EXHIBIT
“
F
”
Solid Waste & Recycling (SWR
)
Fund Reserve
Policy
Page
1 of
6 INTRODUCTION
Objective
This
Solid Waste & Recycling (
SWR)
Reserve Policy (or “Policy”) establishes policy parameters to guide the City’s
SWR
Fund’s long term fiscal
stability, including parameters for establishing
and implementing the
SWR
Fund Reserves. This Policy is
intended
to
provide
direction
for
the
management
of
the
City’s
SWR
Enterprise
Fund
finances
to
establish
reserves
necessary
to
meet
known
and
unknown future
obligations.
Policy Areas
This
Policy
addresses
the
following
areas:
1. Fiscal
Policy
Overview
2. Definitions
3. General
Reserve
Policies
4. SWR Fund
Liability (Emergency) Reserve Account
5. SWR Fund
Capital
Improvement
Project
(CIP)
Reserve
Account
6. SWR Fund
Rate
Stabilization
(
Unassigned
)
Reserve
Balance
EXHIBIT
“
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”
Solid Waste & Recycling (SWR
)
Fund Reserve
Policy
Page
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6 Solid Waste & Recycling (SWR)
Fund Reserve
Policy
1. Overview of Purpose and Scope of this Policy
a.
The
purpose of this Policy is to establish appropriate reserve levels for the City’s SWR
Fund.
b.
Applicability.
This
P
olicy applies
solel
y to the
SWR
Fund
for the City of Napa
.
2. Definitions.
The definitions
set forth below
shall apply to this Policy
.
Unless otherwise
defined in this
P
olicy, the definitions and interpretations set forth in the Budget shall apply to this
P
olicy
.
a.
"Budget”: An annual plan
approved by the City Council
of financial activity including
anticipated expenditures and the estimated means to finance those expenditures.
Budget appropriations are authorized by formal City Council action with any budget adjustments approved in accordance with the provisions of th
e City’s
Fiscal Policy.
b.
“Capital Improvement
Program (CIP)
Project Budget”: The
B
udget includes a
listing
of
all planned
capital improvement projects
by category
.
c.
"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.
d.
"Fund Balance": The difference between assets and liabilities reported in a governmental fund.
e.
"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
f.
"Non
-
Recurring": Revenues or expenditures not expected to recur on a regular basis; not to be included in the regular operating budget.
g.
“
SWR
Fund”: A proprietary enterprise fund operated by the City for the purpose of providing
solid waste and recycling collection and
material
processing services to
the community
.
h.
"
SWR
Fund Operating Budget":
T
otal
SWR
Fund expenditure budget less transfers
to
SWR
Fund Capital Improvement
Project Reserve
,
SWR debt service
,
and
EXHIBIT
“
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Solid Waste & Recycling (SWR
)
Fund Reserve
Policy
Page
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6 transfers to the City’s street
resurface program to mitigate impact of
heavy refuse
and recycling collection vehicles on City streets
.
3. General Reserve Policies
a.
It is the intent of the City to establish and maintain reserve funds in the
SWR
Fund
to ensure the continued delivery of
SWR
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
the
SWR
Fund
to maintain a
positive cash position at any time during
a fiscal year and at year
-
end.
b.
If fiscal changes require staff to recommend funding reserves that differ from the
amounts identified in this
P
olicy, staff will bring this recommendation to Council
as a specific action for approval.
c.
The City will maintain Fund reserves to protect the essential services provided under the fund.
d.
The following types of reserves will be maintained, each with a target funding amount, as described in Table 1:
Table 1. Summary Table for Solid Waste
& Recycling (SWR)
Fund Reserves
Reserve
Purpose
Funding Level
Operating
To cover unforeseen revenue shortfalls,
increases in expenses, and potential
environmental compliance expenditures
20% of projected operating
expenditures (less debt
service, capital improvement
projects, and street repair
and maintenance)
Rate Stabilization
To stabilize collection rates generally at
the time of rate setting to avoid wide
swings in rates over time
10 % of projected
SWR
Operating Fund
re
venue
with ta
r
get of 1% for
FY
25 /
26 , 2
% for FY
26 /
27 ,
5 % for FY
27 /
28 ,
7 % for
FY
28 /
29 ,
and 10% for
FY
29 /
30 and thereafter
Capital
Improvement
Projects (CIP)
To provide for major renovation,
modernization and/or
rebuilding of the
Napa MDF; allocated for projects that
are $
200
,000 or more
Based on
approved
year
-
to
-
year
Council
approved
SWR
CIP
budget
.
Liability
(Emergency)
To fund liabilities of the City for items
related to solid waste, including the final
fulfillment of the City’s legal obligations
with regard to Hidden Glenn
Landfill or
natural disasters
Current funding target of
$
35 0,000
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Solid Waste & Recycling (SWR
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Fund Reserve
Policy
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6 e.
The following is the order of
priority for funding and replenishment of the SWR
reserves: (
1) Liability (Emergency), (2)
Capital Improvement Projects, and (3)
Operating. The
SWR
Rate Stabilization
reserve account is drawn upon and
replenished at the discretion of the City Council.
4. SWR
Operating
Fund Reserves
a.
Operating Reserve.
The City Council hereby authorizes the City Manager to
maintain a
SWR
Fund Operating Reserve in accordance with this Policy.
The
primary purpose of this
SWR
Fund Operating Reserve is to cover day
-
to
-
day
expenses and maintain sufficient funds to cover accounts payable if there are supplier issues, periods of low
material
sales, or unforeseen cost increases
such
as labor disruptions or
natural disasters
.
i.
The
SW
R
Fund Operating Reserve shall be maintained at a
minimum
level
20 percent of the
SWR
Fund Operating Budget.
ii.
The use of the
SWR
Fund Operating Reserve must be approved by the
City Council.
iii.
Each fiscal year, the
SWR
Fund
will include in the Budget
a transfer
from the
SWR
Fund Operating Budget
to the
SWR
Fund Operating
Reserve to bring the reserve balance to
the
minimum
required level
.
However, this transfer may be excluded from the Budget to the extent necessary to avoid a budgeted deficit.
iv.
Approved use of
SWR
Fund Operating Reserve funds may cause the
balance of the reserve to drop below the
minimum
percent level. The
City will begin to restore reserves used under this Policy within 24 months after their first use
if
it below the minimum 20% threshold
. The
proposed timing of repayment of reserves will be subject to approval by the City Council and will be included in the
SWR
Fund Budget
.
b.
Liability
(Emergency)
Reserve.
The City
Council hereby authorizes the City
Manager to
maintain a
SWR
Fund Emergency Reserve
in accordance with this
P
olicy
.
The primary purpose of this
SWR
Fund
Liability (
Emergency
)
Reserve is to
protect the City’s
SWR
Fund
during significant events such as (but not limited to)
liability
from City owned properties related to
current or historical
SWR services
(e.g.,
Hidden Glen Landfill and City’s Materials Diversion Facility), economic
downturns/recessions
/pandemics
that
impact
SWR
Fund
revenues, natural
disasters, declared emergencies (as defined by Napa Municipal Code Chapter
2.89), state government reductions or takeaways of
SWR
Fund
revenues, or other
situations that could not be reasonably foreseen during preparation of the budget.
i.
The
SWR
Fund
Liability (
Emergency
)
Reserve shall be maintained at
a
fixed
$350,000
balance
unless or until adjusted by
separate Council
Action
.
EXHIBIT
“
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Solid Waste & Recycling (SWR
)
Fund Reserve
Policy
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6 ii.
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
SWR
Fund
Liability (
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 declaration of the emergency, and during the duration of the declared emergency in accordance with Napa Mun
icipal Code Section 2.91.040.
iii.
In the case of natural disasters, the
SWR
Fund
Liability (
Emergency
)
Reserve
may
be used to pay for FEMA
-
approved projects.
If used, t
he
project total amount shall be transferred from the Emergency Reserve and deposited into the appropriate project fund.
1. The City Manager is authorized to deposit
any
reimbursement funds received from FEMA and CalOES
,
into
the Emergency Reserve to replenish the fund.
2. The
City Manager is authorized to
initially
fund the
Water
Fund
’s portion of FEMA projects
from
the
SWR
Fund
Liability
(
Emergency
)
Reserve. The proposed timing of repayment
will be included in the
SWR
Fund
Budget
.
iv.
The use of the
SWR
Fund
Liability (
Emergency
)
Reserve must be
approved by
the
City Council.
As an exception, i
n the situations
described in 4.
b
.
i
and 4.
b
.
ii above
, the City Manager is authorized to
use the
SWR
Fund
Liability (
Emergency
)
Reserve and then report to
the
City Council
.
All other situations require
advance
d
approval from
the
City Council.
v.
Each fiscal year, the City will include in the Budget
a transfer from the
SWR
Fund Operating Budget
to the
SWR
Fund
Liability (
Emergency
)
Reserve to bring the reserve balance to
the
target
funding level of
$350,000
.
However, this transfer may be excluded from the Budget to the extent necessary to avoid a budgeted deficit.
c.
Rate Stabilization
(Unassigned)
Reserve.
The City
Council
hereby authorizes the
City Manager to
maintain a
SWR
Fund
Rate Stab
i
lization
Reserve
in accordance
with this
P
olicy
. The primary purpose of this
SWR
Fund
Rate Stabilization
R
eserve
is to provide funding
to absorb revenue shortfalls due to short
-
term decreases in
material
sales
revenue
due to market volatility
o
r other
unanticipated
circumstances
.
i.
The
SWR
Fund
Rate Stabilization
Reserve shall be
funded
when the
SWR Operating Reserve
exceeds the minimum
target (currently 20%
).
ii.
The use of the
SWR
Fund
Rate Stabilization
Reserve must be
approved by
the
City Council.
EXHIBIT
“
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Solid Waste & Recycling (SWR
)
Fund Reserve
Policy
Page
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6 iii.
Each fiscal year, the City will include in the Budget
a transfer from the
SWR
Fund Operating Budget
to the
SWR
Fund
Rate Stabilization
Reserve to bring the reserve balance to
a m
aximum
of
1 0
percent of
that year’s
SWR
Fund Operating Budget
Revenues
. However, this
transfer may be excluded from the Budget to the extent necessary to avoid a budgeted deficit.
iv.
Approved use of
SWR
Fund Rate Stabilization
Reserve funds may
cause the balance of the reserve to drop below the
targeted
1 0
percent
level.
T
he SWR Fund Rate
Stabilization
Reserve
may be drawn upon
or replenished at the discretion of the City Council.
5. SWR
Capital Improvement
Program (CIP)
Fund
Reserve
a.
The
City Council hereby authorizes the City Manager to
maintain a
SWR
Fund
CIP
Reserve
in accordance with this
P
olicy
. The primary purpose of this
SWR
Fund
C
IP R
eserve is to
provide funding for ongoing and future Capital Improvement Projects
at
the
City’s
Materials Diversion Facility (MDF)
.
i.
The
SWR
Fund
CIP
Reserve
shall be funded in accordance with
City CIP
Budget process for SWR CIP projects exceeding $200,000
.
SWR Capital
pr
ojects
that
cost between $5,000
and $200,000 will
generally
be funded
each year out of the SWR operating budget.
ii.
The use of the
SWR
Fund
CIP Reserve must be approved by City Council,
generally through the
City’s
CIP Budget adoption.
6. SWR
Rate Stabilization
(Unassigned)
Fund
Balance
a.
The City Council hereby authorizes the City Manager to maintain a
Rate
Stabilization
(Unassigned)
Fund
Balance in the
SWR
Fund Operating
and
SWR
Non
-
Recurring
Funds for the purpose of cash
-
flow
and unforeseen changes in
revenues and/or
expenditures
, particularly
year
-
to
-
year
materials sales
revenue
due to market volatility
.
i.
Funding for the SWR Rate Stabilization reserve
is only available once the
minimum reserve level
s for the SWR Liability (Emergency) reserve, SWR
Capital Improvement Project reserve
and
SWR
Operating reserve have
been achieved at the end of each
City fiscal year.
ii.
If there is ade
quate net revenue to fund the
SWR Rate Stabil
ization reserve
at the
end of a given
fiscal year, the funding targets are as follows: 1%
of
SWR Operating Revenue for FY2025/26,
2% of SWR Operating Revenue
for FY2026/27,
5 % of SWR Operating Revenue for FY202
7 /2
8, 7% of SWR
Operating Revenue for FY2028/2
9 and 10% of SWR Operating Revenue
for FY2029/30 and
thereafter.
iii.
The
SWR Rate Stabilization Fund Reserve is drawn upon and replenished at the discretion of the City Council.