The proposed ordinance would require that any general debt reserves applied to reduce general fund debt service be matched by an equal appropriation from the general fund for capital projects. General debt reserves are a non-recurring revenue source derived from issuance of general obligation debt. Use of these non-recurring revenues, particularly premiums received as part of city general obligation borrowing, for one-time capital project costs is consistent with maintaining a positive structural budget balance (i.e., on-going revenues are sufficient to meet on-going expenditures).
General debt reserves applied to reduce general fund debt service totaled $3.5 million in 2011 and $11.2 million in 2012. The 2013 adopted budget applies $5 million from general debt reserves to reduce general fund debt service. Direct appropriations for capital projects totaled $507,000 in 2011 and $6.95 million in 2012. The 2013 adopted budget includes a $4.16 million direct appropriation to capital projects (net of funding from the general fund balance for capital projects).
AMENDED Creating Section 4.17 of the Madison General Ordinances to prohibit the use of unused balances in the debt service fund for operating expenses.
DRAFTER'S ANALYSIS: Unused balances in the debt service fund (general debt reserves) can result from underspending in debt-financed capital projects and from receipt of bond sale premiums. These balances do not represent on-going revenue sources for city expenditures. Application of these balances in support of on-going city spending could create future structural budget deficits, compromising provision of city services. This ordinance would prohibit the use of this one-time revenue source for on-going expenditures by requiring that use of general debt reserves be matched by an equal amount of expenditures on capital projects. The Council may, by a separate two-thirds (2/3) vote taken as an amendment during consideration of th...Click here for full text