Berlin Officials Hear Need For Reserve Fund Policy

BERLIN – Elected officials discussed the town’s $3.4 million sewer debt and the need to boost reserves this week.

On Monday, the Berlin Town Council reviewed a draft reserve policy and talked about how much of the sewer fund’s longstanding debt to the town’s general fund should be forgiven.

“What is the right amount?” Mayor Gee Williams said. “I think that’s what everyone needs to have some time to think about. We’ll put this back on the agenda in two weeks and see where we are.”

Administrator Jeff Fleetwood said he wanted officials to have a better understanding of the town’s funds and establish a reserve policy to ensure those funds stayed at certain levels.

“We were trying to come up with a starting point,” he said.

Finance Director Natalie Saleh the town had unspendable money, such as the money the sewer fund owed the general fund, as well as restricted money, such as casino revenue, which has to be used for certain purposes such as public safety.

The draft reserve policy presented Monday states the town should have a reserve with enough funding for three months of general fund operations, a capital reserve of $100,000, a debt reduction reserve and a disaster response reserve.

Councilman Zack Tyndall said it would be helpful if the council received information on all of the various reserve funds at budget time. Saleh, however, said it wasn’t a budget concern.

Williams said a reserve policy would ensure funds were on hand for times when “things go bump in the night.”

“I think that’s one of the things the community needs to understand—we’re not broke,” Williams said. “It’s not that we don’t have the money but the monies we have are designated and obligated for a variety of situations so that come what may we can meet our obligations.”

Councilman Troy Purnell pointed out that if the town approved a policy with specific accounts and amounts, that funding would be committed.

Saleh said it was just a goal to work toward.

“If we have to adjust something on the policy later on it’s perfectly fine,” she said.

Tyndall spoke on behalf of setting achievable goals.

“I think the first thing we should focus on is achieving that benchmark, three months of operating budget in reserves,” he said. “We don’t have it. We have $16,000. I think that this policy could be much more simplistic and act as a better guide.”

As for how much of the $3.4 million debt owed by the sewer fund to the general fund, staff proposed forgiving $1.7 million. Fleetwood added that the sewer fund was self-sustaining now that rate increases had been implemented so the debt was no longer growing.

Councilman Dean Burrell asked if the rates would have to be increased again in order for any of the debt to be paid back to the general fund.

“That’s not the plan,” Saleh said. “The plan is to reduce that note and have a schedule to repay.”

If the general fund is being repaid, it would be able to grow its reserve.

Tyndall questioned who had authorized the sewer fund to borrow from the general fund.

Saleh explained that there was no authorization needed. She said the fund simply could not end the year in the red so money was automatically transferred into it from the general fund.

Tyndall said he wanted to understand what decisions he’d made that had led to the borrowing between the funds.

“I tried to figure out where these numbers were presented,” he said. “I couldn’t find it.”

Saleh said it came up each year when audited financial statements were presents.

“But that’s after the fact,” he said.

Councilman Dean Burrell agreed.

“When I was working I had to maintain a budget,” he said. “I didn’t have flex of getting to end of the year and writing stuff off. I had to monitor and project where I was going to be at the end of the year. If was projecting a deficit I had to change my operations. During the year if we are projecting a deficit what do we do to try to mitigate that and not have to borrow? Or do we just let it go on with the expectation that at the end we’ll get it from the general fund?”

Williams said until the last two years, officials hadn’t been notified of the ongoing borrowing.

“It was never brought up during any budget process at all,” he said. “If we’d known the sewer fund was underperforming, we could have changed the sewer rates five, six years ago.”

Burrell said it wasn’t worth dwelling on how the town had gotten to this point.

“I think what you have presented is food for thought and I think it’s going to put us going in the right direction but it is not the all,” he said. “Yes you need these policies and procedures and this understanding of this plan going forward but we also need an operational part of that that’s going to support this.”

Williams said officials were now receiving quarterly reports from the finance department which would help. He said council members still needed to think about how much of the existing sewer debt they wanted to write off.

About The Author: Charlene Sharpe

Alternative Text

Charlene Sharpe has been with The Dispatch since 2014. A graduate of Stephen Decatur High School and the University of Richmond, she spent seven years with the Delmarva Media Group before joining the team at The Dispatch.