Norwalk Ready to Dip Into $12-Million Reserve Fund

The City Council is expected this week to adopt an $18-million budget that would pay for a variety of long-postponed projects and equipment purchases by dipping into the city’s reserve fund to an unprecedented degree.

In recent budget sessions, the council added $3 million worth of items to the $15-million spending plan presented to it by City Administrator Richard Streng. The extra $3 million will be drawn entirely from the city’s $12-million reserve fund, which is invested at an average interest rate of 6% to 7%.

“I’ve been there 20 years and I have never seen the council go in and do what we did to play catch-up,” said Councilman Robert White. “I hope we did right.”

Not the First Time

City officials say the reserve fund has, on occasion, been used to cover expenses, but never to this degree.

Following council directions earlier this year, Streng prepared a balanced $15-million budget, turning down numerous department requests for new equipment and construction projects. The council, deciding many of the requests could no longer be ignored, put them back in the budget.

“Yes, we hate to dip into the reserves, nobody likes to,” Councilman Michael Mendez acknowledged. “But we felt there was a definite need to do that.”

About half of the budget additions are capital improvements, including an $800,000 sound wall along portions of the Santa Ana Freeway, a $322,000 city maintenance facility, new fuel tanks and monitoring equipment and new basketball courts in a few municipal parks.

Another $600,000 has been earmarked for new city vehicles, landscaping equipment and computers. The council also restored $800,000 in Sheriff’s Department services, including traffic and general law enforcement patrols.

“Down the line it probably would have cost more money to try to repair some of that stuff,” Mendez said, referring to the trucks and equipment slated for replacement. Councilwoman Grace Napolitano agreed, saying: “We’ve come to the end of the rope.”

Possible Surplus This Year

While Streng said the loss of interest from reserve fund investments was of concern, he added that the city hoped to replenish the fund in future years. Moreover, the city may end this fiscal year with a slight surplus that could reduce the projected reserve withdrawal. The interest is used for general fund operating expenses.

The loss of federal revenue sharing money and sagging sales tax revenues have hurt city finances in the past couple of years.

“Just the thought” of raiding the reserve fund “has got to raise some questions,” Mayor Marcial (Rod) Rodriguez said. A bedroom community with no industry, Norwalk has to pursue more developments to boost its sales tax income, he said. “We’ve got to look at every available possibility out there.”