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HomeMy WebLinkAboutCC Resolution 13832 (General Fund Reserve Policy)RESOLUTION NO. 13832 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL ADOPTING A GENERAL FUND RESERVE POLICY WHEREAS, the City of San Rafael is committed to ensuring that service to the public is not avoidably disrupted by natural disasters or unforeseen, negative economic events; and WHEREAS, the City of San Rafael has operated for several years with an infonnal General Fund reserve policy, and now desires to establish a formal policy; and WHEREAS, since the passage of the Measure E Transactions and Use Tax. the City Council wishes to formalize its assignment of and authorize the disposition of a specified portion of those funds; and WHEREAS, the proposed General Fund Reserve Policy has been reviewed by the City Council Finance Committee which has requested that staff bring this policy to the full City Council for discussion, consideration and approval; and WHEREAS, the City Council has reviewed and considered the proposed General Fund Reserve Policy. NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Rafael does hereby approve and adopt the General Fund Reserve Policy that is attached hereto as Exhibit A I, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the Council of said City on Monday, the 3rd of November 2014, by the following vote, to wit: AYES: COUNCILMEMBERS: Bushey, Colin, Connolly, McCullough & Mayor Phillips NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None ESTHER C. BEIRNE, City Clerk CITY OF SAN RAFAEL POLICIES AND PROCEDURES Policy No. Subject: Resolution No. Issue Date: Revision Date: Prepared By: Approval Recommended By: City Council Approval Date: General Fund Reserve Policy November 3, 2014 Mark Moses, Finance Director Nancy Mackle, City Manager The City's General Fund Reserve Policy documents the City's approach to establishing and maintaining sufficient reserves to ensure the continuity of City operations and service delivery. This policy is designed to: • Establish target reserve levels and the methodology for calculating reserve levels. • Establish criteria for the use of reserves and a process to replenish reserves. The General Fund is the main operating fund that pays for general services provided by the City, such as public safety, parks and library services. The General Fund accounts for all general revenues of the City not specifically levied or collected for other City funds and for expenditures related to the delivery of the City's general services. The City Manager shall be responsible for enforcing this policy. The City Manager or his/her designee may issue supplemental procedures and memorandums that detail specific directions that clarify this policy. However, such procedures and directives must be consistent and not conflict with the general provisions of this policy. It is the policy of the City of San Rafael to ensure that there will be adequate financial resources to protect the City against unforeseen circumstances and events such as revenue shortfalls and unanticipated expenditures. The Government Finance Officers of America (GFOA) recommends that reserve levels be directly related to the degree of uncertainty the local government faces: the greater the uncertainty, the greater the financial resources necessary. Past experience is to be used as a guide, with particular attention being paid to the following: 0 Diversity of revenue base General Fund Reserve Policy — page 2 • Volatility of revenue structure • Volatility of political environment • Consistent operating surpluses/occasional or frequent operation deficits • Uneven cash flows, requiring short-term borrowing The City's General Fund Reserves shall be comprised of the following four components: Emerkencv and Cash Flow Reserve (10% mininunn) An emergency and cash flow reserve will be maintained for the purposes of (1) sustaining General Fund operations in the case of a public emergency, such as a natural disaster or other unforeseen catastrophic event; and (2) to cover sudden operating shortfalls caused by (a) a severe drop in revenues that cannot be sufficiently offset by a corresponding reduction in expenditures and/or other available resources, or (b) an unforeseen, unavoidable expenditure that must be paid from the General Fund. Under Governmental Accounting Standards Board Statement No. 54, this reserve will be assigned. This reserve level is measured as a percentage of annual operating expenditures. Budgeted operating expenditures are to be used for the purposes of budget allocations and projections, and actual operating expenditures are to be used for the purpose of measuring this reserve at fiscal year-end. This reserve may be expended only when the City Council detennines by resolution that such action is consistent with the purpose and intent ofthis policy. The adequacy of the Emergency and Cash Flow Reserve assumes that there are also sound policies and procedures in place to ensure that there are sufficient funds and assets for the following essential needs: • encumbrances and other commitments • projected general liability claims • projected workers compensation claims • replacement of vehicles and equipment • maintenance and replacement of infrastructure • employee retirement costs • technology replacement and upgrades Policies, procedures and funding strategies should be established for each of these areas and, where appropriate, approved by the City Council. In the event the balance in the Emergency and Cashflow Reserve fails below the minimum level, the City Manager shall recommend a plan to replenish the fund within a timeframe not to exceed three years. This recommendation shall be approved by the City Council no later than the time at which the next annual budget is adopted. Any variance from the stipulations established within this policy shall require approval by the City Council along with a statement of findings supporting the temporary or ongoing modification to this policy. General Fund Reserve Policy -- page 3 Measure E — Public Safetv Facilities Reserve In November 2013, the San Rafael voters passed Measure E, a three-quarter percent transactions and use tax (TUT), effective April 1, 2014. On May 5, 2014, the City Council directed staff to set aside one-quarter percent (or one-third of these tax proceeds) for the purpose of public safety facility planning, construction and major improvements. This portion of Measure E revenues are assigned to this reserve, so that they can be used later to directly fiind facility -related costs, or to cover debt service costs and payments associated with the financing of these improvements. The City Manager is directed to assign these funds (i.e., the one-quarter percent TUT) to this reserve as they are received, and is authorized to expend these funds for qualified public safety facility costs as described above. The City Manager shall report periodically to the City Council on the status of these funds. Other Facilities and Infrastructure The purpose of this assigned reserve is to accumulate funds to be used for the purpose of non-public safety facility construction and major improvements (e.g., library, administrative and non -safety buildings, streets and the stormwater system). Unassivued Reserve Any available General Fund balances not reserved or included in one of the assigned reserves will be maintained as "unassigned,'° until such time it is allocated to one of the other reserves or appropriated for General Fund purposes. Total General Fund Reserves will be based on, and reconciled to, the General Fund fund balance. The sum of the Emergency and Cashflow Reserve, Measure E — Public Safety Facilities Reserve, Non -Public Safety Facilities Reserve, Unassigned Reserve and contractual commitments (i.e., outstanding purchase orders) shall equal the unrestricted and uncommitted fund balance. 3