Responding to a request from the City Council, Mayor Carolyn Kirk has issued a comprehensive plan for distributing $1,721,762 from cash reserves for 21 distinct purposes, leaving the city reserves of more than 5 percent of the operating budget, as recommended by the state, she said Friday.
After the distribution, which requires council approval, the city would be left with $2,752,699 in its stabilization account and total reserves of $4,930,000.
“The comprehensive plan for free cash is straightforward,” Kirk wrote in a memo to the council. “It calls first and foremost for the protection and growth of the city’s reserve levels, and adherence to the fiscal policies set forth by the administration ... This approach forces choices to be made and not all requests can be honored.
”However,” she continued, “in this, as we are already starting to see, this approach leads to stability and sustainability of the services important to the citizens of Gloucester.”
The largest distribution, $529,518, would go to the School Department to fill fiscal 2013 budgetary gaps, primarily in special education.
The city held $4.8 million in free cash following the closing of the books on fiscal 2012, which ended June 30. It was the third consecutive year of free cash for Gloucester after nearly a decade of red ink at the bottom line of annual reconciliations.
“To show just how far we have come in the last five years,” Kirk wrote in a cover memo to the council, “note that as of July 1, 2008, Gloucester alone accounted for more than half of the total negative sum of free cash reported from the 351 municipalities. Today, we are generating appropriate amounts of free cash that demonstrate good fiscal management.”
The council has already approved the appropriation of $422,500 for Fire Department overtime and school heating.
Bond rating agencies and the state Department of Revenue recommend municipalities keep at least 5 percent of their operating budget in reserve in a combination of free cash and reserved fund balances. Last fall, Moody’s Investor Services reaffirmed Gloucester’s Aa3 bond rating, while noting a 24 percent increase in long term debt over the last year.