Lexington finished the fiscal year with a surplus of more than $19 million, according to preliminary figures released to the Urban County Council Tuesday.
Bill O'Mara, the city's finance commissioner, told the council during a Budget, Finance and Economic Development Committee meeting that increases in revenue and savings from personnel costs were behind most of the surplus for the fiscal year that ended June 30. Revenue was $9.5 million more than budgeted, and the personnel savings totaled $4.8 million. Savings from debt service and other operational savings also contributed to the $19.5 million surplus.
During Tuesday's committee meeting, O'Mara recommended that the council sock away much of the $19.5 million — such as $11.5 million for possible lawsuits, $3 million for unexpected insurance or health care costs and more than $5.6 million in the contingency fund.
But many on the council said the city's contingency fund, now at more than $26 million, is nearly at its goal of 10 percent of total general fund revenue, or approximately $30 million.
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Moreover, the city has never tapped that contingency fund since it was started in 1997. The city automatically deposits roughly $50,000 into the fund each month and also puts 25 percent of any surplus into the contingency fund at the end of the year. The city will hit the 10 percent goal in the next year or two, many on the council said.
"Keeping money in an account that is earning us very little (in interest) when we have needs that will accelerate and cost more in the long run is not fiscally responsible," Vice Mayor Steve Kay said.
Councilman Fred Brown agreed.
"There are other priorities in this city, and I will name three: paving, public safety and parks, which we are not funding adequately," Brown said.
He said a recent analysis of city roads showed many in his district were in poor condition. During the recession, the city was not able to pave as many roads. Now those roads are crumbling and will cost more to fix, he said.
Council member Kevin Stinnett, chairman of the Budget, Finance and Economic Development Committee, supported putting $5.6 million into the contingency fund — an annual contribution of more than $1 million and an additional $4.6 million.
Stinnett said if the council allocated the additional $4.6 million, the contingency fund would be at the 10 percent goal. The council could then decide what to do with any surplus or excess funds.
Ultimately, the council voted during a work session to allocate $2.3 million, or roughly half of the suggested $4.6 million, into the contingency fund. That means the council would have approximately $7 million in surplus to spend. The total in the contingency fund would soon total $29.7 million, or roughly 9.1 percent of total general fund revenue.
The council will make decisions on how that $7 million will be spent at a meeting next week. In addition, at a December Budget, Finance and Economic Development Committee, the council will discuss what to do after the city reaches the 10 percent goal and discuss loosening the many restrictions on when the contingency funds may be spent.