Placentia City Council
AGENDA REPORT
TO: CITY COUNCIL
VIA: CITY ADMINISTRATOR
FROM: DIRECTOR OF FINANCE
DATE: OCTOBER 18, 2022
SUBJECT: AMENDMENT TO THE GENERAL FUND RESERVE POLICY NO. 460 FISCAL
IMPACT: NONE
SUMMARY:
On September 12, 2017, the City Council adopted Resolution No. R-2017-53 establishing its General Fund Reserve Policy ("Reserve Policy) requiring the City to seek and maintain a contingency reserve goal of 17% of budgeted operating expenditures in the General Fund. The purpose of the contingency reserve was to provide sufficient funds to continue operations should there be any known or unknown contingencies. On June 5, 2018, the City Council adopted Resolution No. R-2018-34 amending the Reserve Policy to include guidelines for appropriating new ongoing or one-time unrestricted revenues to various reserves to be used for specific purposes. In recognition of the City's continued progress in the area of overall financial health and sustainability, on January 26, 2021 the City Council adopted Resolution No. R-2021-05 increasing the contingency reserve goal to 25% of budgeted operating expenditures.
The proposed amended Reserve Policy reflects the clarification of terms and definitions to assist in the compliance with the policy.
RECOMMENDATION:
It is recommended that the City Council take the following action:
Adopt Resolution No. R-2022-66, a Resolution of the City Council of the City of Placentia, California, approving and adopting amendments to the City of Placentia Policy and Procedure Manual, Reserve Policy.
DISCUSSION:
Financial policies are essential for ensuring sound financial management practices and providing a strategic, Tong -term approach to financial management. The Government Finance Officers' Association (GFOA) recognizes that financial policies are an essential part of financial management and developed several recommended best practices to provide guidance on the
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Oct 18, 2022
City Council Agenda
October 18, 2022
development of sound financial policies. One of GFOA's recommendations is that every government establish and formally adopt a General Fund reserve policy with a minimum unrestricted fund balance of no less than two (2) months (17%) of operating revenues or expenditures and that financial policies be reviewed every 1-3 years.
The City's current Reserve Policy, which was last reviewed in January 2021, requires the City to maintain a minimum unrestricted fund balance of no less than three (3) months (25%) of operating expenditures, which exceeds the GFOA recommendation. As a result of the direction provided by the City Council and the implementation of Measure U, the City's financial position has continued to improve. In recognition of and in alignment with the City's continued increase in financial health, the City currently has an estimated reserve balance of 47% for fiscal year 2022-23.
The Measure U Citizen's Oversight Committee has met to discuss Policy No. 460 and is recommending the proposed changes noted in Attachment 2, Proposed Amended General Fund Reserve Policy No. 460. Approving the amended reserve policy will ensure a fiscally prudent and consistent application of taxpayer funds, which in turn will continue to improve the City's overall fiscal health.
FISCAL IMPACT:
There is no fiscal impact for this action.
Prepared by: Reviewed and ap• roved by:
Jen fer Lampman
Director of Finance
Damien R. Arrula
City Administrator
Attachments:
1. Resolution No. R-2022-66 Amending the General Fund Reserve Policy
2. Proposed Amended General Fund Reserve Policy No. 460
3. PowerPoint Presentation