814,000 was listed as "restricted;" $4,754,000 was listed as "committed," which means it is the city's so-called rainy day fund money. That left $6,028,000 as unassigned.
That unassigned amount included the $3 million.
The city has a $700,000 "appropriated deficit" for 2017, which would be addressed with the carry-over positive balance from 2016.
Mr. Steel Tuesday said Mr. Loukx's letter to council "adequately explains" why the administration made the transfer.
"I would still like to see no [capital improvement fund] transfer," he said.
Mr. Steel said he has written legislation asking a majority of council to move the money back into the capital improvements fund.
