For many years, the City of Radford has enjoyed a low tax rate, several city improvements and a sound balance of reserves.
Part of the reason is that the electric fund generated significant profit that is transferred to support the operations of the city’s general fund.
That has changed in the last three years. The reserves have dropped significantly and now threaten the city’s ability to maintain low tax rates and fund future improvements.
After the foundry closed, the revenue of the electric fund dropped significantly. Revenue in the general fund has been flat, while expenditures continue to rise. Both the general fund and the electric fund have reported deficits in each of the last three years.
The total deficit for the two funds over three years amounts to $6,761,642. city council also approved a budget for 2018 that had additional deficits for both funds.
The city’s reserves are now dangerously low. The fund balance of the general fund has dropped from $7,018,204 in 2014 to $4,536,154 in 2017, a decrease of 35.4 percent.
Part of fund balance is classified as “unassigned.” This is the part of reserves that is available for any purpose. Unfortunately, unassigned fund balance has dropped 57.8 percent over the last three years.
The council has a policy that the unassigned fund balance should be maintained at 10 percent of general fund expenditures. If it drops below this level, city council needs to take action to restore the balance.
At June 30, 2017, the unassigned fund balance was 4.9 percent of expenditures, less than half of stated policy.
The electric fund has seen an even larger decrease in reserves. The unrestricted net position of the electric fund dropped from $11,167,148 in 2014 to $5,351,666, a decrease of 52.1 percent. The electric fund transferred close to $6 million dollars to the general fund in 2017.
City Council is now working on the budget for 2019. Our elected officials need to take action to create a sustainable budget for the city.
It appears to me that it will require both increases in taxes and fees and reductions in expenses where possible.
If Radford is to survive as an independent city, the council needs to approve a balanced budget going forward.
Bruce Chase, Ph. D.
Radford
Chase is a faculty member at Radford University and teaches governmental and nonprofit accounting.
