Council may tap reserve

CITY HALL — The City Council on Tuesday put off a decision whether to transfer millions from the city’s reserve to help bridge major deficits in city funds that cover expenses like workers’ compensation and lawsuit payouts.

Spending down the reserve has historically been a tough sell at City Hall, but officials have been trying to close a $35-million gap in the funding system that has been an issue for external auditors.

During a third-quarter financial report Tuesday, city officials recommended the $2.7-million transfer for this month to begin filling a nearly $35-million shortfall among the internal service funds.

The internal city accounts are used to finance services that various city departments provide to one another.

“As a best practice, your internal service funds should be at a slight surplus or minor deficit,” Finance Director Bob Elliot said at a budget meeting last month.

But on Tuesday, council members said they wanted to first have a more in-depth discussion on dipping into the city’s reserve, which is typically seen as a last resort.

“I think it’s the matter of some large amounts of money here, and it’s just having this firmly in mind,” said Councilman John Drayman.

Of the city’s 18 internal service funds, four — which cover city expenses for lawsuit payouts, workers’ compensation, compensated employee absences and the subsidy for retiree health benefits — have substantial budget deficits.

The liability insurance fund, which is $10 million in the red, was hit hard by multimillion-dollar city payouts stemming from damage during the 2005 winter storms.

City officials have created a 10-year plan to shore up the gap through increased charges to the various departments.

To decrease the burden on the General Fund budget in the coming fiscal year, city officials have recommended the transfer from reserves and other surplus funds.

After the proposed transfer, the General Fund reserve would stand at nearly $54 million, officials said.

Still, Mayor Ara Najarian, who initiated the request for a more in-depth discussion on the transfer, has questioned for weeks whether the transfer is a good idea.

“We’ve resisted dipping into our general funds reserve for many, many important issues in our community,” Najarian said at an April budget meeting. “And I’d hate to dip into that for ongoing maintenance and operations.”