Key Management Practices
Update
February 14, 2023
Key Management Practices (KMPs)
• Details budget policies and guidelines for the
following:
▪ Capital improvement plan and use of capital
expenditures
▪ Debt policy and capital financing
▪ Operating budget guidelines
▪ Reserves
▪ Use of one-time resources
Reserve Policy Review
• Reserves are critical to financial planning
• Flexibility
• Risk Mitigation
• Policy elements considered
• Describe purpose of reserve
• Reserve target levels
• Minimum target level set to better accomplish fund purpose • Maximum level of reserve set to define the maximum
allowable fund balance
• How to reach target levels
Reserves
• General Fund Operating Reserve
• Disaster Contingency Reserve
• Self-Insured Losses Reserve
• Retiree’s Health Fund
• Fleet Capital Reserve
• Building Reserve
General Fund Operating
Reserve
The City will maintain an operating reserve equal in the General Fund equivalent to, at a minimum, 25% of the
planned budgeted operating expenditures. in the
General Fund (less any capital equipment and/or project budget). These reserved dollars will be used to support unforeseen emergencies, operating insufficiencies and
short-term internal loans. Management will exercise
every mechanism available (e.g., budget cuts, hiring
freezes, etc.) to avoid use of the reserve. To the extent the reserve level falls below 25%, a plan will be
developed and executed to replenish the reserve at the
targeted funding level within three years.
Disaster Contingency Reserve
(no change)
The City will maintain an emergency reserve equal
to $1 million as set by Resolution 2012-136. These
reserved dollars will be used in the event of a
"declared emergency" providing financial support
for recovery efforts as directed by the City Council.
Self-Insured Losses Reserve
(no change)
The City will maintain a self-insured losses reserve
equal to $2 million. These reserved dollars will be
used for losses not covered under existing
insurance programs.
Retiree’s Health Fund
The City will maintain a Retiree's Health Fund,
which will be used to fund the Retiree's Health
Trust to offset retirees' health accrued liability.
Additionally, the Retirees' Health Fund will be
partially funded by annual transfers in of 5% of the
General Fund's current fiscal year's fund balance
unreserved surplus.
Fleet Capital Reserve (no change)
The City will maintain Fleet Capital Reserve in the Fleet Fund for the purchase of new and replacement vehicles
and other capital assets. Reserve amount will be
expended to each Operating Fund Division based upon
the vehicles assigned. These amounts will be calculated utilizing the annual asset depreciation expense and
allocated through a modified Fleet Allocation process. In the case where funds reserved in the Fleet Fund for a
particular asset to be replaced, or an additional new
asset to be purchased, are insufficient to cover the entire cost of the asset, additional amounts will be expensed to the appropriate Operating Division in that year.
Building Reserve (new)
The City will maintain a Building Reserve to fund
capital maintenance projects to sustain existing
City facilities or to support the expansion of
existing city facilities to address the workforce
needs of city services.
Unfunded Pension Liability
Reduction (delete)
An additional 1% will be added to the employer rate of
unfunded pension liability which will be used to pay
down the City's unfunded pension liability. In addition, after all General Fund Special Reserve Fund transfers, if it is determined that the projected (current) fiscal year will have an increase in the General Fund unassigned
(unreserved) Fund Balance, 50% of this increase will be used to pay down the City's unfunded pension liability.
This transfer of funds will occur during the budget
process following each year in which an increase occurs.
Reserve Target Levels
General Fund – Use of Surplus
In the event the General Fund realizes surplus, after
calculating the 25% General Fund Operating Reserve
target, 75% remaining General Fund surplus (net amount
by which the unreserved unassigned fund balance is
increased in that fiscal year), in the amount not to
exceed 5% of the current fiscal year's revenue budget,
will be split between assigned as outlined below. Priority will be given to those items that relieve budget or
financial operating pressure in future periods. GF-
Economic Reserve Fund (10%), GF Building Reserve
(20%), Retiree's Health Fund (5%), Fleet Reserve Fund
(20%), City Council Community Fund (10%), and a
payment towards the City's unfunded pension liability
(35%).
General Fund – Use of Surplus
Annual Operating Surplus
Assigned/Committed Reserves
(NTE 5% of Revenue)
Long-term liabilities
(Pension, retirees’
health benefits, debt
service, etc.)
Economic Reserve Fleet Reserve Building Reserve
Capital Reserve
(requires City Council
approval)
One-time
expenditures/Projects
Seed capital for new
programs/construction
Unassigned
Fund
Balance
Monitoring Performance (new)
The City will review the current and five-year
projected reserve to ensure that they are
appropriate given the economic and financial risk
factors the City is subject to on an annual basis
during the City's budget process.