City of San Mateo, California
Financial Policy
Capital Investment Reserve
I. Purpose
The Capital Investment Reserve is established within the Capital Projects Fund to finance major capital improvement projects that are critical to support municipal services. These projects may lack immediate funding or have funding not yet identified. This policy outlines how the Capital Investment Reserve will be funded and the conditions under which funds may be expended.
II. Funding the Reserve
1. Initial Funding:
City Council reviews and approves initial funding for the Reserve, with future additional funding made in subsequent years, generally from the General Fund budgetary surplus.
2.Additional Funding:
Additional contributions to the Reserve may be made from surplus funds, one-time revenues, proceeds from the sales of City properties, or other unrestricted funding sources. These contributions will require City Council approval. City staff will review the General Fund’s funding levels annually and make recommendations to transfer funds from the General Fund to the Capital Investment Reserve as part of the annual budget adoption process.
3.Interest Earnings:
Any interest earned from the Reserve will be credited to the General Fund.
III. Conditions for Use of Reserves
1.Expenditures:
Reserve funds may only be used for projects that are specifically authorized by the City Council.
These projects should be identified in the City's Capital Improvement Plan and must address critical unfunded capital needs. The reserve is not intended to cover operating expenditures or recurring costs.
2.Authority for Use:
Only the City Council can authorize the use of funds from the Capital Investment Reserve. The typical authorization process will occur with the adoption of the annual budget; however, Council can authorize the utilization of these funds at any other time through a resolution. This includes any inter-fund borrowing, which must be approved by the City Council, along with repayment terms.
IV. Annual Reporting
To ensure transparency and accountability, the Finance Director shall provide an annual report on the status of the Capital Investment Reserve. This annual report shall be presented to the City Council during a regularly scheduled financial update, such as the mid-year budget update or public hearings on the City’s budget. It shall include the reserve balance, contributions made during the fiscal year, expenditures, and if any, planned uses for future capital projects.
V. Annual Policy Review
This Policy will be reviewed annually during the budget process. The City Council may amend the policy at any time to ensure its effectiveness, alignment with the City’s long-term financial goals, or compliance with current best practices.