Item 5B. 2024 Fund Balance Review
Superintendent's Recommendation:
NO ACTION REQUIRED; THIS ITEM IS FOR INFORMATION AND DISCUSSION.
Background:
The Financial Management Plan establishes minimum fund balances for nine Park District funds. These minimum fund balances are designed to provide adequate funding for specific events, future costs or provide ongoing funds for specific operations. The information in this board action summarizes these minimum fund balances and provides options for those funds with excess fund balances.
General Fund – There are four reserves set:
- Compensated Absences – The cost of future vacation, severance, and associated benefit costs to ensure future costs are fully funded. This reserve totals $4,355,566 and is fully funded.
- Subsequent Year Operations and Maintenance Funding – Operations and Maintenance funding from the Met Council received in August ($689,013) is reserved so that it can be applied to the subsequent year’s budget. In addition, $1,200,000 received in supplemental Operations and Maintenance Funds are being held to finance $400,000 of the 2025-2027 budgets.
- Contingencies – One million dollars set aside to be used to fund costs associated with unbudgeted emergencies, natural disasters, and other such events. This reserve is fully funded.
- Working Capital – Twenty-two percent (22%) of the ensuing year’s budget is reserved to fund operations until property tax revenue is received in June. This reserve totals $11,716,463 and is fully funded.
The available fund balance after funding the above reserves is $1,380,152. This amount represents 2.6% of the 2025 budget. Winter weather adversely impacted revenue during the first part of 2025 so staff is recommending holding the fund balance as it provides a margin for budget variances for the remainder of the year.
Scott-Three Rivers Partnership Fund – A reserve of $150,000 is set to ensure adequate funds are available for unbudgeted repairs, extraordinary expenditures, and revenue shortfalls. The year-end fund balance is $1,460,534. In 2024, the Board approved using $663,000 from the fund balance to aid Scott County in land acquisition of two properties in Blakely Bluffs Park Reserve. Scott County has requested the remaining fund balance be held for future land acquisitions or other unbudgeted needs that may arise.
Glen Lake Golf Course Fund – A reserve of $150,000 is set to ensure adequate funding for unbudgeted repairs, extraordinary expenditures, and revenue shortfalls. The 2024 fund balance is $1,051,051, which results in an excess fund balance of $886,150. The agreement with Hennepin County calls for sharing any fund balance in excess of the reserve. However, the irrigation system is 27 years old, and staff is looking into options for funding the irrigation system replacement with excess fund balance. For this reason, staff recommends not sharing the $886,150 at this time and reporting back to the Hennepin County and Park District Boards later this year.
Land Acquisition, Development and Betterment Fund – The reserve of $500,000 is to ensure that funds are always available to acquire and/or develop park land if needed. The fund balance amount above the reserve is $1,812,384. Staff is recommending the balance in this fund be held for future acquisitions or improvements as there is no permanent funding mechanism for this fund and acquisition opportunities are increasing as demonstrated by two acquisitions (with a total cost of $760,063) that have already occurred in 2025.
Equipment Internal Service Fund – The Financial Management Plan sets a reserve of $500,000 which is designed to provide funds for unplanned equipment repair or replacement. The fund balance is $877,500, meaning there is $377,500 of excess funds. The Park District has been underfunding the Equipment Internal Service Fund for the last several years to draw-down the fund balance. Staff is not recommending using any of this excess fund balance as the balance continues to decrease and once the balance is at the minimum increases to the amount contributed from operating funds will need to increase.
Risk Management Fund – The reserve requirement of $500,000 in this fund is designed to provide funds to cover the costs of future insurance claims. The fund balance as of December 31, 2024, is $357,051. This amount decreased substantially in 2024 due to rising costs of insurance and no increase in the annual contribution to the Risk Management Fund. The 2025 budget includes an increase of $325,000 in the amount the General Fund and Hyland Hills Ski Area are contributing which should start to replenish this balance.
Park Preservation and Rehabilitation Fund – A reserve of $1,000,000 is set to ensure there is adequate funding to maintain and preserve park and natural resource facilities. The existing fund balance results in an excess fund balance amount of $3,008,604, although more than $1.7 million has been previously allocated to fund rehabilitation projects leaving $1.3 million as an excess fund balance. Staff recommends holding this balance to determine if there are projects needed that it could fund.
Debt Service Fund – The Debt Service Fund balance reserve is set at the amount needed to pay the subsequent year’s February 1 bond principal and interest. The fund balance at year-end is less than required and therefore there is no excess fund balance at this time.
Noerenberg Trust Fund – The reserve amount of $1,200,000 is based on the non-expendable balance of the donation. The fund balance is exactly this amount as any interest earned during the year is transferred to the General Fund to partially finance operations at Noerenberg Memorial Gardens.
Conclusion
If Commissioners agree with the staff’s recommendations for each fund, staff will continue monitoring the fund balances for all funds. In addition, staff intends to review the reserve section of the Financial Management Plan to update it and ensure the reserves are appropriate and adequate.
Relationship to the System Plan:
The Request for Action supports the following goal(s) of the System Plan:
Goal 2: Parks Matter
Goal 3: Lead by Example
by ensuring the Park District handles its financial resources in a well thought out and deliberate manner.
