On page one of the local section in Sunday’s edition of the Orange County Register, three writers examine the state of each of the budgets for the 34 cities in Orange County.
Astonishingly, Cypress is rated as on the brink of fiscal collapse:
- Two were in razor-thin territory, with reserves below 1 percent of annual expenses: Cypress and Placentia.
Orange County Breeze immediately asked for a response from Richard Storey, Finance Director for the City of Cypress.
Residents of Cypress should hold off on tar and feathers, torches and pitchforks.
Cypress is in much better shape than painted in the article.
Mr. Storey’s emailed reply:
As follow-up, the article was based on taking the general fund unassigned fund balance at June 30, 2011 and comparing this amount to the General Fund expenditures for FY 2010-11. Unfortunately, the OC Register did not recognize that the City of Cypress “assigns/commits” a portion of its fund balance (25% of its operating expenses) for a contingency/unforeseen situations/ stabilization agreement. Under GASB 54, the City reports its fund balance by self-imposed constraints to show how fund balance amounts will ultimately be expended. Since the City Council formally approved the 25% contingency it is recorded under committed fund balance not unassigned. The Notes in the CAFR (page 78) identify this fact.
It is also interesting that in an e-mail sent July 14 (Saturday) the OC Register indicated that “(NOTE ON THE TERM ‘RESERVES!’ in nearly every case, we’re talking about general fund unassigned fund balance. But a couple of cities had a very small unassigned fund balance but sizeable reserve contingency funds — Huntington Beach, Newport Beach and Irvine come most immediately to mind. In these cases, we added the contingency to the unassigned fund balance to reach the “reserve” number.)”. However they did not include Cypress’ committed amount.
In response to this article, the City is far from financial doom:
The General Fund also has assigned $1.6 million in cash to a Business Relocation Stabilization Account
These two designations of the General Fund’s fund balance would equal over 30% reserve.
The City also maintains general fund monies in the capital projects fund (a 30% emergency contingency of $7.2 million)
In addition, the City’s infrastructure fund is an assignment of general fund monies and includes $8+ million.
Finally, the most important point for FY 2010-11:
- Our General Fund revenues/sources were $30 Million
- Our General Fund operating expenses and basic capital expenses were $25+ Million
- Leaving the balance available for assignment annually of $4+ million.
As indicated in their Saturday e-mail they compare expenditures with the unassigned fund balance as a “good way to get an idea of how liquid y’all are”. It seems that looking at the General Fund cash ($27,304,783) compared to accounts payable ($2,433,809) would indicate better what is the City’s liquidity. By using the “unassigned” fund balance, the article is criticizing the City for having a financial plan which commits, assigns and restricts funds for specific purposes.
Stated simply, the City tags general fund money for particular purposes — but that doesn’t spend the money.
Imagine all the money in the general fund stored in a big cookie jar. At the beginning of each fiscal year, as part of the budget process, all that money is dumped out of the big cookie jar and divvied up among smaller jars with labels like “capital improvement” and “business relocation.”
One of those smaller jars is even labeled “Contingency” — but the Register reporters did not include that in their calculation of reserve funds, as was done for other cities.
Some also goes back in the big cookie jar as “unassigned” — the Register reporters’ “razor-thin territory.”
The City can still reach into any of the smaller cookie jars if it needs to. The money hasn’t been spent, just divided up. And the contigency funds are not committed in any case.
File photo by C.E.H. Wiedel of Cypress Civic Center.