DATE: May 6, 2024
TO: Mayor and Members of the City Council President and Members of the Estero Municipal Improvement District (EMID) Board of Directors
VIA: Stefan Chatwin, City/District Manager
FROM: Waqas Hassan, Assistant Finance Director
DEPARTMENT: Finance
SUBJECT: GENERAL FUND RESERVE POLICY
RECOMMENDATION
It is recommended that the City Council/EMID Board of Directors approve the attached resolutions adopting an updated General Fund Reserve Policy that would establish a minimum reserve threshold of 50% of budgeted annual operating expenditures.
EXECUTIVE SUMMARY
At the February 26, 2024 Special Meeting, the City Council/EMID Board provided policy direction to City staff to prepare a resolution updating the General Fund Reserve Policy and changing the minimum reserve threshold to 50% of the budgeted annual operating expenditures.
BACKGROUND AND ANALYSIS
The City’s current reserve policy for its General Fund is a minimum reserve threshold of 33-1/3% of budgeted annual operating expenditures, with a target reserve range of 33- 1/3% to 50% of budgeted annual operating expenditures.
Based upon the discussion held during the February 26 meeting, the Council/EMID Board of Directors determined that the current General Fund reserve policy should establish a fixed percentage reserve threshold instead of a range. Additionally, it was
determined that the COVID-19 pandemic and the current economic situation has proved that the City needs to be fiscally prepared for unforeseen circumstances.
Increasing the General Fund reserve threshold to 50% would allow the threshold to be more reflective of increasing operating expenditures in future years. In addition, the City Council indicated that a reserve threshold of 50% be used in managing General Fund reserves in its 5-Year Financial Plan.
Upon City Council adoption of the attached resolutions, staff will record a designation of unrestricted General Fund balance equal to 50% of the FY 2023-2024 budgeted annual expenditures. Thereafter, at the end of each fiscal year, staff will update the designation of unrestricted General Fund balance based on 50% of the budgeted annual expenditures for the following fiscal year.
CALIFORNIA ENVIRONMENTAL QUALITY ACT
Not Applicable
FISCAL IMPACT
There is no fiscal impact in accepting the policy. Staff will record a designation of unrestricted General Fund balance representing 50% of the FY 2023-2024 budgeted annual operating expenditures. Going forward, staff will update this designation every year based on the budgeted annual General Fund operating expenditures.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Innovation and Sustainability
Staff Empowerment and Operational Excellence
ATTACHMENTS
Attachment 1 – City Resolution
Attachment 2 – EMID Resolution