Flush with cash

City discusses how to reduce reserve funds

They say a child who has experienced starvation will hoard food when it becomes plentiful.

So it’s understandable that the city of Altoona would build up its reserves after stabilizing its finances through Act 47, after a long period of financial struggle caused by systemic demographic issues, including the loss of businesses and residents to the suburbs, starting in the mid-20th century.

Now the reserves have built up to the point that even the formerly cash-hungry city sees the necessity of shrinking them.

Officials expect that the unassigned fund balance will be about $10.7 million by the end of 2018.

That is almost 34 percent — a little more than one-third — as much as the city’s $31.5 million in budgeted expenditures for this year.

The Govern­ment Finance Officers Association recommends that municipalities maintain reserves of between 5 percent and 10 percent, City Manager Marla Marcinko told City Council at a recent planning meeting.

Thus, the projected year-end reserve is about 3.4 times higher than the top end of the recommended range, as a percentage of total expenses.

At the meeting, Marcinko proposed that the city undertake about $5.3 million worth of projects, which would cut the reserve in half, to about $5.4 million — although at 17 percent, the remaining reserve would still be well beyond the recommended percentage.

Allowing the reserve to stay at the current level would be “irresponsible,” Marcinko told council.

The largest item on Marcinko’s list is the city’s $2.2 million contribution to the $6.2 million bill over five years for the Intergovernmental Stormwater Committee’s pollution-reduction projects, which need to be done to comply with state and federal regulations.

Otherwise, most of the projects Marcinko proposed are aesthetic, recreational or business “enhancements.”

Those include $850,000 for replacement of decorative lighting downtown; $535,000 for a “wayfinding” system; $450,000 for Heritage Plaza improvements, including half the cost of a permanent pavilion in cooperation with a private partner who would pay the rest; $400,000 each for decorative crosswalks at 20 intersections and modification of tree lawns on 11th and 12th avenues; $225,000 for replacement of playground equipment that has been removed because of liability concerns; and $200,000 for a main street manager.

City Council members challenged some aspects of Marcinko’s plan, asking whether the money would be better spent on more substantial projects.

The group agreed that further discussion is needed — a discussion expected to take place at a planning meeting this month.

It might be better to spend reserve money on streets — some of them look like they’re in a war-town country — or on curbs and sidewalks, Councilman Bruce Kelley said.

The sidewalks are especially bad on Seventh and Eighth streets, where slabs have been heaved up by tree roots, said Mayor Matt Pacifico.

Some things are nice, but not necessities, Pacifico said, adding that he favors a “conservative, practical approach.”

Typically, the city handles those kinds of projects through its capital program, borrowing through bonds periodically for funding, Marcinko said.

Otherwise, it routinely uses Community Develop­ment Block Grant funds for paving and for curbs and sidewalks — although CDBG money for those kinds of projects can only be used in low-to-moderate-income areas, Marcinko said.

Most of her proposed projects may be “touchy-feely,” but they would be a way for the city to give back to residents after years of government parsimony, Marcinko said. It would build community and ultimately attract business development, Marcinko said.

“I get it,” Kelley said. But there has been a lot of deferred maintenance, and many residents who live on rutted streets would rather get them paved, Kelley said.

The reserve money would not go far on the kinds of projects Kelley proposes, given the enormity of those needs, Marcinko said.

Conversely, her enhancements would be like a gift to residents, and they would ultimately make a more noticeable difference, she said.

Some residents are going to suggest that the city give some of the money back, Kelley and Councilman Dave Butterbaugh said.

Butterbaugh said that regardless of what it does with the reserve, council needs to try to keep taxes from rising, given that the county and the school district tax bills have been rising.

Maybe it could cap taxes for those older than 65, he said.

“I would like to shift more toward (Earned Income Tax),” Pacifico said.

Consensus emerged on the ISC funding and the spending of $190,000 on demolition of a deteriorated building next to an employee parking lot near City Hall, along with the expansion of the lot into the space freed up by the demolition, coupled with landscaping.

Otherwise, the city needs to assess projects based on what is needed versus what is nice to have, Pacifico said.

“It’s a balancing act,” Councilman Erik Cagle said.

“This is going to take some time,” Kelley said.

Mirror Staff Writer William Kibler is at 949-7038.