*NOT YET APPROVED*
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Resolution No. _____
Resolution of the Council of the City of Palo Alto to Extend and Amend the Development Services Reserve Fund Policy Previously Adopted by Ordinance No. 5420.
R E C I T A L S
A. In 2016, the Development Services Department completed Phase I of a fee study to update certain non-valuation-based fees for services, reserving an update of valuation- based fees for Phase II of the fee study.
B. In 2017, the Development Services Department completed Phase II of the fee study, which recommended adjustments to the Department’s valuation-based fees, the adoption of an operating reserve, and associated changes.
C. On September 19, 2017, the Finance Committee reviewed the fee study and recommended adoption of an ordinance updating Development Services Department fees in accordance with the study’s recommendations, adjusted by the annual salary and benefits adjustment of 5.5 percent.
D. On November 13, 2017, the City Council adopted Ordinance 5420 to adjust Development Services Department fees and approve a FY 2018 Development Services Department Reserve Fund Policy.
E. The Development Services Department Reserve Fund Policy was based on a fee study regarding best practices and assumed that the Reserve Fund would be fully funded by FY 2022.
F. Reserve funds were expended in FY 2020 and FY 2021 to cover pandemic-related departmental operating losses and maintain continuity of service.
G. As a result of this use of reserve funds, the Planning and Development Services Department seeks to extend the funding period for the Reserve Fund beyond the planned sunset in FY 2022.
H. The Planning and Development Services Department plans for continued use of the Reserve Fund at existing levels through FY 2025 when a new Cost of Services Study is expected to be implemented.
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*NOT YET APPROVED*
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NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. The Council of the City of Palo Alto adopts the Planning and Development Services Department Reserve Fund Policy, as set forth in Exhibit “1” and incorporated herein by reference. This policy replaces the policy adopted by Ordinance 5420.
SECTION 2. The Council finds that the adoption of this resolution does not meet the definition of a project under Public Resources Code Section 21065, thus, no environmental assessment under the California Environmental Quality Act is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
__________________________ _____________________________ City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
__________________________ _____________________________ Assistant City Attorney City Manager
_____________________________
Director of Planning and
Development Services
_____________________________
Director of Administrative Services
*NOT YET APPROVED*
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EXHIBIT 1
Planning and Development Services Department
Reserve Fund Policy
Section 1. Purpose
The purpose of the Planning and Development Services Department Reserve Fund (PPDSDRF) is to build and maintain an adequate level of unrestricted funds available to cover any unforeseen shortfalls that arise outside of the regular budget planning process, as well as one- time, nonrecurring expenses that will build long-term capacity for Development Services. The fund may not be used to create or hire new full time benefited positions. The department intends for the operating reserve to be used and replenished within a reasonable period of time for Development Services. This policy will be implemented in conjunction with the other financial policies of the City and is intended to support the goals and strategies contained in those related policies and in strategic and operational plans.
Section 2. Definitions and Goals
The PDSDRF is a designated fund set aside by action of the City Council. The target of the PDSDRF is equal to three (3) months of average recurring operating costs; with a range of 23 (minimum) to 27 (maximum) percent with a target of 25 percent of average recurring operating cost.
The PDSDRF is dynamic and will be reviewed and adjusted in response to internal and external changes. In addition to calculating the actual reserve at the fiscal year-end, the reserve fund minimum, target and maximum can be adjusted by the Council as necessary each year during the annual budget development process. These reserves will be reported to the Finance Committee and City Council.
Section 3. Funding of Reserves
The PDSDRF will be funded by a five (5) percent of Development Services fees as listed in the City’s Municipal Fee Schedule beginning in Fiscal Year 2024, upon City Council approval, through Fiscal Year 2025. The City Council may, from time to time, direct that a specific source of revenue be set aside for the PDSDRF.
Section 4. Accounting for Reserves
The PDSDRF will be recorded in the City’s accounting system and financial statements titled as the Development Services Department Reserve Fund. The PDSDRF will be maintained in accordance with the City’s investment policy.
Section 5. Authority to Use the PDSDRF
Authority to use the PDSDRF will remain with the City Council. The City Manager will submit a request to use the PDSDRF to the City Council. The Director of Development Services Department will prepare the report identifying the need for access to the PDSDRF and confirm that the use is consistent with the purpose of the reserves as described in this policy.
Determination of need requires analysis of the sufficiency of the current level of reserve *NOT YET APPROVED*
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funds, the availability of any other sources of funds before using reserves, and evaluation of the time
period for which the funds will be required and replenished.
Section 6. Fee or Rate Stabilization
PDSDRF may be added to the Planning and Development Services Department revenue projections by action of the City Council and held to manage the trajectory of future year rate increases.
Section 7. Reappropriation of PDSDRF
At the end of each fiscal year the PDSDRF will be reappropriated to the following fiscal year in accordance with Palo Alto Municipal Code Section 2.28.090.
Section 8. Relationship to Other Policies
The City Manager maintains City Council approved policies, which may contain provisions that affect the creation, sufficiency, and management of the PDSDRF. It will be the responsibility of the City Manager and Director of Administrative Services Officer to notify the Director of Development Services if changes to city -wide policies impact the PDSDRF. These policies may be City Council approved policies such as the Investment Policy or administrative policies within the confines of the Municipal Code.
Section 9. Reporting, Monitoring and Review of Policy
The Director of Planning and Development Services is responsible for ensuring that the PDSDRF is maintained and used only as described in this policy. Upon approval of the use of PDSDRF , the Director of Planning and Development Services and the Director of Administrative Services will maintain records of the use of funds and plan for replenishment. Staff will provide reports to the City Council within the annual budget process, or sooner if warranted by internal or external events.