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General Fund Reserves Use Policy Resolution#34722 • Adopted by Council,May 03, 1990 Mayor J.E. Bud Clark Barbara Clark April 26, 1990 Auditor of the City of Portland SCB:TG:RR General Reserve Fund Use Policy INTRODUCTION Over the past three years and continuing with the proposed FY 1990-91 budget the Council,through past actions, established the General Reserve Fund to house and clearly identify the discretionary reserve within the budget. As a result of annual transfers and one-time unexpected revenues Council was able to achieve a five percent General Reserve in just three years.A general fund reserve is needed for two reasons: • To insulate General Fund programs and current service levels from large and unanticipated one-time expenditure requirements,a revenue reduction due to a change in state or federal legislation,resulting from adverse litigation, or similar unforeseen action. • To temporarily insulate General Fund programs and current service levels from slower revenue growth that typically occurs during an economic recession. This reserve is not intended to be used because General Fund expenditure growth exceeds normal revenue growth. The level of the reserve fund is measured as a percentage of the budgeted General Fund revenues net of short-term borrowing receipts. Analysis attached as Appendix A of the December 1989 Financial Forecast shows that a 10 percent reserve level is required. The following paragraphs set out policy guidelines that could govern Council's use of reserve funds. EMERGENCY RESERVE The Council reserves the first five percent,or one half of the overall reserve as an Emergency Reserve. The emergency reserve is available to fund one-time emergency,unanticipated expenditure requirements or offset unanticipated revenue fluctuations occurring within a fiscal year. The reserve avoids the need to make budget adjustments outside of the normal budget hearing process.The Council can withdraw funds from the emergency reserve after the General Fund's budgeted contingency is exhausted. The emergency reserve will only be accessed when the result of emergency expenditures or an unexpected revenue reduction would be that the General Fund would likely end the fiscal year with a negative ending fund balance. Revenue shortfalls associated with bureau service reimbursement income,contract income,or cost recovery revenues may not be offset by a transfer of resources from the General Reserve Fund. Restoration of the Emergency Reserves will begin the fiscal year following their use.Restoration will be consistent with the Council's past practice of budgeting transfers totaling a minimum of$1 million dollars a year to the General Reserve Fund. USE OF THE COUNTER CYCLICAL RESERVE The second 5 percent of the reserve is designated as a counter cyclical.The Council will use this half of the reserve to either maintain General Fund current service level programs or transition expenditure growth to match slower revenue growth during the first 18-to 24 months of a recession. The counter cyclical reserve is designated for use as"bridge financing"necessary to offset slower revenue growth during a recession. For purposes of this policy, slower or recessionary revenue growth triggers Council's assessment of use of the reserve when: • 294 City of Portland, Oregon-FY 1999-00 Adopted Budget