2013 2:00:00 PM

Tuesday, May 28, 2013 2:00 PM
City Council Chambers, Legislative Building, 745 Fourth St, Sparks, NV

General Business: 6.2

Title: Consideration and approval of Resolution No. 3238, a Resolution authorizing the Financial Services Director to request advance distributions of property taxes apportioned to the City of Sparks in an amount allowed by Nevada Administrative Code (NAC) 354.280 as necessary.

Petitioner/Presenter: Jeff Cronk/Jeff Cronk

Recommendation: That Council approves the resolution authorizing the Financial Services Director to request advance distributions of property taxes as necessary.

Financial Impact: None - this will impact cash flow only.

Business Impact (Per NRS 237):
A Business Impact Statement is not required because this is not a rule.

Agenda Item Brief: Advance distributions of property taxes may be needed to improve cash flow situations. NAC 354.280 requires that an advance apportionment be requested of the county treasurer by the City Council. As payment outflows cannot always be predicted accurately, cash needs may not allow sufficient time to request Council approval for each event. This resolution will allow the Financial Services Director to manage the cash flow in a more efficient manner. Requests for advances will be made as needed. Upon request the County Treasurer will send up to 75% of the undistributed tax receipts on hand in the county treasury to be distributed to the City, effective until rescinded.

Background: Over the last five years, property tax revenues account for 33% to 38% of the revenue in the General Fund. The majority of property tax revenues are from real property assessments which are collected by the County in four installments and distributed to the City after the installment due date. Typically, the first installment is the largest distribution of the year. Distributions are made to the City after the end of the ten-day grace period annually in September, October, January and March. Historically, July through September are months in which the City has the highest likelihood of having cash flow challenges.

Analysis: The Government Finance Officers Association (GFOA) ‘Best Practice’ recommends, “at a minimum, that general-purpose governments, regardless of size, incorporate in its financial policies that unrestricted fund balance in their general fund be no less than two months of regular general fund operating revenues or regular general fund operating expenditures.” Two months of cash flow would require General Fund ending fund balance levels at the end of June to be around 16.7% of expenditures. It should be noted however that due to the timing of cash needs, historically the City has been able to manage the cash balances, without an advance of real property taxes, if the ending fund balance in the General Fund is at or above 12.5% of prior year expenditures. As the City’s policy is to maintain a General Fund ending fund balance of 8.3% of expenditures, the Financial Services Department monitors the City’s cash flow needs closely to ensure there is sufficient cash available to make payroll, vendor, and other payments that become due prior to receiving the next installment of property taxes. See the attached cash flow chart indicating the historically low cash flow months of January and August. Per NAC 354.280, a request for advance tax apportionment must be made by the Council of the City of Sparks. When the need arises to request an advance distribution, there may not be sufficient time for staff to obtain Council authorization. Without the cash on hand to make payroll, vendor, or other payments, the General Fund would be forced to ‘borrow’ from another fund. Any interfund borrowing that is not approved via a public hearing process would lead to a violation of Nevada Revised Statute (NRS) 354.6118. By approving the attached resolution, Council would be authorizing the Financial Services Director to request an advance distribution of property taxes as necessary. The advance would influence the timing, not the amount, of the real property taxes received in the General Fund.

Alternatives: Council could request to take action each year as needed to authorize the Financial Services Director to request an advance of apportioned taxes. If the timing is not sufficient, the General Fund may be forced to accept an interfund loan without public notice and therefore violate Nevada Revised Statute 354.6118.

Recommended Motion: I move to approve Resolution No. 3238 to authorize the Financial Services Director to request advance distributions of property taxes apportioned to the City of Sparks in an amount allowed by Nevada Administrative Code (NAC) 354.280 as necessary.

Attached Files:

Cash Flow Chart CY12-GF.pdf

R-3238 Cash Management via Property Tax Advance Resolution.pdf

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