BEMIDJI -- Bemidji council members took action Monday to maintain a healthy cash flow for the city.
During an April 12 work session, the Bemidji City Council approved a resolution recommended by Bemidji Finance Director Ron Eischens to use $450,585 in surplus money for its fund balance. In 2020, the city's general fund had a surplus of $1.1 million.
The general fund is the city's largest fund and is used for basic operations, such as administrative business, finance work, recreation and public safety. The primary reason for the surplus was $1.2 million in federal coronavirus relief.
The majority of the general fund is from property taxes and local government aid, which is provided to the city in July and December. Because there are periods of time in between this funding, the city maintains a fund balance equal to 50% of the subsequent year's budget to have a cash flow in case of emergencies, as well as keeping good interest rates and bond rating.
The council passed a resolution to use $450,585 of the $1.1 million surplus, bringing the fund balance to $6.8 million. While there was a surplus this year, Eischens said it's important to remember that it was mostly from the Coronavirus Aid, Relief, and Economic Security Act.
"A concern on this is if we didn't have the CARES funding in 2020, we would not be able to hit that 50% without doing more sophisticated transfers between funds or maybe we don't have it at 50%," Eischens said. "The CARES Act really allowed us to do that."
Eischens said an option for the remaining surplus dollars, coming to $642,424, are South Shore bond payments. The city owns land along the South Shore of Lake Bemidji which it purchased for development.
The outstanding balance for the South Shore bonds is $1.2 million.
"When you have a one-time revenue like this, usually it's prudent to spend it on one-time projects, and not commit it to something that will be an ongoing expense," Eischens said. "From a staff perspective, our recommendation is to apply it to the South Shore bonds. If the bonds get paid off, the current tax levy we're levying the public would be freed up for other purposes, or reduce the levy itself."
Since purchasing the bonds, developments along the South Shore have included the Sanford Center, opening in 2010, the Country Inn and Suites opened in 2014, and the South Beach Apartments opened in 2018. The city also cleaned up the debris from the area and opened South Shore Park in 2017.
The decision on how to use the remaining surplus dollars will be made during a work session scheduled for May 10.