9.2. SR 09-20-2021Request for Action
To
Item Number
Mayor and City Council
9.2
Agenda Section
Meeting Date
Prepared by
Work Session
September 20, 2021
Lori Ziemer, Finance Director
Item Description
Reviewed by
Liquor Fund Reserve Balance
Cal Portner, City Administrator
Reviewed by
Action Requested
Liquor fund reserve balance discussion.
Background/Discussion
The primary reasons for maintaining reserves in an enterprise fund is to provide adequate working capital to
ensure stable service delivery, meet future capital needs, and protect against financial instability. The Government
Finance Officers Association (GFOA) recommends governments use working capital as the measure of available
margin for meeting its obligations, which typically is the liquor fund's cash balance. It is also recommended to use
annual operating expenditures as the measurement in setting a benchmark reserve target. A minimum level of
reserves should be sufficient to provide adequate cash flow needs based on operating expenditures.
According to the city's Financial Management Policy, the liquor fund will maintain a cash flow reserve balance at a
level of one year of next year's projected operating expenditures plus next year's debt service obligations (principal
and interest). Reserve levels may need to be adjusted for the following additional considerations:
■ Transfers out to other funds.
■ Current and future capital needs.
■ Asset age and condition may have greater exposure to higher maintenance and repair costs.
■ Economic downturns or unforeseen emergencies or events that would trigger a financial hardship.
■ Planned one-time expenditures or grant opportunities.
■ Debt position and the impact on the city's credit rating.
■ Needed funding source for identified capital projects.
■ Management's plan for reserves.
Council Consideration
Level of liquor fund reserves.
Possible uses of excess reserves.
Financial Impact
N/A
Mission/Policy/Goal
Leverage strengths to develop a sustainable and prosperous community.
Attachments
Comparison of municipal liquor stores
Liquor fund information
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires pi ospei ly.
M
TUREJ
Updated.• August 2020
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Elk River Liquor Fund Information
Liquor Fund Monthly Cash Flow
(based on 5 year average)
$300,000
$200,000
$100,000 _
$0 _ ■ _ ■
et et et et
($100,000)
,ate ept � PJ 'sett` Oe� �etC oet``
F �eQ �o Qe
($200,000)
($300,000)
($400,000)
Liquor Fund
Income Before Transfers - Transfers
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
■ Income Before Transfers Transfers Out
LIQUOR TRANSFER HISTORY
Income Before
Transfers
Liquor
Transfer
Net Change
General
Fund
Transfer To
Park
Improve.
Other
Reason
2011
$824,579
$3,115,592
($2,291,013)
$270,000
$95,592
$2,750,000
PW Facility
2012
847,614
468,667
378,947
300,000
108,510
60,157
Fiber Project
2013
962,818
672,289
290,529
330,000
250,289
92,000
Oak Knoll Lights
2014
1,154,108
685,060
469,048
361,850
282,519
40,691
Fiber Project
2015
1,064,897
689,718
375,179
399,050
290,668
2016
945,939
704,567
241,372
438,950
265,617
2017
965,025
710,866
254,159
482,850
228,016
2018
1,024,690
689,174
335,516
492,000
197,174
2019
1,066,993
714,855
352,138
500,000
214,855
2020
1,023,296
755,147
268,149
500,000
255,147
Liquor Fund Reserve Calculation
For Year Ended 2020
(based on Financial Management Policy)
Cash Balance 12/31/20
Cash Flow Reserves:
2021Operating Expenditures
Excess after cash flow reserve
Additional Reserve Considerations:
Transfers Out
Capital Outlay
$4,897,299
1,421,650 Minimum Reserve
$3,475,649
750,000
20,000
Excess after additional considerations $2,705,649