City Council Finance Committee
September 24, 2025
Review General Fund
Reserve Policy
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What is Fund Balance?
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➢ What is Fund Balance?
• Represents the difference between the City’s totals assets and current/future liabilities. It essentially shows the net available resources in that fund at a given point in time. • Categories of Fund Balance:
• Nonspendable – Resources that cannot be spent.
• Restricted – Resources with external restrictions (i.e. grants). • Committed – Set aside for specific purposes by formal government action. • Assigned – Intended for specific purposes but not legally restricted (i.e. encumbrances). • Unassigned – Available for any purpose.
What is Fund Balance? (cont.)
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➢ What is a Targeted Fund Balance?
• A targeted fund balance percentage refers to the desired level of reserves a government or organization aims to maintain in its General Fund.
• The Government Finance Officers Association (GFOA) recommends that general-purpose governments maintain unrestricted fund balance in their General Fund of at least two months (or approximately 16.7%) of regular operating expenditures (excluding transfers). ➢ Why is a targeted 20% fund balance important?
• Ability to pivot for unexpected expenses without resulting in direct to significant service reductions or borrowing.
• Improved ability to weather economic downturns.
• Ability to remain operational during natural disasters. • May impact / improve credit ratings, leading to lower borrowing cost. • Enhanced financial stability and resilience.
Updated General Fund 5-Year Forecast
($ in thousands)
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General Fund Reserve Policy - Current
• The current reserve policy meets the following objectives of the City:
– Ensure financial stability
– Maintain operations in times of economic uncertainty
• The City’s current reserve policy sets the following targeted reserve levels:
– Economic Uncertainty - 20% of budgeted General Fund
expenditures, excluding any significant one-time expenditures; and
– Major Emergency – Establish a goal of maintaining a target balance of $5,000,000; and
– Undesignated Fund Balance - The Undesignated Fund Balance remains in the General Fund until allocation by the City Council to another designated reserve or fund
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Best Practices & Comparable Policy Levels
Agency Reserve Fund Level
Dublin N/A
Oakland 7.5%
Berkeley 16.7%
Fremont* 16.7%
Pleasanton 16.7%-25.0%
Emeryville 20.0%
Hayward 20.0%
Piedmont 20.0%
San Leandro** 20.0%
Union City 20.0%
Alameda*** 20.0%
Albany 25.0%
Livermore 30.0%
Newark 30.0%
GFOA (Recommendation) 16.7%
Notes:
*City of Fremont – Policy also includes a Budget Uncertainty Reserve with no set reserve level **City of San Leandro – Policy also includes $5M for Major Emergencies ***City of Alameda – Policy also includes 5% for Economic Uncertainty Pg 7
General Fund Reserve Policy - Proposed
• The objectives of the economic uncertainty reserve fund would be expanded to allow for the following:
– Ensure financial stability
– Maintain operations in times of economic uncertainty
– Maintain operations during and in response to natural disasters – Ensure available funding for major emergencies
• The proposed reserve policy sets the following targeted reserve levels:
– Retain a fund balance level of 20% for economic uncertainty – Eliminate the funding level of $5,000,000 in the major emergency reserve fund.
– Undesignated Fund Balance - The Undesignated Fund Balance remains in the General Fund until allocation by the City Council to another designated reserve or fund
• Retitle Fund: “Emergency and Economic Uncertainty Reserve Fund”.
General Fund 5-Year Forecast w/ Policy Update
($ in thousands)
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Provide
Feedback on Proposed Policy
Changes
Recommend
Proposed Policy Changes to
the Full Council for Adoption
Discussion &
Feedback
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