COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Ambulance Transport System Enterprise
Fund Reserve Policy
POLICY
NUMBER EFFECTIVE
DATE
PAGE
2/14/2023 1 OF 3
ADOPTED BY: (Resolution No.) DATED: 2/14/2023
AMENDED BY: Resolution No. (date of resolution)
BACKGROUND
On May 12, 2020, City Council approved Chula Vista Council Resolution No. 2020-102 directing the Fire Department to provide exclusive Emergency Medical Ambulance Transport Services (ATS) within the City of Chula Vista, the City of Imperial Beac h, and the Bonita Sunnyside Fire Protection district. In the resolution were revenue projections that included both a base rate and ancillary fees multiplied by the volume of transports to reach projected FY 2022 revenues. The resolution adopted a rate of $ 2,800 as the “Base Cost of Service ”. In addition, Resolution No. 2020-103 authoriz ed a purchase agreement with Republic EVS for purchase of 13 ambulances; Resolution No. 2020-104 authoriz ed a purchase agreement with Stryker Medical for gurney systems; Resolution No. 2020-105 authorized a sole source purchase agreement with Zoll Medical Corporation for cardiac monitors and auto pulse systems; and Resolution No. 2020-106 authorized a sole source purchase agreement with Motorola Solutions . These resolutions re sulted in loan agreements in the amount of $4,493,100 with Banc of America Public Capital Corp , and an interfund loan in the amount of $4,881,710 from the Measure A available fund balance. These loans are being utilized to provide funding for all capital p urchases and star t-up costs as sociated with the Ambulance Transport Program. The interfund loan from Measure A was agreed to be repaid within the first five (5) full years of operation of the ATS program at an interest rate equal to the City’s pooled inves tment rate of ret urn, which wa s approximately 2.2% at the time the interfund loan was approved by City Council. The loan from Banc of America Public Capital Corp is repaid in semiannual payments with an annual interest rate of 1.00%.
PURPOSE
To establish a formal ATS Enterprise Fund Reserve Policy. The fund reserve policy is to provide guidance to City Council and staff in making financial decisions and aid in ensuring fiscal responsibility of the ATS Enterprise Fund. This policy establishes reserves that will position the Transport program to be able to weather significant economic downturns and more effectively manage uncertainties. Sufficient reserves create the financial stability necessary to meet debt obligations of the ATS Enterprise Fund, reduc e the risk of i mpacting the General Fund , and support continuous provision of emergency services to our residents.
POLICY
This Policy establishes four (4) distinct ATS Enterprise Fund Reserves:
1. Debt Obligation Reserves – Minimum 1-year current debt obligation
2. Liability Insurance Reserves - Minimum $1 million liability insurance reserves
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Ambulance Transport System Enterprise
Fund Reserve Policy
POLICY
NUMBER EFFECTIVE
DATE
PAGE
2/14/2023 2 OF 3
ADOPTED BY: (Resolution No.) DATED: 2/14/2023
AMENDED BY: Resolution No. (date of resolution)
3. Operating Reserves – Minimum 180 days operating expenses
4. Capital Replacement Reserves - Minimum $4 million in capital replacement reserves Debt Obligation Reserve
The ATS Enterprise Fund will maintain a fund balance reserve equal to one fiscal year’s debt obligation. This reserve is to ensure debt obligations are met to keep the City in good credit standing. In fiscal years with no current debt obligations, the debt obligation reserve will be used to bring other reserve balances to their stated policy levels. If all reserves have achieved minimum levels and no debt obligations exist, this reserve will be no longer be required and any funds will be release for other use at the discretion of the Fire Department.
If funds are appropriated (spent) from the Debt Obligation Reserves due to unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the magnitude of the event caused the Debt Obligation Reserves to be d eeply reduced, the City Manager , Fire Chief and Finance Director shall provide the City Council with a plan to incrementally replenish the reserves to the minimum one-year debt obligation level . The provided plan will align with the budget process or quart erly m onitoring report, whichever occurs first.
Operating Reserve
An Operating Reserve represents unrestricted resources available for appropriations by City Council to address extraordinary needs of an emergency nature. The ATS Enterprise Fund will maintain an Operating Reserve of no less than 180 days of operating expenses . This will be calculated using the following fiscal year’s adopted expense budget (excluding debt service and transfers-out), with the maximum reserve amount of twelve months of operating expen ses. The Fire Department reserves the right to maintain reserve balances at their discretion within the minimum and maximum thresholds of 180 days and up to twelve months of operating expenses.
If funds are appropriated (spent) from the Operating Reserves due to unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balan ce. If the magn itude of the event caused the Operating Reserves to be deeply reduced, the City Manager, Fire Chief and Finance Director shall provide the City Council with a plan to replenish the reserves to the minimum operating balance.
Capital Reserves
The ATS Enter prise Fund will maintain four million dollars in reserves specified for various capital equipment replacement, as needed. This reserve is to ensure funds are available for various capital purchase needs as they arise. This reserve is also being created to provide relief from the need to obtain debt-based funding for capital or equipment needs. The Fire Department will
COUNCIL POLICY
CITY OF CHULA VISTA
SUBJECT: Ambulance Transport System Enterprise
Fund Reserve Policy
POLICY
NUMBER EFFECTIVE
DATE
PAGE
2/14/2023 3 OF 3
ADOPTED BY: (Resolution No.) DATED: 2/14/2023
AMENDED BY: Resolution No. (date of resolution)
reassess the need for capital reserve needs every three (3) years and incorporate necessary adjustments into the budget process to ensure reserve goals are met in a manner that are balanced with other budgetary priorities.
If funds ar e appropriated from the Capital Reserve due to anticipated or unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the magnitude of the event caused the Cap ital Reserves to be deeply reduced, the City Manager, Fire Chief and Finance Director shall provide the City Council with a plan to replenishment the reserves to the minimum balance . The provided plan will align with the budget process or quarterly monitoring report, whichever occurs first.
Liability Insurance Reserves
The ATS Enterprise Fund will maintain one million dollars in r eserves specifie d for meet ing liability insurance needs as they arise. This reserve is to ensure claims can be addressed and fulfilled as they arise. The Fire Department will r eassess the need for liability insurance reserve needs every three (3) years and incorporate nec essary adj ustments into the budget process to ensure reserve goals are met in a manner that are balanced with other budgetary priorities.
If funds are appropri ated from the Liability Insurance Reserve due to anticipated or unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the ma gnitude of the event caused the Capital Reserves to be deeply reduced, the City Manager, Fire Chief and Finance Director shall provide the City Council with a plan to replenis h the reserves to the minimum balance . The provided plan will align with the budget process or quarterly monitoring report, whichever occurs first.
Establishment of Reserves
The ATS Enterprise Fund program is current ly in its second year of operation. To establish the reserves outlined above , until reserves are fully funded , all revenues in excess of expenses (surplus) at year end will be used to fund reserves . In determining the s urplus, expenses will include any discretionary Measure A loan payment.
These reserves will be established as an equal 25% allocation to each reserve category of excess revenue at year end, after any discretionary Measure A loan payment.
The funding waterfall will be evaluated periodically and may be revised by the Finance Director in consultation with the Fire Chief.