By MIKE ANTHONY

Executive Editor

The Crestwood Board of Aldermen will conduct a public hearing next week on the city’s proposed 2012 budget.

The public hearing will take place at 7 p.m. Tuesday, Nov. 22, at the Government Center, 1 Detjen Drive.

The city’s Ways and Means Committee recently voted to forward to the Board of Aldermen the proposed 2012 budget that projects a surplus of $70,210 on Dec. 31, 2012. The city’s 2011 budget projects the use of $249,307 in cash reserves to balance it.

As currently proposed, the 2012 budget projects total expenditures of $11,897,094 with anticipated revenues of $11,117,304 — a deficit of $779,790.

Including $850,000 held in escrow for the final payment on certificates of participation issued in 2001 to fund the construction of the city’s Aquatic Center and transfers in totaling $249,543 to the general fund and capital improvement fund from the park and stormwater fund — and corresponding transfers out totaling $249,543 from the park and stormwater fund — a surplus of $70,210 is anticipated.

The proposed budget also includes a five-year plan, based on a 2-percent annual cost increase and department heads’ individual five-year plans, that forecasts the city’s total cash across all three major funds: $3.54 million in 2012, $3.35 million in 2013, $3.4 million in 2014, $3.41 million in 2015 and $2.75 million in 2016.

While the city’s total cash position remains relatively flat from 2012 through 2015, the city’s cash position is expected to drop by roughly $663,000 in 2016, primarily a result of expenditures outpacing revenues in the city’s general fund from 2013 through 2016.

During a Board of Aldermen budget work session last week, City Administrator Petree Eastman, who began her duties last month, raised a concern about the amount of the city’s unrestricted fund balance.

“… One of the things that I noticed as I was going through this is that there’s still things that I would like to address going forward, none of which are really absolutely critical at this point in terms of specific line items,” Eastman said Nov. 8, specifically referring aldermen to the five-year plan contained in the proposed budget.

“… One of the things that is common among city managers and city administrators is to look at your budget and where you are with your unrestricted fund balance … Those are funds that are set aside that really have no designation at this point and can be used for contingencies, emergencies and even to balance a budget …

“And so when we’re looking at this budget, it looks like we have beyond 2016 to run things because of the cash balance, but your pool of money for emergencies has been greatly diminished and those numbers can be reflected when you subtract out the cash balance from 2012 to 2013, you can see there’s $172,000 right there …”

The five-year plan projects that the cash balance of the general fund will decrease by $172,749 in 2013 from 2012. By 2016, the five-year plan projects the total cash balance in the general fund will be $818,595.

“The point that I want to raise here is that I hope that as we go through this process and certainly as we go into 2012 fiscal year, that we will focus on this critical big picture, which is that we do not have a large fund balance anyway and that it really diminishes significantly over time from a budgeting perspective. And those are the numbers that city managers tend to look at rather than cash balance,” Eastman said.

For example, she said, “… If a tornado had come through, instead of hitting primarily Sunset Hills, it had come straight down Watson and knocked out all our sales-tax-revenue-generating businesses, we wouldn’t have the cash on hand and we’d have to rely on those reserves. And so I think we have to be very cautious in making sure we have plenty of reserves in place.

“That being said, the GFOA, which is the Government Finance Officers Association, recommends that you have three months of your average expenditures for a particular year set aside for that purpose. In that case, that would mean $2 million. We are at $571,000 in our cash reserves for emergencies and contingencies. So I just want to bring that up and say this is kind of the flavor that we’re having as we look forward and the tunnel opening is in clear sight and we have to be very careful going forward …”

The city administrator later said she had polled other cities to determine how much of an unrestricted fund balance they maintain.

“… I realize that every city is not the same, but nevertheless I wanted to get a sense of where people were because a lot of fund balances were funded with cell-phone settlements, as you know, including ours, and so I wanted to see where everybody was,” she said. “And there wasn’t really anybody lower than 25 percent … There were some cities that had a policy of having an entire year’s worth of money set aside.

“Of course, those are the folks with casinos and lots of retail. But nevertheless, even cities like Rock Hill that doesn’t really have even the amount of expenditures that we have, have a fund balance of over 25 percent. So a $2 million reserve is 25 percent or thereabouts. So I’m thinking that that’s a pretty good rule of thumb. And the GFOA does strongly suggest this — not just suggest it, but strongly suggests it for obvious reasons …”

Ward 1 Alderman Darryl Wallach later cited a media account that reported the owners of Crestwood Court plan to announce their redevelopment plans for the mall next year.

“Well, obviously, we’re going to be hopefully receiving a proposal from them very shortly and I think that we need to be prepared to meet them with as much professionalism as we can,” Eastman said. “And that means having the appropriate counsel, attorneys, and planners that can help us navigate this very complex process with a development of that size and nature. And of course, we don’t know the specifics.

“We don’t know what they’re going to propose, especially with regard to finance and so we’re going to have to be able to address those things legally and from a planning perspective as well as from a political perspective,” she said. “… So we do need to have some funds available. I did look at this particular item in the general services fund and we do have some moneys under professional services that could be dedicated to attorneys’ fees and that sort of thing, and there are — I think it’s under other professional services and even under attorneys as well … because we’re not really spending where we were and so I think there are moneys there.

“There might be additional moneys that we have to spend in order to protect ourselves going forward and to make sure that we meet this with the professionalism they are expecting, certainly. I have talked with some attorneys about how that might be structured and Ellisville came into the comments about that where the attorneys are billed out at a very-reduced rate on the front end, but ultimately the development fees and that sort of thing pays for the attorneys in the long run. So it’s not something that I see as being a big cash problem for us, but until we actually engage a firm, I’m not going to know that answer …

“Certainly, that is something I think that we need to spend in order to make sure this is done properly. I don’t think our in-house staff really has the capabilities, including myself, to deal with all the legal technicalities and issues that arise in a complex deal like we’re expecting to come down the pike.”

Wallach later asked Eastman, “What about the revenue stream that’s coming from Crestwood Court? Are you comfortable with the projections that you’ve projected for 2012?”

She replied, “… Well, certainly we’ve all heard the news reports that the folks that are in the mall except for potentially Sears and the other actual retailers will probably no longer be there and I don’t know how much sales tax is generated just for that piece and certainly I think that we’re going to be awhile before we see any significant revenue increases from Crestwood Court …”