1 Consolidated Fiscal Policies/Procedures
February 6, 2023
Attachment 2
2 Presentation This Evening
• Amending The Current Fiscal Substantiality
Policy
• Amending The Current Fund Balance Policy
• Developing New Council Policies and Staff
Administrative Fiscal Procedures
• Providing Follow up to December 19, 2022
City Council meeting regarding Fiscal
Policies Contributions
Consolidated Fiscal
Policies and
Procedures
3 Policy Versus Procedure
Policy – requires action or
decision by City Council, more
high-level in substance, and
typically applies to broad policy
goals and objectives relating to
the allocation of resources.
Fund Balances, Reserves & Surplus
Pension and OPEB Funding
Budget Adoption and
Administration
Fiscal Sustainability Plan Elements
Capital Improvement
Debt Management
Investments
Economic Development
Procedure – requires
management decisions that
involve detailed steps used
regularly to meet operational
objectives
Cash Management
Procurement Card
Accounting, Auditing and Financial
Reporting
Risk Management
Grant Management
Travel and Expense
Purchasing
Capital Asset Management
4 CONSOLIDATED FISCAL POLICIES AND PROCEDURES
5 Consolidated Fiscal Policies and Procedures – Scope of Work
• Starting with the City’s current policies, incorporate existing and appropriate language into a new
consolidated policy document, update the
language to reflect City’s financial objectives, goals
and specific changes.
• Amend or add language where appropriate to
reflect best practices, institutional controls and
financial concepts from the Government Finance
Officers Association (GFOA), International
City/County Management Association (ICMA),
Rating Agencies & Bond Insurers and other
industry-leading trade and research groups.
6 Focus of Today
Contingency Fund Balance (17% now)
Seeking direction on new %
Catastrophic Events Reserve
Pension and OPEB Funding
Budget and Fiscal Sustainability
Capital Improvement
Equipment Replacement
Unassigned Fund Balance (Surplus)
7 Contingency Fund Balance
POLICY PURPOSE Current Policy Proposed Policy
Economic Contingency Reserve
Financial needs due to a downturn or recession in the local, state, or national economy; action by another government that eliminates or shifts revenues from the City; an unanticipated inability to fully pay the General Fund’s debt service obligations in any given year; other unexpected reductions or interruptions of revenue streams; or cash flow requirements of the General Fund
17%
22% with goal of
incrementally
increasing to
25%
8 Contingency Fund Balance
•Based on the Discussion With Labor
Subcommittee regarding increasing the
General Fund Fund Balance
22% Recommended by June 30, 2023
23% Recommended by June 30, 2024
24% Recommended by June 30, 2025
25% Recommended by June 30, 2026
& Then ongoing
9 Catastrophic Events Reserve
POLICY PURPOSE Current Policy Proposed Policy
Catastrophic Events Reserve
Financial needs due to unforeseen claims, damages, or liability, loss of critical infrastructure, facilities, equipment, or assets; extraordinary public service demands caused by natural disasters (earthquake, flood, fire etc.), civil unrest or other unforeseen events.
none
$300k Initially
Increasing for
10 years
to reach $5M
10 Pension and OPEB Funding Policy Summary
• Funding Goal and Target
• Funding Strategies
• Annual Prepayment of UAL Payment
• Allocation of Liabilities Across Funds
• Tax-Exempt Exchange
• Cost Sharing & Contract/MOU Provision
• Examine Medical Benefit Levels and Eligibility Criteria • Use of One-time Monies or Annual Contribution
• Base Selection Strategy
• Superfunding
• Policy Review and Amendment
Pursuant to the implementation of this policy, staff was given City Council direction on pursuing the establishment of a Section 115 trust to build a pension reserve.
11 Pension and OPEB Funding Policy Summary
POLICY PURPOSE Current Policy Proposed Policy
Pension 115 Trust Funding
The Section 115 Trust allows the City to build its pension reserve while maintaining oversight of investment management and control over the risk tolerance of the portfolio. Funds placed intro the trust is irrevocable, meaning it cannot be withdrawn and used for another expenditure of the City.
none
$1.5M Initially
$500k annually
thereafter
Other Post Employment Benefit Funding Retiree medical benefits. pay-as-you-go pay-as-you-go 12 Budget Adoption and Administration Policy Summary
• Budget Preparation Process
• Preparation Schedule
• Content and Format
• Department Budget Requests
• Long-Range Fiscal Forecast (LRFF)
• Annual Budget Administration
• Revenues and Collections
• Grants and Donations
• User Fee and Service Charge Cost Recovery
• Expenditures
• Budget Amendments and Transfers
• Budget Reporting to City Council
13 Fiscal Sustainability Policy Summary
“Fiscal Sustainability” now proposed as a general policy of intent as opposed to a major category under which other policies appear.
• Purpose:
• Help focus limited City resources on activities that
are most cost-effective
• Address the City’s priorities for sustained growth and prosperity.
• Describe the role the City will play in several areas to support fiscal sustainability
14 Capital Improvement Policy Summary
Purpose: To set the general parameters within which
capital spending decisions are made.
• Capital Improvement Plan Formulation
• Capital Project Criteria
• CIP Development Responsibility
• Project Requests and Consideration
• Project Selection
• CIP and its Relation the Budget
• Project Financing
• Project Progress Reporting
15 Capital Improvement Policy Summary
POLICY PURPOSE Current Policy Proposed Policy
Capital Improvement Projects (CIP) Funding To phase in the impact of unfunded capital improvement projects. Allocated to CIPs without a funding source.
1% of
Adopted
Revenues
1/2% Initially
eventual goal
of 1%
One member of Labor Subcommittee suggested contributing 3/4 % 16 Equipment Replacement Funding
POLICY PURPOSE Current Policy Proposed Policy
Equipment Replacement Funding To phase in the impact of replacement and upgrade costs of capital equipment and high-cost vehicle replacements.
Replacement
funding for fleet
vehicles and
major
equipment using
a Replacement
Fund sinking
account
beginning fiscal
year 2013-14.
No $ Goal
$100k Initially,
increasing
annually to
$400k at end of
10 years
17 Unassigned Fund Balance (SURPLUS)
The City Manager may recommend the unassigned fund balance be used for one-time expenses. When recommending use of the unassigned fund balance for one-time expenses, the City shall attempt to achieve the following balance:
• 50% allocated to one-time payments that reduce long-term obligations such as unfunded pension or OPEB liability, bonded indebtedness, or lease obligations; and • 50% allocated to facility or infrastructure improvements, equipment purchases, or other long-term capital needs that improve the community’s safety, aesthetics, transportation, or quality of life.
POLICY PURPOSE Current Policy Proposed Policy
Unassigned Fund Balance (Surplus)
To be allocated towards:
• Catastrophic Events Reserve
• Pension 115 Trust Funding
• Capital Improvement Funding
• Equipment Replacement Funding
none
50% allocated to
l ong-term
obligations
50% allocated to
long-te rm capital
needs
18 SUMMARY (Some figures are Hypothetical)
FY 2021-22 Audited Fund Balance $49,697,832
FY 2022-23 Fund Balance Surplus (1) 2,000,000
Projected FB FY 2022-23 51,697,832
ANNUAL CONTRIBUTIONS
FY 2023-24 PROPOSED BUDGET (1) 151,000,000
Recommended Amts.
Year 1 Goal Amts.
Catastrophic Event 300,000 500,000
Equipment Replacement 100,000 400,000
CIP 755,000 1,510,000
115 Trust 1,500,000 500,000
Total Policy Contributions 2,655,000 2,910,000
FY 2023-24 Projected FB % 34.24%
FY 2023-24 Projected FB Goal of 22% 33,220,000
Unassigned Surplus (34.24% - 22%) $18,477,832
(1) These figures are hypothetical figures to assist with this exercise 19 CONCLUSION
• These Consolidated Fiscal Policies and
Procedures require City Council approval via
Council Resolution
• Annual amounts will be presented for City
Council approval as part of the Proposed Budget
Process
• Use of the unassigned fund balance for one-time
expenses will require City Council approval
20 QUESTIONS and FEEDBACK?