City of Hoover scores record revenues in 2021, strengthens reserves

The city of Hoover had a record year for tax collections in fiscal 2021, with sales and use tax revenues jumping 18% to $99.8 million and overall general governmental tax revenues rising 14% to $127 million, according to the 2021 audit.

The stellar financial year resulted in a $34 million boost to the city’s general fund balance, which grew from $47.8 million on Sept. 30, 2020, to $82.2 million on Sept. 30, 2021, records show.

The city’s chief financial officer, Tina Bolt, said all the big cities across the state experienced similar gains in fiscal 2021.

“We think it’s due to all the stimulus money and people getting out from COVID and spending,” Bolt said.

Hoover Council President John Lyda said city officials are thankful for the strong consumer spending. It’s debatable whether all the stimulus money being put out by the federal government is a good thing, but it certainly helped improve the city’s bottom line, Lyda said.

Following the strong 2021, the Hoover City Council on Monday night approved two new financial policies designed to help protect some of that surplus money for what council members said could be challenging economic times ahead.

First, the council approved a resolution to beef up the city’s general fund balance to the point where it could cover six months’ worth of the city’s expenses.

At the end of fiscal 2020, the general fund balance of $48 million would cover only 4.2 months’ worth of expenses, and the council needs $69 million currently to cover six months of expenses.

The resolution approved Monday night set a goal of reaching that by Sept. 30, 2025, but Bolt said the city actually can reach that goal immediately and still have $10 million left over from 2021 to cover whatever projects the council deems most important.

Another resolution approved by the council Monday night sets up a new budgeting policy that calls for the council to project a 4% increase in revenues with each budget. That 4% amount was chosen because that is the average actual revenue growth the city has experienced over the past five years, 10 years and 20 years, Bolt said.

However, the policy also requires the council to budget to spend only 70% of that increase and save the other 30% in a budget stabilization fund. The idea is to set aside money each year into a reserve account to help the city more easily weather potential difficult economic years in the future, Bolt said.

That will keep the city from having to make significant spending cuts during the middle of a fiscal year like the city did during the height of the COVID-19 pandemic, she said. Once department heads are given a certain amount for the year, they won’t have to worry about it being taken away if a crisis arises, City Administrator Allan Rice said.

The idea follows a similar measure taken by the state Legislature beginning in fiscal 2012 to keep from having to declare proration for the state’s Education Trust Fund. The state’s “rolling reserve fund” has worked well, so city officials decided to implement it at the municipal level to protect against future years when tax revenues may decline, Rice said.

If the actual revenue increase ends up being greater than 4%, the council would be free to spend that additional money however it chooses, whether on debt, technology, capital improvements or other projects.

Kathi Thomas, a Trace Crossings resident, on Monday suggested the City Council use the extra $10 million surplus it currently has to fix stormwater problems around the city.

While the city has completed some stormwater projects and is evaluating other potential stormwater projects that impact public rights of way, many more problems remain, and residents need help, Thomas said.

“It’s not going to get any better until something is done,” she said. “Get a plan. Make a timeline. Get the work done.”

The financial policies adopted by the council Monday night were jointly developed by the mayor’s office, the City Council and the city’s finance staff.

Lyda said he believes the two measures will shore up the city’s finances for generations and perhaps will be the most important decisions made by this council.

With inflation threatening to stifle the economy again, rough times could be ahead, “but we are incredibly well-positioned to face it,” Lyda said.