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A resolution adopting the revised Fund Balance Reserve Policies for The Metropolitan Government of Nashville and Davidson County.
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WHEREAS, pursuant to Ordinance No. BL2022-1632, the Metropolitan Council amended the Metropolitan Code of Laws to create Section 5.04.170 requiring The Metropolitan Government of Nashville and Davidson County to maintain a fund balance reserve policy; and
WHEREAS, pursuant to RS2022-1901, the Metropolitan Council adopted the Fund Balance Reserve Policies as required by MCL 5.04.170; and
WHEREAS, pursuant to MCL 5.04.170(D), the Metropolitan Department of Finance is required to annually review the Fund Balance Reserve Policies as part of the preparation of the annual operating budget, with any requested amendments to such policies submitted to the Metropolitan Council for review and approval by resolution; and
WHEREAS, the Metropolitan Department of Finance has reviewed the existing Fund Balance Reserve Policies and recommends that it be revised, effective for Fiscal Year 2026 that begins on July 1, 2025; and
WHEREAS, the policies’ revisions will improve the Metropolitan Government’s ability to maintain fund balance targets, will aid in long-term planning by providing resources across funding cycles, and addresses the non-use of surplus appropriations authorized pursuant to the policies; and
WHEREAS, it is fitting and proper that the Metropolitan Council adopt the revised Fund Balance Reserve Policies, a copy of which is attached hereto as Exhibit A.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY:
Section 1. The Metropolitan Council hereby approves and adopts the revised Fund Balance Reserve Policies for The Metropolitan Government of Nashville and Davidson County, attached as Exhibit A and incorporated herein by reference, such policies to be effective as of July 1, 2025.
Section 2. This Resolution shall take effect from and after its adoption, the welfare of The Metropolitan Government of Nashville and Davidson County requiring it.
Agenda Analysis
Analysis
This resolution would adopt revised Fund Balance Reserve Policies for the Metropolitan Government of Nashville and Davidson County. Section 5.04.170 of the Metropolitan Code of Laws requires that Metro maintain fund balance policies and that the Department of Finance shall review the annual operating budget for compliance with the fund balance policies. The current Fund Balance Reserve Policies were adopted by Council Resolution RS2022-1901. The Department of Finance is recommending that the Fund Balance Reserve Policies (“Policies”) be revised effective as of the beginning of Fiscal Year 2026 (July 1, 2025).
The revisions to the Policies are focused on budget sustainability and budget stabilization matters. The Policies maintain the minimum fund balance reserve targets for the governmental funds (17%) and the debt service funds (50%) but remove the language permitting the Finance Director to increase the minimum targets by an amount no greater than 3% to avoid the need for tax anticipation notes. In its place, the revised Policies create a Budget Sustainability Reserve with a minimum target of 3% of the budgeted operating expenditures and the budgeted debt service, or up to 6% if the Finance Director determines it necessary. The Budget Sustainability Reserve targets will be established with each budget ordinance.
The Budget Sustainability Reserve will be used for Budget Stabilization purposes, which is not changed from the current Policies, and to maintain the minimum target percentages in the in both the Operating Reserve (17%) and the Debt Service Fund Balance (50%). This maintenance of minimum target percentages is a new provision in the Policies. If necessary, amounts in the Budget Sustainability Reserve may be appropriated in the annual budget ordinance to the Operating Reserve and the Debt Service Fund Balance to meet the minimum targets. If the Budget Sustainability Reserve is insufficient to replenish the fund balances, then the Surplus Fund Balance will be used for replenishment.
The revised Policies contain a new provision regarding annual review of the use of Surplus Fund Balance to fund certain projects. Such appropriations shall be expended within a 12-month period. If not, the Finance Director shall review such appropriations to determine continued need based on departmental justifications for extensions. If an extension of an appropriation is not warranted, the Finance Director will be authorized to return the appropriation from the original fund.
Per Section 5.04.170 of the Metropolitan Code of Laws, amendments to the fund balance policies are to be approved by the Council by resolution.