COT Clarifies Use of Reserves

Tallahassee Reports has written about the $172 million in reserve funds the City of Tallahassee has tucked away. Part of the $172 million includes approximately $95 million in a “rate stabilization fund.”

During an informative discussion with Assistant City Manager Raoul Lavin, he detailed the parameters regulating the use of the rate stabilization fund.

The uses of the fund are limited to four categories. Each category has a minimum and maximum target level. They are as follows: Rate stabilization ($23-$50 million), Future Generation Needs ($37-$74 million), Retirement of Debt ($62-$116 million) and Fuel Hedging Program ($30 million).

Based on this information, the minimum and maximum target level for the fund is $152 and $270 million. In other other words, based on commission policy, the fund would begin running a surplus after reaching a level of $270 million.

To the best of his recollection, Mr. Lavin indicated that the rate stabilization part of the fund has only been used for low income relief to the tune of approximately $5 million over the last two years. There has been no across the board cuts in rates using this fund.

The Fuel Hedging monies are used to stabilize fuel prices so consumers are protected against significant swings in electric rates.

In addition, Mr. Lavin indicated that decisions on how and when to spend the reserves are decided during “rate studies.” These “rate studies” take place every two or three years.

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