Suggested Revisions to
Interdepartmental Policy 460
General Fund Reserve Policy
Measure U Citizens' Oversight Committee
April 19, 2022
Background
• Policy 460 established a General Fund Reserve Policy
— Established general fund reserve level goal of 17% of annual operating budget expenditures
• Subsequently raised goal to 25%, which was satisfied end of FY2020-2021 — Established revenue allocation guidelines for new sources of revenue (on-going as well as one-time)
• Measure U revenue was first and most significant revenue source covered by the policy
• To establish adequate reserves, new on-going revenues were allocated — 50% infrastructure, vehicles, and equipment
— 20% employee retention and recruitment
— 10% post -employment benefits sustainability
— 20% general fund contingency reserves
— Revisions of the policy require 4/5ths vote of City Council
Motivation to Review and Possibly
Modify Policy 460
• Having operated under the guidance of Policy 460 for three years, the Citizens' Oversight Committee has identified areas for possible revision and/or clarification
— Policy did not require any formal review or oversight to assess/confirm reserve goal level
— Policy lacks clarity regarding procedures once reserve goal is reached, but events cause reserve level to fall back below goal
• Existing policy language focused on establishing reserves; policy clarity is needed for conditions of maintaining or replenishing reserves
— Policy did not place a requirement on the City Council to periodically review the reserve goal level for adequacy and possible revision
Oversight Committee Suggested Modifications
Formalize a yearly process for reviewing the status of the reserve level vs. the council specified goal
— Require a long range reserve level forecast be generated and include a citizen oversight requirement
Clarify the language regarding allocation of funds depending upon satisfaction of the reserve level goal
— Add specific language to cover maintaining and replenishing scenarios Adjust the allocation levels depending upon reserve level status to reflect discretionary nature of allocation categories
Eliminate references to a number -specific reserve level goal in the body of the policy
— Eliminate the need to modify the policy with every city council reserve goal change
— Place council -approved specific goal level in an appendix to capture history and current condition
Oversight Committee Suggested Changes to Revenue
Allocation When Maintaining Reserve Level
(Reserve Goal Level Satisfied)
Current Policy Allocation
Infrastructure, Vehicles, and
Equipment
Post -Employment Benefits
Sustainability Reserve
Employee Retention and
Recruitment (including
additional staff)
Suggested Allocation
60% Infrastructure, Vehicles, and 50%
Equipment
10% Post -Employment Benefits 10%
Sustainability Reserve
30% Employee Retention and 30%
Recruitment (including
additional staff)
General Fund Contingency 10%
Reserve
• This is the current reserve level condition
• Oversight Committee suggests some funds continue to flow into reserves to support building reserves as budget grows
Oversight Committee Suggested Revenue
Allocation Requirements When Replenishing Reserve Level (Reserve Goal Level Not Satisfied)
Current Policy is Silent Suggested Replenish Reserve
(Revert back to Establish Reserve Allocation) Allocation Infrastructure, Vehicles, and 50% Infrastructure, Vehicles, and 40% Equipment Equipment
Post -Employment Benefits 10% Post -Employment Benefits 10% Sustainability Reserve Sustainability Reserve
Employee Retention and 20% Employee Retention and 30%
Recruitment (including Recruitment (including
additional staff) additional staff)
General Fund Contingency 20% General Fund Contingency 20% Reserve Reserve
• With the reserve goal level achieved, this condition would occur if reserves were utilized or if expenditures grew without a corresponding revenue surplus to fund reserves • Suggested allocation reflects desire to not "take -away" presently allocated employee retention funding
Council Requested Actions
• Receive and File Report
• Provide direction to City Staff regarding desire to follow -upon recommendations to revise/update policy
• Oversight committee is willing to work with city staff to draft specific language to modify the policy however City Council may direct
— Oversight Committee has a working draft from which to start the process