DATE:June 27, 2024
TO:Mayor and Members of the City Council
President and Members of the Board of Directors
FROM:John R. Gillison, City Manager
INITIATED BY: Noah Daniels, Finance Director
SUBJECT: Consideration to Approve the Following to be in Compliance with Governmental Accounting Standards Board (GASB) Statement No. 54: 1) Updated Fund Balance Policy; 2) a Resolution Committing to the Level of Fiscal Reserves for the City of Rancho Cucamonga; and 3) a Resolution Committing to the Level of Fiscal Reserves for the Rancho Cucamonga Fire Protection District. (RESOLUTION NO. 2024-057 AND
RESOLUTION NO. FD 2024-009) (CITY/FIRE)
RECOMMENDATION:
Staff recommends that the City Council adopt a resolution committing to the level of fiscal reserves for the City of Rancho Cucamonga (City) and the Board of Directors adopt a resolution committing to the level of fiscal reserves for the Rancho Cucamonga Fire Protection District (Fire District).
Both resolutions will approve the updated Fund Balance Policy shared by the City and Fire District.
BACKGROUND:
Since 2011, to comply with GASB 54, the City Council and Board of Directors have been recommended to adopt resolutions to establish the upcoming fiscal year’s Fund Balance Policy.
The Fund Balance Policy primary purpose is to establish fund balance commitments for the City and Fire District by formal action of the City Council and Fire Board.
ANALYSIS:
To accommodate any changes to these commitments that may become necessary due to changes in operations or City Council goals, staff annually bring the resolutions with the attached Fund Balance Policy before the City Council and Board of Directors for their consideration at the end of each fiscal year.
At this time, the Fund Balance Policy modifications include:
•clarify the five classifications of fund balance for governmental funds: nonspendable, restricted, committed, assigned, and unassigned.
•Updating the minimum funding goal for the Self-Insurance commitment from eight to nine times the yearly self-insurance reserve for the City and Fire District to reflect the increasing costs covered by insurance claims and reserve goal in the City’s Reserve Funding Goals Policy.
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These changes do not change the Policy's purpose or use. The fund balance commitments included in the Policy are the following:
•Changes in Economic Circumstances
The City General Fund’s fund balance commitment for changes in economic circumstances is established at a goal of a nine-month reserve, or 75% of the City General Fund’s adopted expenditure budget for the upcoming fiscal year. Similarly, the Fire District's fund balance commitment for changes in economic circumstances is established at a goal of a nine-month reserve, or 75% of the Fire District's adopted expenditures budget for the upcoming fiscal year.
The specific uses of the fund balance commitment include 1) the declaration of a state or federal state of emergency or a local emergency as defined in Rancho Cucamonga Municipal Code Section 2.36.020; or 2) a change in economic circumstances in a given fiscal year that results in revenues to the City or Fire District being insufficient to cover expenditures for one or more fiscal years. The City Council or Fire Board may, by the affirming vote of four members, change the amount of this commitment and/or the specific uses of these monies.
•Facilities Capital Replacement
The City General Fund and Fire District's fund balance commitment for their respective facilities’ capital replacement is established as a minimum funding goal of 50% of capital assets value comprised of construction in progress (excluding infrastructure), building improvements, and improvements other than building.
•Working Capital
The City General Fund’s fund balance commitment for working capital is established as a minimum funding goal of 5% of the City's General Fund adopted expenditure budget for the upcoming fiscal year. The Fire District's fund balance commitment for working capital is established as a minimum funding goal of 50% of the Fire District's adopted expenditure budget for the upcoming fiscal year.
•Self-Insurance
The City General Fund’s and Fire District's fund balance commitment for payment of workers' compensation, general liability, and employment practices liability claims is established as a minimum funding goal of nine times the City and Fire District's yearly self- insurance reserve for all types of insurance coverage.
•PASIS Workers' Compensation Tail Claims
The Fire District's fund balance commitment for payment of outstanding workers' compensation claims remaining after its withdrawal from PASIS is established at a goal equal to the claims cost detail report from the Fire District's third-party administrator at the end of the fiscal year, plus 15%.
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•Employee Leave Payouts
The City General Fund’s and Fire District's fund balance commitment for employee leave payouts is valued in accordance with the memorandum of understandings for the City and Fire District’s bargaining groups as of the last day of the fiscal year. •Vehicle and Equipment Replacement
The Fire District's fund balance commitment for replacing fire safety vehicles and equipment, as determined based on its replacement criteria, is established as a minimum funding goal of 50% of the Fire District’s vehicle and equipment replacement value. •Law Enforcement
The City General Fund’s fund balance commitment for public safety purposes, including operations, equipment, capital outlay, capital facilities, personnel, and booking fees. The funding goal is 100% of the most recently approved Schedule A from the San Bernardino County Sheriff's Department.
•Economic Development Strategic Reserve
The City General Fund’s fund balance commitment for the acquisition and development of key properties to promote economic development for the benefit of the City as a whole and potentially generate ongoing revenues through negotiated agreements with third parties, including, but not limited to, land leases or public-private partnerships. The funding goal is the equivalent of the current value of a 10-acre mixed-use site on Foothill Boulevard as of January 1 of each year.
•Seasonal Weather Emergency Reserve
The City General Fund’s fund balance commitment is to provide for unanticipated costs incurred due to damage resulting from severe weather emergencies, such as wind, flood, fire, extreme or cold, and other forces of nature to avoid adversely impacting the City’s operating budget. The City Council will appropriate funding for these events on an as- needed basis when extreme seasonal weather emergencies occur. •Community Benefit Projects
A portion of the City General Fund’s fund balance is received from development projects, typically by means of a development agreement, which is committed to addressing the impacts typically associated with, but not limited to, large warehouse, industrial, and commercial developments, including affordable housing demand, future greenhouse gas emissions, fire protection services, electric vehicle charging, reduction in vehicle miles traveled, pedestrian safety improvements, carbon capture, alternative energy production, noise reduction, and environmental justice.
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•Public Safety Personnel Affordable Housing
A portion of the Fire District's fund balance is committed to providing additional funding to match the City's contributions to help create affordable for-sale housing for public safety personnel, including but not limited to Fire District employees. Funding may be used for silent seconds, closing costs, assistance with obtaining financing, or to help buy down the cost of design and construction of single-family housing units. The funding goal for this reserve is established as the value of the affordability gap to construct 50 housing units that are affordable at the 60% California Tax Credit Allocation Committee (TCAC) median income with a 4% tax credit scenario per unit, or $192,600 per unit, for a total funding goal of $9,630,000.
Note that an action of the City Council and Fire Board to commit fund balance needs to occur before the end of the fiscal year; however, the amounts can be determined in a subsequent period based on the funding guidelines established in the Fund Balance Policy.
FISCAL IMPACT:
There is no fiscal impact as a result of the recommended actions.
COUNCIL MISSION / VISION / GOAL(S) ADDRESSED:
The Fund Balance Policy and accompanying Resolutions supports the City Council’s core value of providing and nurturing a high quality of life for all by demonstrating the active, prudent fiscal management of the City’s financial resources essential to creating an equitable, sustainable, and vibrant city, rich in opportunity for all to thrive by building on our foundation and success as a world-class community.
ATTACHMENTS:
Attachment 1 – Resolution (City)
Attachment 2 – Resolution (Fire)
Attachment 3 – Fund Balance Policy (Exhibit A)