Hudson -- City staff moved some items on the community project priority list, such as a new town hall, to later years in the five-year budget to maintain a carryover of at least 25 percent each year.
Finance Director Jeff Knoblauch shared a list of changes at the Sept. 27 Council workshop meeting.
In 2018, the five-year budget had shown an 18 percent carryover of ending balance to disbursements, and Council members had voiced concern at the previous meeting about dipping so low.
Council unofficially has stayed around 40 percent for a carryover amount.
"We went back and talked about it and tried to smooth [the carryover balances] it out," said City Manager Jane Howington.
By taking longer to complete the list of priority projects, the fund balance could be maintained at 25 percent or higher according to Howington.
One of the priority projects is the Municipal Service Center construction (a new town hall), which had been slated for 2018 when the current 3-year lease expires. Staff moved it to 2021, but Council wants to continue with the site location and design of the future facility.
The lease renewal in 2018 could be higher but it would depend on demand for office space at the time, Knoblauch said.
The city is paying below market for the MSC rent, Howington said. Because of rent, the debt service is only reduced by the difference.
"The MSC would be really nice to get us back downtown," Howington said. "The citizens would like it, we would like it, but we have to make difficult choices [about when to build it]."
If next year the city has a fund balance of 40 percent because of higher revenue or lower expenses, Council could look at moving the MSC construction back to 2018, Howington said.
Council could look in November or December at potential options of publicly owned property in the downtown area for the MSC location, Howington said. Then Council and staff could look at the options of the building architecture to fit the site.
"It changes the dynamic if we use land we own or have to buy land in downtown," said Assistant City Manager Frank Comeriato.
Council agreed to go forward with the design and site selection but the five-year plan would show construction pushed out to 2021.
Council members asked whether Barlow Community Center would be needed if similar facilities were built in the new MSC, but Knoblauch cautioned that the theater expansion at Barlow Community Center has not been paid off.
Comeriato said Barlow Community Center is fully used, especially by the theater group, which is part of the community.
"It's heavily used," Comeriato said. "It doesn't sit idle."
"Ultimately we'll look at it," said Council member Alex Kelemen. "The building doesn't lend itself to a lot of expansion."
Council members wanted to know how going below a 40 percent carryover would affect the city's AAA bond rating, the highest available, set by both Moody's Investor Service and Standard & Poors, a financial services company.
"We stayed above 40 percent [in the past] which was our target," Knoblauch said. "The rating likes higher percentages."
Last year the city talked with Moody's and Standard & Poors.
"We told them we were dipping below 40 percent by investing in the community where there is a return [with the Downtown Phase II and Velocity Broadband]. My argument was we anticipate dropping below but anticipated with investments in the community, there will be a return on projects."
The projects would generate additional income tax revenue, and over time the city carryover balance would grow closer to 40 percent, Knoblauch said.
"There are a lot of things they look at," Knoblauch said. "We rate very well and have strong demographics. Property tax values are very high. There are a lot of checkmarks in our favor when they go down the list."
Kelemen said he would go below a 40 percent carryover as long as interest rates are low. If interest rates go up, then raise it to 40 percent, he said.
"Put our money where it's making money," Kelemen said. "If it's not making money in the bank, then put it back into the community."
The budget shows an upswing in the long-term, Howington said.
"When we talked about it two years ago, we were willing to invest in ourselves and use money in our community knowing we would have the return," Howington said. "We prioritized broadband because it would create more value in the community."
The debt is not adding to the city's operating costs when the fund balance goes down, Knoblauch said. The capital improvements are one-time expenditures.
"We are investing in the community where we will have a better return," Knoblauch said.