HomeMy WebLinkAboutOverview of Revised Financial Reserve Policy for the City Pr8/5/2009
Finance Department
August 17, 2009
► Strengthen our ability to respond to financial
emergencies
► Continue the city's commitment to long term
infrastructure and capital investment
► Clarify the use of the Economic Uncertainties
Reserve
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8/5/2009
7% of General Fund revenues reserved for Economic
Uncertainties
Unreserved/Undesignated funds at year-end
divided as follows:
• 50% to Second Tier Reserve
• 25%to Infrastructure Fund
• 25%to Capital Improvement Reserve (CIR)
Equipment Replacement Reserve funded from
annual budget appropriations
Reserves and Designations*
Encumbrances
$6,522,000
Long-term Receivables
1 ,321 ,000
Prepaid Insurance
2,904,000
Restitution
220,000
Condo Conversion Settlement
890,000
Capital Projects (CIR)
3,280,000
Economic Uncertainties (7%)
13,628,000
Second Tier
8,591 ,000
Equipment Replacement
6,91 3,000
Undesignated/Unreserved
174,000
Total Fund Balance
$44,443,000
*Using audited amounts from the Comprehensive
AnnuaiFinanclaiReport(CAFR), 913012008
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8/5/2009
Proposed Change - Fold "Second
Tier" into Economic Uncertainties
$35
$30
$25 p Equipment Replacement
Millions 0Second Tier
$20
0 Economic Uncertainties
$15 ® Capital Projects
$10
$5
$0
Current Categories Proposed Categories
o Long term goal of two months of General Fund
expenditures reserved for Economic Uncertainties
Unreserved/ Undesignated funds at year-end
divided as follows:
• 50%to Economic Uncertainties until fully funded
• 25%to Infrastructure Fund
• 25%to Capital Improvement Reserve
Once Economic Uncertainties attains full funding,
undesignated funds divided as follows:
• 25%to Infrastructure Fund
• 25%to Equipment Replacement
50%to Capital Improvement Reserve
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8/5/2009
o Economic Uncertainties Reserve
• Use in an emergency
• Require formal City Council action to
access
• If used, must re -fund reserve amount
within three years
Examples of Emergency that may warrant
use of the Economic Uncertainties reserve:
Unplanned major event, i.e. disaster,
requiring expenditures over 5% of General
Fund budget
Budgeted revenue taken by another
government entity
Drop in revenue source of more than 5%
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8/5/2009
Proposed Fund Balance
�.`
Reserves and Designations
Encumbrances
$3,500,000
Long-term Receivables
1,000,000
Prepaid Insurance
3,000,000
Restitution/undergrounding
541,000
Condo Conversion Settlement
890,000
Capital Projects (CIR)
3,280,000
Economic Uncertainties
20,635,000
Equipment Replacement
6,91 3,000
Total Fund Balance
$39,759,000
o Long term strategy to guard against risk;
initially sets aside 6 weeks of operating
expenditures or 11 % of General Fund
revenues
o Retains all funds currently reserved for
equipment and capital
o Use of Reserve is transparent and requires
Council action
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8/s/2009
Finance Department
August 17, 2009