Fiscal Policy
INT
RODU
CTION
Objec
tive
T
o establish a set of fiscal policies which will assist in ensuringThis Fiscal Policy (or “Policy”) establishe
s policy parameters to guide the City’s long term fiscal stability . These policies are, includ
ing parameters for establishing and implementing the City Budget. This Policy is intended to provi
de direction so thatfor the management of the City’s finances are managed in a manner that wil
l continue to provide for the delivery of quality services; maintain an enhanced service delivery;
ensure a balanced budget; and establish reserves necessary to meet known and unknown future obligations.
Policy Areas
This policyPolicy addresses the following areas:
1. Fiscal P
olicy Overview
2. Definitions
3. Budget Creation
4. Budget Priorities
5. Budget Adjustments
6. Accounting, Auditing and Financial Reporting
7. Capital Improvement Projects and Infrastructure
8. Debt
9. General Revenue Policies
10. Enterprise Fund Revenue
11. Investment
12. General Reserve Policies
13. Use of Fund Balance
14. General Fund Reserves
15. Capital Improvement Project (CIP) Fund Reserves
16. Trusts
17. Tourism
Improvement District Fund Reserve
18.17. Inte
rnal Service Fund Reserves
19.18. E
nterprise Fund Reserves
20.19. Inte
rnal Service Replacement Funds
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Fiscal
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1. Overview
of Purpose and Scope of this Policy
a. The general financial goal is to maintain and enhance the sound fiscal condition of the City.
b. App
licability. This policyPolicy applies to all funds for the City of Napa, as well as funds
managed by the City of Napa on behalf of other entities such as the Hou
sing Authority of the City of Napa, the Napa Enhanced Infrastructure Fina
ncing District, and Napa County.
2. Defini
tions. The following definitions set forth below shall apply to this Policy:. Unless otherwi
se defined in this Policy, the definitions and interpretations set forth in the Budget shall
apply to this Policy.
a. "Bala
nced Budget": In each fund, budgeted revenues plus
unreserve
d/undesignated fund balance are greater than budgeted expenditures. b. "Budg
et”: An annual plan approved by the City Council of financial activity including antici
pated expenditures and the estimated means to finance those expenditures.
Bud
get appropriations are authorized by formal City Council action with any budget adju
stments approved in accordance with the provisions of this Fiscal Policy. b. “Capi
tal Improvement Program (CIP) Project (CIP) Budget”: The adopted budget Budge
t includes a 5-year CIP budget, listing of all planned CIPcapital improvement projects, the
ir budgets, and their various funding sources.
c. “City
Charge”: Any tax, assessment, fee, or fine imposed by the City, in accordance with
the policies established by City Council pursuant to Napa Municipal Code Secti
on 3.04.040, and the “Policies and Procedures for the Establishment, Impl
ementation, and Enforcement of City Fees, Fines, and Charges” (Resolution Nos.
R2018-046 and R2018-047, as they may be updated by City Cou
ncil).category.
d. “Defici
t”: The excess of fund expenses over fund revenues at the close of a fiscal year.
e. “Department Director”: the chief executive appointive officer (as defined by City Charter Section 75 and Napa Municipal Code Title 2) of each Department identified in the Budget, or the authorized designee of the Department Director or City Manager.
f. "Fund": An independent fiscal and accounting entity with a self-balancing set of accounts recording cash and/or other resources together with all related liabilities, obligations, reserves, and equities.
g. "Fund
Balance": The difference between assets and liabilities reported in a governmental fund.
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h. "Fund
Balance Categories" per current governmental accounting standards (GASB 54):
i. “Non-Spendable”: Cannot be readily converted to cash or cannot legally be spent
ii. “Restricted”: External imposed (by granting agencies, governmental entities, etc.) restrictions on spending
iii. “Committed”: City Council formally-imposed (by resolution or other action) restrictions on spending
iv. “Assigned”: Funds reserved by Council direction or City Manager for designated purposes
v. “Unassigned”: Residual balance not classified in any of the above categories
i. "General Fund Operating Budget": total General Fund expenditure budget less transfers to other funds and reserves.
j. "Non-Recurring": Revenues or expenditures not expected to recur on a regular basis; not to be included in the regular operating budget. k. "Surplus": The excess of fund revenues over fund expenses at the close of a fiscal year
.
k. "Objec
t Code”: Object codes are used in the City’s financial system to differentiate betwe
en different types of revenues, expenditures, and balance sheet accounts.
3. Bud
get Creation
a. The C
ity Council will adopt a balanced two-year budget by June 30 of every other year
. As a part of the bi-annual reviewbiennial budget process, prior to the end of the first
year of the two-year budget cycle, the City Council will adopt thea budget for the
second year of the two-year budget.(in compliance with City Charter Secti
ons 87 – 91) which will incorporate any amendments for the second year of the two
-year budget cycle. When considering each budget, or any amendments to a bu
dget recommended by the City Manager, the City Council will consider the follow
ing policy goals:
i. A bi
-annualbiennial base operating budget will be developed by verifying or conserva
tively projecting revenues and expenditures for the current and forthcomi
ng two fiscal yearyears.
ii.
The
City will maintain a level of expenditures which will provide for the public well-being and safety of the residents, property owners, businesses, and visitors of the community.
iii. CurrentP
rojected revenues will be sufficient to support currentprojected operatin
g expenditures. The City will estimate its annual revenues by an obje
ctive, analytical process utilizing trend, judgmental, and statistical ATTACHMENT 2
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anal
ysis as appropriate. Revenue estimates adopted by the City Council must be
conservative.
iii.
iv. The
City shall contract with outside consultants or utilize limited term City staff positions for peaks in workload, when a project is limited in term and/or scope, or when specialized expertise is necessary and it is more cost- effective to hire a consultant than add a full-time staff position. Any appointment to a limited-term employment position shall be made in accordance with Council Policy (R1999-247, as may be amended).
Conversely, for longer -term needs (at least 3 to 5 years), or when the City Manag
er determines it is more cost-effective, the City Council may consider adding full-time staff.
v. The
City will project its equipment replacement and maintenance needs for the next sixten years and will update this projection each year. From this projecti
on a maintenance and replacement schedule will be developed and followed.
vi. The
Non-Recurring General Fund will be used to budget for non-recurring items.
b. Each
Department Director may request additional funds for new positions, equipment, or programs during the budget creation process. Requests are submitted as DecisionBudget Packages and include a description of what the funds
requested funding will be used for and the estimated financial impact. c. Compe
nsated Absence annual appropriations are budgeted in the General Fund for payment of various accrued leave balances (non-Enterprise Fund only). The three appropriations are for payment of accrued leave for separating employees, leave payouts for continuing employees, and annual cashouts of management leave. The appropriation amounts shall be based on historical trends, salary growth, and anticipated usage of leave cashout policies. d. The
Public Safety Overhire annual appropriation is budgeted in the Non-Recurring General
Fund. This appropriation can be used to pay for Public Safety staffing whe
n the department has a reasonable and necessary reason for temporarily overf
illing a position. Use of this appropriation is subject to City Manager approval.
The an
nual appropriation amount shall be $200,000.
4. Bud
get Priorities
When considering each budget, or any amendments to a budget recommended by the City Mana
ger, the City Council will consider the following policy goals:
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a. Mainten
ance and replacement funding will be prioritized each year to ensure that capital facilities and equipment are sufficiently maintained to avoid service disruptions.
b. Proje
cts or programs to improve City business processes and/or increase efficiency will be prioritized over the addition of new full-time staff. c. If fund
ing is not available for operations and maintenance costs of proposed new facilities, the City will delay construction of these facilities.
5. Bud
get Adjustments
a. Budget adjustments should be requested throughThe City Manager is authorized to estab
lish administrative regulations to document the Finance procedures for Dep
artment Directors to submit requests for budget adjustments using the City’s Bud
get Adjustment Form (BAF)financial system.
i. Each
Department Director should manage their budget by object category (Sala
ries and Wages, Services, Materials and Supplies, etc.).
Generall
y,Any proposed amendment to the Finance Department will not process
budget adjustments that transfer funds between objects within the same
key and category unless needed for contract or purchase order approva
l.
ii. The B
udget Adjustment Form requires the signature of the Department Direc
tor.
a. All
budget adjustments require signature approval by the appropriate authority:
i. Any
budget adjustment for a CIP project, any transfer between City funds, or any app
ropriation of fund reserves requires Council approval.
ii.b. Any bu
dget transfer involving salaries and benefits budgets or a transfer between depa
rtments requires approval by the Department Director and , except that the City Mana
ger. is authorized to approve an amendment to the Budget upon making
a written determination in accordance with any of the following circums
tances:
iii.i. Add
itional budget appropriations may be approved by the City Manager whe
nWhen the increased expenditure is completely offset by new matching
revenue. The Department Director also must sign off on the budg
et request. under either of the following circumstances:
1. To the
extent an operationthe City receives donations (including grants
) for a specified purpose, the City Manager is authorized to increas
e appropriations for that operationdepartment and that
fiscal ye
ar in an amount not to exceed the amount of the donation.
Adjustments shall be reported to the City Council as part of the nex
t regular financial report.
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2. To
the extent an operation relies on estimated fee revenue as its source
of revenue, and the revenue received during the fiscal year excee
ds the estimated revenue identified in the budgetthat a depa
rtment projects revenues above that fiscal year’s budgeted revenue
s, the City Manager is authorized to increase
approp
riations for that operationdepartment and that fiscal year in an a
mount not to exceed the lesser of: (a) amount of the estimated fee reven
ue or (b) 15% of the budgeteddepartment’s total revenue budg
et for that fund fee revenue estimate.and object code.
Adj
ustments shall be reported to the City Council as part of the next regula
r financial report.
iv.i. A
Department Director mayAny budget transfer funds within the same fund invol
ving: (a) salaries and benefits budgets, or (b) transfers between depa
rtments, or (c) accounts not restricted above within thea department as neces
sary to meet department objectives.
c. Bud
gets may be carriedThe City Council hereby authorizes the City Manager, for all fund
s except the General Fund, to carry forward a revenue or an expenditure approp
riation from a prior yearfiscal year to the next fiscal year, based on the follow
ing criteria:
c. The
City Manager is authorized to increase appropriations for each fund in each fiscal
year,departmental request and in an amount not to exceed the amount encumb
ered but not yet expended appropriations from that fund for the previou
sprior fiscal year. For the General Fund, the City Manager is authorized to carry forwa
rd an expenditure appropriation from a prior fiscal year to the next fiscal year, provided the amount is for an encumbrance that will carry forward to the next fiscal year and does not exceed not yet expended appropriations from the fund for the prior fiscal year.
i. The actua
l amount of thesethe increased appropriations for the next fiscal year
, due to unexpended encumbrances, unexpended
encumb
rancesdepartment requests, and available appropriations from the prior
fiscal year, will be reported to the City Council as a part of the annual financi
al audit for the previousprior fiscal year.
ii. The
City Manager is authorized to increase appropriations for each fund in each
fiscal year, in an amount not to exceed not yet expended approp
riations from that fund for the previous fiscal year for continuing nonrecu
rring projects.
6. Acc
ounting, Auditing &and Financial Reporting
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a. The C
ity'sCity’s accounting and financial reporting systems will be maintained in confor
mance with generally accepted accounting principles and standards of the Government Accounting Standards Board.
b. Fina
ncial reports will be submitted to the City Council and will be made available to the public at least twice each fiscal year.
c. Full
and continuing disclosure will be provided in the general financial statements and bond representations.
d. The C
ity will maintain a good credit rating in the financial community. e. The C
ity will maintain a liquidity ratio of at least 1:1.
f. An
annual audit will be performed by an independent public accounting firm with the subsequent issue of an official Annual Comprehensive Annual Financial Report (CA
FRACFR), including an audit opinion.
g. In acc
ordance with City Charter section 58, the Finance Director will, at least once a month, provide a written report to the City Council of the cash in the Treasury to the City
Council in writing.
h. In acc
ordance with Napa Municipal Code section 2.32.050, the Finance Director shall deliver to the City Manager and to the City Council at a regularly scheduled Council meeting, a budget report showing the budget status at the end of the preceding month.
i. The
Long-Term Financial Forecast shall be prepared annually projecting revenues and expenditures for the General Fund. This forecast shall be used as a planning tool in developing the following year’s operating budget.
7. Cap
ital Improvement Projects and Infrastructure
When considering each Budget, or any amendments to a Budget recommended by the City Mana
ger, the City Council will consider the following policy goals:
a. The
City will plan for the design, construction, implementation, operation, and maintenance of capital improvements in accordance with an adopted capital improve
ment programCapital Improvement Program.
b. The
City will develop an annual five-year plan for capital improvements, including CIP
project design, construction, implementation, and operating and maintenance costs
(“CIP Project Budget”).
c. The
purchase of new or replacement capital equipment with a value of $25,000 or more
and with a minimum useful life of two years will require City Council approval. d. The
City will use intergovernmental assistance to finance only those capital improvements that are consistent with the Capital Improvement PlanProgram and City prio
rities and for which operating and maintenance costs have been included in the budgetBudget.
e. To
cover the costs of CIP projects planned for the Water Enterprise Fund and the Solid Waste / Materials Diversion (and Recycling) Enterprise Fund, the City will ATTACHMENT 2
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seek
non-General Fund sources of revenue (including grants from other agencies), and the City will otherwise cover the costs through the establishment and regular updating of City Chargesfees and charges that are equitably imposed on users of the service
s.
f. The
Water Fund shall propose a budget that includes a minimum investment in infr
astructure of $3 million annually for five years starting in FY 2012-13 to be funded
by rate based revenue and connection fees from development.
8. Deb
t
a. The
City Council may authorize the use of short-term debt to cover temporary or emergenc
y cash flow shortages of less than one fiscal year. All short-term borr
owing will be approved in writing by the City Manager, filed with the Finance Direc
tor, and taken to City Council for approval.
b. The
City Council may issue inter-fund loans rather than outside debt instruments to meet short-term cash flow needs. Inter-fund loans must be repaid consistent with terms established in a written agreementapproved by a Council resolution. c. The
City will confine long-term borrowing to fund capital improvements that cannot be funded from current revenues.
d. The
City will use special assessment revenue, inter-fund loans or other self- supporting bonds instead of general obligation bonds when feasible.
9. Genera
l Revenue Policies
a. The C
ity will strive to maintain a diversified and stable revenue base to shelter it from short-term fluctuations in any one revenue source. b. The ob
jective of the revenue policies is to ensure that funding is derived from a fair, equitable, and adequate resource base, while minimizing tax differential burden
s. Services having a citywide benefit shall be financed with. When establi
shing new or amended sources of revenue: (i) the City Council will use General F
und revenue sources generated from a broad base, (such as property taxes, tran
sient occupancy taxes, sales taxes, and business license taxes.
Servi
ces) to pay for City services that provide a citywide benefit; and (ii) services that provi
de a particular benefit to a customer or user shall primarily be financed with user fees, charges, or assessments based on the level of service provided (in accordance with California Constitution Article XII C, Section 1(e), known as “Prop 26
”).State law, including California Constitution Articles XIII C and XIII D, know
n as “Prop 26” and “Prop 218”). The City’s goal is to recover from the recipi
ent of City services the full cost of services provided, subject to the limitatio
ns of law, unless the City Council determines that public policy or market factors
warrant a lesser fee amount.
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c.iii
. The C
ity will estimate its annual revenues by an objective, analytical process
utilizing trend, judgmental, and statistical analysis as appropriate.
Reve
nue estimates adopted by the City Council must be conservative. d.c. Fees
Subject to approval by the City Council, and in accordance with limitations of State
law, fees for City services will be adjusted at least annually to recover the fullon
a recurring schedule to address changed circumstances, including cost of services
provided, unless when it is determined that policy, legal, or market factors require l
ower fees and it is in the public interest.living adjustments. e.d. Non
-recurring revenues will be used for non-recurring expenditures only. (Incl
udingThis includes all non-recurring funds, including capital and reserves.). i. Non
-recurring general revenues will be deposited into the Non-Recurring General Fund.
10. Enterp
rise Fund Revenue
a. The
City will set fees and user charges for each utility fund at a level that fully supports the total direct and indirect cost of the activity . and that supports capital inves
tment in the system including the costs of annual depreciation of the system assets
. Indirect costs include the cost of annual debt service used for capital assets and ove
rhead charges.
b. Water
rates shall be established at a level that supports operating costs as well as capital
investment in the system equal to or greater than the level of annual depreci
ation of the system assets based on the average of the previous five years.
11. Invest
ment
a. The
City Treasurer will annually submit an investment policy to the City Council for review and adoption.
b. The
City Treasurer will invest the City’s monies in accordance with applicable laws and adopted investment policies and direct the investment of bond or note monies on deposit with a trustee or fiscal agent in accordance with the applicable indenture or issuance document.
12. Genera
l Reserve Policies
a. It is t
he intent of the City to establish and maintain reserve funds to ensure the continued delivery of City services to address emergencies, address a temporary revenue shortfall or provide stability during economic cycles. Sufficient reserve funds will be managed to provide adequate cash flow, stabilize the City's interest rates and provide continuity in service delivery. The City shall maintain adequate cash reserves in each fund to maintain a positive cash position at any time during a fiscal year and at year-end.
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b. If fiscal ch
anges require staff to recommend funding reserves abovethat differ fro
m the policy minimumsamounts identified in this Policy, staff will bring this recommend
ation to Council as a specific action for approval.
b.
13. Use
of Fund Balance
a. The
City shall reduce committed or assigned fund balance first only if the expenditures incurred are for the purpose for which the funds were originally committed or assigned. Otherwise, unassigned fund balance shall be reduced first, followed by assigned, and then committed.
b. Fund
Balance amounts that are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed, are to be reported as Assigned Fund Balance. The Finance Director is designated the authority
authorized to “assign” amountsdesignate fund balances that are “assign
ed” to be used for specific purposes. Those amounts are to be reported in the
financial statements as “Assigned Fund Balance” in compliance with GASB Statement 54.
c. At
After the end of each fiscal year, and upon completion of the annual financial audi
t, the City Council shall take action to transfer any available unassigned fund bala
nce in the General Fund shall be transferred to the CIP Facilities Reserve. d.c. At
the end of each fiscal year, any undesignated fund balance, net of planned spend
ing in future budgets, in the Non-Recurring General Fund in excess of 2% of that
year's General Fund Operating Budget shall be transferred to the CIP Facilities Rese
rve or appropriate for other priority expenditures.
14. Genera
l Fund Reserves
a. The
City shall establish andCouncil hereby authorizes the City Manager to maintai
n a General Fund Emergency Reserve. in accordance with this Policy. Each fiscal
year, the City will include in its adopted budgetthe Budget a transfer to the General
Fund Emergency Reserve to bring the reserve balance to at least 14 % percent
of that year’s General Fund Operating Budget. ThisHowever, this transfer may be
excluded from the adopted budget if there isBudget to the extent necessary to avoid
a budgeted deficit.
i. The
primary purpose of this reserveGeneral Fund Emergency Reserve is to p
rotect the City’s essential service programs and funding requirements during significant events such as (but not limited to) economic downturns/recessions that impact City revenues, natural disasters, declared emergencies (as defined by Napa Municipal Code Chapter 2.89), state government reductions or takeaways of City revenues, or other ATTACHMENT 2
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situatio
ns that could not be reasonably foreseen during preparation of the budget.
1. In the
event the City Manager declares that action is needed to be taken to resolve an emergency, in accordance with Napa Municipal Code Section 2.91.040, the City Manager is authorized to encumber and spend the General Fund Emergency Reserve to pay the costs of the action to resolve the emergency. These actions shall be reported to the City Council at their next meeting after the decl
aration of the emergency ., and during the duration of the decl
ared emergency in accordance with Napa Municipal Code
Secti
on 2.91.040.
ii.
In the
case of natural disasters, the General Fund Emergency Reserve shoul
d be used to pay for FEMA-approved projects. After receiving FEMA approva
l, theThe project total amount shall be transferred from the Emergen
cy Reserve and deposited into the appropriate project fund. The tran
sfer of funds and related budget adjustments shall be taken to City Cou
ncil for review and approval.
1. All
The City Manager is authorized to deposit any reimbursement funds
received from FEMA and CalOES will be deposited, into the Emergen
cy Reserve to replenish the fund.
2. The
The City Manager is authorized to initially fund the City’s portion of FE
MA projects will be initially funded byfrom the General Fund Emergen
cy Reserve. The proposed timing of repayment will be
included in the City’s Long-Term Financial Forecast.
iii. The
use of the General Fund Emergency Reserve must be approved by the City Council. In As an exception, in the situations described in
14.1.1a
a.i and 14.1.2a.ii above, the City Manager is authorized to use the General
Fund Emergency Reserve and then report to the City Council. All other
situations require advance approval from the City Council before use. iv. App
roved use of General Fund Emergency Reserve funds may cause the bala
nce of the reserve to drop below the required 14 % percent level. The City
will begin to restore reserves used under this policyPolicy within 24 months a
fter their first use. The proposed timing of repayment of reserves will be subject to approval by the City Council and will be included in the City’
s Long-Term Financial Forecast.
v.
b. The
City shall establish andCouncil hereby authorizes the City Manager to maintai
n a General Fund Operating Reserve. in accordance with this Policy. Each fiscal
year, the City will include in its adopted budgetthe Budget a transfer to the General
Fund Operating Reserve to bring the reserve balance to at least 6%5 percent
of that year’s General Fund Operating Budget. ThisHowever, this transfer ATTACHMENT 2
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may be
excluded from the adopted budget if there isBudget to the extent necessary to avo
id a budgeted deficit. The primary purpose of this reserveGeneral Fund Operating
Reserve is to make up for temporarily decreased revenues or to provide temporary
resources in the event of an economic downtown downturn while expen
diture reductions are implemented.
vi.i. The use
of the General Fund Operating Reserve must be approved by the City
Council.
vii.
ii. App
roved use of General Fund Operating Reserve funds may cause the
balance of the reserve to drop below the required 5% percent level.
The
City will begin to restore reserves used under this policyPolicy withi
n 24 months after their first use. The proposed timing of repayment of reserves will be subject to approval by the City Council and will be incl
uded in the City’s Long-Term Financial Forecast.
viii.
c. The
City shall establish andCouncil hereby authorizes the City Manager to maintai
n a General Fund Contingency Reserve . in accordance with this Policy.
Each
fiscal year, the City will include in its adopted budgetthe Budget a transfer to the General
Fund Contingency Reserve to bring the reserve balance to at least 6%1 pe
rcent of that year’s General Fund Operating Budget. ThisHowever, this tran
sfer may be excluded from the adopted budget if there isBudget to the extent neces
sary to avoid a budgeted deficit. The primary purpose of this reserveGeneral Fund
Contingency Reserve is to provide funding for non-recurring unanticipated expen
ditures or to set aside funds to cover known contingencies with unknown costs.
ix.i. The
use of the General Fund Contingency Reserve must be approved by the C
ity Council.
x.ii.
App
roved use of Contingency Reserve funds may cause the balance of the
reserve to drop below the required 1% percent level. The City will begi
n to restore reserves used under this policyPolicy within 24 months after
their first use. The proposed timing of repayment of reserves will be
subject to approval by the City Council and will be included in the City’
s Long-Term Financial Forecast.
b.d. In the
event that budgeted revenue is not enough to fully fund all reserves, they shall
receive funding in the following priority order:
i. First
, repay any reserves as outlined in the City’s Long-Term Financial Forecast. If multiple reserves require replenishment, they should receive funds in the following order: first the Emergency Reserve, then the Operating Reserve, then the Contingency Reserve.
ii.
Next,
bring the reserve funds up to their prescribed percentage amounts in the following order: first the Emergency Reserve, then the Operating Reserve, then the Contingency Reserve.
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iii. If the
City experiences two consecutive years where the reserves could not be fully funded, the next Long- termTerm financial forecast shall map out
identify a strategyplan to bring the reserves up to the correct balances and mai
ntain annual contributions at the required level.
15. Cap
ital Improvement ProjectProgram (CIP) Fund Reserves
a. The
City shall establish and Council hereby authorizes the City Manager to maintai
n a CIP Facilities Reserve. in accordance with this Policy. Each fiscal year, the C
ity will include in its adopted budgetthe Budget a transfer from the General Fund
to the CIP Facilities Reserve, in thean amount ranging from 0.5 percent to
3.0 percent
of 2% of thethat year’s General Fund Operating Budget.
i. The
primary purpose of this reserveCIP Facilities Reserve is to provide fundin
g for the expansion or maintenance of existing City facilities or the creation
/renovation/acquisition of new facilities that meet the workforce needs of City services.
ii.
The
use of the CIP Facilities Reserve must be approved by City Council, generally through the CIP Budget adoption.
b. The
City shall establish and Council hereby authorizes the City Manager to maintai
n a CIP General Reserve. in accordance with this Policy. Each fiscal year, the C
ity will include in its adopted budgetthe Budget a transfer from the General Fund
to the CIP General Reserve, in thean amount of 1%ranging from 0.5 percent to 3.0 percent
of the year’s General Fund Operating Budget.
i. The
primary purpose of this reserveCIP General Reserve is to provide fundin
g for ongoing and future Capital Improvement Projects.
ii.
The
use of the CIP General Reserve must be approved by the City Council, gene
rally through the CIP Budget adoption.
iii. The
CIP Budget shall not program out the use of more than 90% percent of the
expected CIP General Reserve or CIP Facilities Reserve balance in any
year of the 5-year plan. This allows forthe Capital Improvement Program
(CIP) Project Budget.
iii. The
City Council hereby authorizes the City Manager to maintain a cushion in case p
roject costs are higher than expected.
c. A Gene
ral Plan Update Reserve Fund shall be maintained in the CIP Fund to accumul
ate funds necessary to update the General Plan every 20 years. The General Fund adopted budget shall include a transfer to the General Plan Update Reserve Fund of $100,000 per year.
i. The
use of the General Plan Update Reserve must be approved by the City Cou
ncil, generally through the CIP Budget adoption.
16. Trus
ts
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a. The
City will comply with GASB 45 and establishhas established an irrevocable trus
t to fund future retiree medical costs. The Trust will be funded through bi-weekly charges to departments equal to the Annual Required Contribution (ARC) as a percentage of payroll based on the most recent OPEBOther Postemployment Ben
efits (OPEB) Actuarial Report.
b. The
City has established an irrevocable Section 115 trust to help mitigate increas
es in future pension costs. Deposits to the Trust shall be authorized by the City C
ouncil as funds are available.
17. Tou
rism Improvement District Fund Reserve
a. The C
ity will maintain a Contingency Reserve Fund (CRF) for the Napa Tourism Imp
rovement District (Napa TID). The purpose of the CRF is to build and protect reserves
for usage during periods of extended economic downturn and uncertai
nty, unanticipated events that may impact travel and hospitality in the region
, or emergency / natural disasters that impact the City of Napa and busi
ness community and result in fluctuations of Transient Occupancy Tax revenue
s. Once approved as part of the Napa TID budget, funds in the CRF will remain un
spent until specific findings are made by the Local Governing Commit
tee of the Napa TID that require their usage. The findings will depend on the nature
of the emergency or unmet need.
b. It is t
he goal of the Napa TID to maintain the CRF so that the CRF balance is at a minimu
m of 35 percent of the annual budgeted revenues. The CRF will be held in a separa
te reserve account and will be funded on an annual basis at the end of each fisca
l year based on current year revenues. Additional funding of the CRF (above
the required 35 percent) shall be determined as a part of the preparation of the ann
ual workplan for the Napa TID, but shall not cause the balance of the CR
F to be greater than 100 percent of the annual budgeted revenues. c. The an
nual funding to the CRF will be equivalent to the budgeted surplus incl
uded in the adopted budget. The City of Napa Finance Department shall fund the CRF on
June 30 of each year based on actual revenues.
d. Any
recommendation to the City Council from the Local Governing Committee of the Napa
TID to use the CRF must include a plan for replenishment of the CRF.
18. 17. Internal
Service Fund Reserves
a. Flee
t Fund
i. The
City will establish andCouncil hereby authorizes the City Manager to maintai
n a Fleet Operating Reserve within the Fleet Fund. The target minimum reserve balance is $100,000.
ATTACHMENT 2
Fiscal
Policy
1. The
primary purpose of this reserve is to provide temporary resources in the event of higher than anticipated Fleet Operating costs.
2. The
use of the Fleet Operating Reserve must be approved by the City C
ouncil.
3. App
roved use of Fleet Operating Reserve funds may cause the balance of the reserve to drop below the $100,000 minimum. The City will begin to restore reserves used under this policyPolicy withi
n 24 months after their first use by collecting additional revenue through Fleet operations and maintenance rates. The proposed timing
of repayment of reserves will be subject to approval by the City
Council and will be included in the City’s Long-Term Financial Forecas
t.
b. Ris
k Management Fund
i. Sel
f-insurance reserves will be maintained at a level which, together with purchased insurance policies, adequately protects the City. The reserve funding level goal for each program is no less than the target 80% confidence level appropriately discounted for investment income.
1. The use of the Risk Management Fund Reserve must be approved by the Ci
ty Council.
2. App
roved use of the Risk Management Reserve may cause the
bala
nce of the reserve to drop below the target 80% confidence level
. Replenishment of the Risk Management Reserve will be
subje
ct to approval by the City Council.
19. 18. Enterp
rise Fund Reserves
a. Water Fun
d
a. The W
orking Capital or Undesignated and Recycling Fund Balance for the i. The
City will maintain a prudent level of reserve funds in the Water Enterpris
e Fund is to be maintained at a minimum 45-90 days of operating expen
ses or 12.3% to 25% of Operating and Maintenance costs. ii. The
City will transfer Working Capital or Undesignated Fund Balance of the Water
Enterprise Fund that is above 90 days of operating costs or 25% of annu
al operating and maintenance costs into the Capital Improvement Rese
rve.
iii. The
City will establish a Water Capital Improvement Reserve to pay for unforesee
n cost escalations to CIP projects and future compliance projects
. The reserve will be maintained at a minimum level of 10%-20% of annu
al capital improvements to the Water System.
ATTACHMENT 2
Fiscal
Policy
iv. The
City will establish a Long Term Water Supply Reserve and set aside $200
,000 annually from the operating fund.
v. The
City will establish a Water System Renewal and Replacement Reserve for
unforeseen and unbudgeted replacements or repairs. The reserve will be
maintained at a minimum level of 10%-20% of annual capital improve
ments to the Water System.
vi. The
City will establish a Water Fund Emergency Reserve to fund operating or cap
ital expenditures required as a result of unbudgeted financial liability.
The
reserve will be maintained at a level of 5%-10% of annual operating expen
ditures excluding debt service.
1. The
City Manager (or their designee) has the authority to expend Water
Fund Emergency Reserves to address critical needs within the w
ater system. In accordance with NMC 2.91.04, the item will be taken
to Council at the first feasible time at a regularly scheduled counci
l meeting.
b. the Sol
id Waste and Materials DiversionRecycling Fund
i. The
City will maintain a Rate Stabilization Reserve in as determined during the Sol
id Waste Fund. This reserve will be funded at a level of 5%-10% of collecti
on revenues to stabilize collection rates to avoid wide swings in rates over
time.
ii. The
City will maintain a Solid Waste/Materials Diversion Operating Reserve to co
ver unforeseen revenue shortfalls, increases in expenses, and potentia
l environmental compliance expenditures. The reserve should be funded
at a level of 20% of operating expenditures, which excludes contr
ibutions to reserves, the Street Resurfacing Program, capital projects, and de
bt service.
iii. The
City will maintain a Capital Improvement Projects (CIP) Reserve in the Sol
id Waste Fund to provide for major renovation, modernization or for plan
ned capital improvement program repairs and maintenance at the Nap
a MDF. This reserve is for projects that exceed $250,000 in any given year
, as set in policy approved by City Council. The annual contribution will equa
te to the annual depreciation of the MDF facility.
iv.
i. The
City will maintain a Liability Reserve in the Solid Waste Fund to fund liab
ilities of the City for items related to the Solid Waste Fundperiodic rate- setting p
rocess.
20. 19. Internal
Service Replacement Funds
a. Flee
t Fund
a. “Flee
t Replacement Reserve” and “Fleet Equipment Replacement and Upgrade Rese
rve”
ATTACHMENT 2
Fiscal
Policy
i. The
City willCouncil hereby authorizes the City Manager to maintain a Fleet Rep
lacement Reserve for costs associated with the replacement of vehicles and other rolling stock (such as trailers, compressors or other equipment on wheels) as they become unserviceable, obsolete or reach a predetermined service life. The reserve will be maintained at a level adequate to replace all stock, per the pre-determined replacement schedule. The reserve will track contributions and replacements based on the contributing fund (General Fund, Water Enterprise Fund, etc). ii.
The
City will establish andCouncil hereby authorizes the City Manager to maintai
n a Fleet Equipment Replacement and Upgrade Reserve within the Fleet Fund. The primary purpose of this reserve is to cover costs associated with the replacement of specialized tools, Fleet facility/vehicle equipment, as well as Electric Vehicle (EV) charging stations supporting City EV’s/equipment. This funding can be used to add new equipment and charging stations, as well as replace existing items throughout the life cycle of the equipment. The reserve will be maintained at a level adequate to replace all stockequipment, per the pre-determined replacement schedule. iii. The use
of the Fleet Replacement and Fleet Equipment Replacement and Upg
rade Reserve Funds must be approved by the City Council. iv. Rep
lenishment of the Fleet Replacement and Fleet Equipment Rep
lacement and Upgrade Reserves will be subject to approval by the City Cou
ncil.
b. Fire
Apparatus Replacement Fund
i. The
City willCouncil hereby authorizes the City Manager City to maintain a Fire
Apparatus Replacement Fund for costs associated with the replacement of Fire Apparatus vehicles as they become unserviceable, obsolete or reach a predetermined service life. The fund will be maintained at a level adequate to replace all stock, per the pre-determined replacement schedule.
1. The use of the Fire Apparatus Replacement Fund Reserve must be approve
d by the City Council.
2. Rep
lenishment of the Fire Apparatus Replacement Reserve will be subje
ct to approval by the City Council.
c. Equ
ipment Replacement Fund
i. The
City will establish andCouncil hereby authorizes the City Manager to maintai
n an Equipment Replacement Fund for capital equipment as it becomes unserviceable, obsolete or reaches a predetermined service life.
The fund will be maintained at a level adequate to replace all capital equipment per the pre-determined replacement schedule.
ATTACHMENT 2
Fiscal
Policy
1. The
use of the Equipment Replacement Fund Reserve must be
approve
d by the City Council.
2. Rep
lenishment of the Risk Management Reserve will be subject to approva
l by the City Council.
ATTACHMENT 2