DATE:
February 21, 2023
TO:
Paul Buddenhagen, City Manager
FROM:
Lawrence Chiu, Finance Director
SUBJECT:
Resolution Of The City Council Of The City Of Emeryville Amending The City’s Reserve Policies
RECOMMENDATION
Staff recommends that the City Council adopt the above-entitled resolution amending the City’s financial policy related to reserve funds.
BACKGROUND
The existing reserve policy, which was approved by the City Council in conjunction with development of the Fiscal Year 2016-17 Budget, identifies the purpose, eligible uses and target funding level of the Economic Uncertainty Reserve and provides a description of the Undesignated General Fund Reserve. The reserve policy has not been reviewed or updated since 2016.
DISCUSSION
The existing reserve policy addresses only the Economic Uncertainty Reserve and the Undesignated General Fund Reserve. Staff is recommending that the title of the policy document be revised from “Reserve Policies” to “Expenditure and Reserve Policies” and that the following policy amendments be considered:
Economic Uncertainty Reserve
The existing policy establishes a target funding level of 50 percent of the General Fund operating budget for the Economic Uncertainty Reserve. No change to that target funding level is proposed at this time. The balance in the Economic Uncertainty Reserve is $22,978,571, which represents 48 percent of the $47,895,372 approved Fiscal Year 2022-23 General Fund budget. The Mid-Year budget adjustment, which the City Council will consider on March 7, 2023, will include a request to transfer $969,115 from the Unassigned fund balance (reserve) to the Economic Uncertainty reserve to reach the 50 percent target level.
Disaster Reserve
The Disaster Reserve, with a balance of $3,142,251, is identified in the City’s audited financial statements. However, a description of the intended uses for these funds and a target funding level is not included in the current reserve policy. It is recommended that the Disaster Reserve be formalized and incorporated into the Expenditure and Reserve Policies document, including a statement that the purpose of this reserve is to provide funding if needed to respond to a disaster or other imminent or emergency event. It is also recommended that this reserve fund maintain a balance of $5 million.
Emeryville Measure F Funds
On March 3, 2020, the Measure F ballot measure was approved by 74.5% of Emeryville voters. Measure F increased the City’s sales tax levy by one quarter-cent to maintain the health and improve the quality of life in Emeryville. In Fiscal Years 2020-21 and 2021-22, Measure F funds totaling $2.5 million were utilized to support the Emeryville Child Development Center’s early childhood education costs. The current balance in the Measure F fund is $4.4 million.
It is recommended that a policy prioritizing the eligible uses of Measure F funds and establishing a target reserve balance of $4 million be incorporated into the Expenditure and Reserve Policies.
Emeryville Measure O Funds
Emeryville voters, on November 8, 2022, approved Measure O which adjusted the City’s Real Property Transfer Tax. The City will begin receiving Measure O funds in early 2023.
As with the Measure F funds, it is recommended that an expenditure policy identifying prioritized uses for Measure O funding be incorporated into the Expenditure and Reserve Policies document. It is also recommended that a Measure O Critical Needs Fund be established and maintained with a balance of $1 million for the purpose of providing funds to address unbudgeted one-time critical maintenance or critical service needs.
A draft of the proposed Expenditure and Reserve Policies is attached. The recommended changes to the existing Reserve Policies document are noted in red font.
ADVISORY BODY REVIEW
The Budget and Governance Committee reviewed the proposed Expenditure and Reserve Policies on February 7, 2023.
PREPARED BY: Lawrence Chiu, Finance Director
APPROVED AND FORWARDED TO THE
CITY COUNCIL OF THE CITY OF EMERYVILLE:
__________________________________
Paul Buddenhagen, City Manager
ATTACHMENTS
Draft Resolution
Draft Expenditure and Reserve Policies
Adoption of Financial Reserve Policy Amendments
City Council Meeting | February 21, 2023
MEMORANDUM