Suffolk News-Herald

The city dipped into its surplus fund to cover $5.4 million in excess expenditures last fiscal year.

Several major unanticipated expenses prompted the transfer from the city’s reserve fund over the past year, according to the city’s annual financial report released to the Suffolk City Council last Wednesday. Those expenses include:

n$3.5 million to the Capital Projects Fund;

n$3.1 million for the redesign and rebuild of the bulkhead at Constant’s Wharf;

na $2.4 million contribution to the Industrial Development Authority, which will cover the debt service reserve fund to support the revenue bond issuance for construction of the Hilton Garden Inn and Suffolk Conference Center.

The city has traditionally kept at least 10 percent of the city’s general government expenses – substantially more than the 7 percent mandated by the state – in its undesignated fund balance, said Christine Ledford, the city’s finance director.

Using the reserve fund has reduced the undesignated fund balance to 7.2 percent of the city’s expenses, she said.

Building up the reserve fund enhanced the city’s favor among bond rating agencies, enabling the city to borrow more money at lower interest rates in recent years.

Tapping the reserve should not hurt the city borrowing ability, said Ledford.

&uot;It will have little to no impact on our level with the rating agents,&uot; she said.

Dennis Craff, spokesman for the city, agreed.

&uot;It (10 percent) is a goal,&uot; Craff said. &uot;We are still in pretty good shape overall and we try to be conservative in all that we do.&uot;

The city is expecting to recoup the $3.1 million used to complete the bulkhead project, having filed suit against Virginia Marine Structures, the original company hired – and later fired – from the project, Ledford said.

&uot;We are right on this issue,&uot; said Ledford. &uot;When this goes to court, we will get all that money back.&uot;

City Manager R. Steven Herbert was out of the office Friday and could not be reached for comment.