South Lake Tahoe should lower the amount of reserves it keeps on hand to pay for improvements to its streets, bike paths and recreation center, according to recommendations from outgoing City Manager Tony O'Rourke.
The City Council should change the city's policy on the amount of reserves it requires, from 25 percent to 20 percent of the general fund, according to a five-year financial plan suggested by O'Rourke.
Council members will discuss and possibly approve the proposal, which is an update to a March 2011 financial plan, during a meeting next week.
The purpose of the 25 percent reserve policy is to ensure the city has enough money on hand to protect against unexpected revenue shortfalls. South Lake Tahoe has relied on reserve funding, as well as job cuts and other cost-saving measures, to fill budget gaps since 2008.
Right now, the city has $9.8 million, or 35 percent of its general fund, in unassigned reserves.
"Even by prudent fiscal policy this is excessive," O'Rourke said in the plan. The Government Finance Officers Association recommends governments keep a minimum general fund reserve of 16.6 percent.
O'Rourke recommends gradually reducing the reserve to 20 percent during the next five years and putting $1.8 million from those reserves into a capital improvement fund.
"Over the years the City has failed to keep pace with needed capital investments," O'Rourke said in the plan. "As an example, the City's cost to create complete streets ... exceeds $320 million. In addition, City facilities from the Recreation Center to Fire Stations are dated and dysfunctional, and our rolling stock's average age is 14 years, twice the norm of most cities. Shifting excess General Fund unassigned reserves to a Capital Improvement reserve would enable the City to issue more debt or use cash for needed capital improvements."
The 2011 financial plan projected annual deficits averaging $4.7 million through 2016. Balanced budgets for the next five years under the latest proposal.
The projections do not rely on the successful passage of Measure B, which will be before voters in June and could change the structure of the city's business tax, or the revival of a proposal to install additional metered parking in the city.
The plan assumes a 2 percent increase to the city's hotel tax and passage of a 5 percent amusement tax in April 2014. It also relies on 1.4 percent revenue growth per year. Growth is forecasted "on a very conservative basis," O'Rourke said.
The council meeting will begin at 9 a.m. Tuesday at Lake Tahoe Airport.
Also at the meeting, the City Council is expected to formally accept the resignation of O'Rourke, who has accepted a position as the city manager of Yakima, Wash. The council will discuss appointment of an interim city manager and the process for filling the position longterm. The council is also scheduled to hear presentations from four potential recruiters.