Department of Revenue Quotes

Here are 3 definitions, according to the Department of Revenue, Division of Local Services.

RECURRING REVENUE SOURCE

A source of money used to support municipal expenditures, which by its nature can be relied upon, at some level, in future years. (See Non-recurring Revenue Source)

NON-RECURRING REVENUE SOURCE

A one-time source of money available to a city or town. By its nature, a non-recurring revenue source cannot be relied upon in future years. Therefore, such funds should not be used for operating or other expenses that continue from year-to-year. (See Recurring Revenue Source)

FREE CASH

Free Cash is a revenue source which results from the calculation, as of July 1, of a community's remaining, unrestricted funds from operations of the previous fiscal year based on the balance sheet as of June 30....DOR recommends that communities understand the role free cash plays in sustaining a strong credit rating and encourages the adoption of policies on its use. Under sound financial policies, a community would strive to generate free cash in an amount equal to 3-to-5 percent of its annual budget. Free cash would not be depleted in any year, so that the following year's calculation would begin with a positive balance. Conservative revenue projections and departmental appropriations would be orchestrated to produce excess income and departmental turn backs. As a non-recurring revenue source, a prudent use of free cash would be to fund one-time expenditures, a capital purpose or to replenish other reserves....

Department of Revenue Quotes

"Best Practices" - FREE CASH

There are several areas where financial policies make sense. Communities should consider policies regarding the level of free cash and stabilization fund reserves and how these reserves are to be used. For example, it is prudent to avoid using these reserves for operating expenses as they are not "recurring" revenue sources. Maintaining free cash balances in the area of three to five percent of the budget provides funding for unforeseen or emergency expenses, reduces the need for cash flow borrowing and demonstrates to bond rating agencies that a community is living within its means. Policies on the amount needed in the stabilization fund vary depending on what big ticket items need funding in future years. For example, a community may decide to build this account aggressively in the years prior to a new school project to reduce the amount to be borrowed or to cushion the impact on the tax rate.