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General Fund Reserves Use Policy Resolution#34722
<br /> • APPENDIX A
<br /> A DISCUSSION OF REQUIRED GENERAL FUND RESERVE LEVEL
<br /> General
<br /> The Council,at present,is operating with a goal of funding the General Reserve Fund at 5 percent of the General Fund
<br /> revenues net of short-term borrowing proceeds. As noted in the Financial Forecast,the General Reserve Fund will
<br /> probably end FY 1989-90 at or very close to the desired 5 percent goal.Table 3 shows that estimated year-end balance
<br /> in the General Reserve
<br /> Table 3: General Reserve Fund Status
<br /> City of Portland
<br /> General Fund Reserve Fund
<br /> Audit Actual Adopted Budget Estimated Year-End
<br /> Item FY 1997-88 FY 1988-89 FY 1989-90 FY 1989-90
<br /> GENERAL RESERVE FUND DETAIL
<br /> Beginning Fund Balance $0 $1,000,000 $2,433,894 $2,434,967
<br /> Transfers-IN $4,950,000 $1,340,283 $1,000,000 $9,667,952
<br /> Transfers-OUT ($3,950,000) $0 $0 ($4,000,000)
<br /> Interest Income $0 $94,684 $103,017 $472,481
<br /> Ending Fund Balance $1,000,000 $2,434,967 $3,536,911 $8,575,400
<br /> • Ending Fund Balance As Percent of Net Reve-
<br /> nues 0.623% 1.409% 2.034% 4.926%
<br /> Net Revenues $160,591,017 $172,784,494 $173,926,367 $174,087,688
<br /> 5%Reserve Level(5.000%) $8,029,551 $8,639,225 $8,696,318 $8,704,384
<br /> Over(Under) ($7,029,551) ($6,204,258) ($5,159,407) ($128,984)
<br /> (*)Total General Fund revenues less short-term borrowing proceeds
<br /> Table 3 -General Reserve Fund Status
<br /> Fund will be somewhere around 4.9 percent.The forecast for the fund currently assumes that$3 million will be needed
<br /> to fund Police and Fire retirements expected to result from recent vote approval of Fire and Police,Disability and
<br /> Retirement pension reform. Another$1 million of possible expenditures,requiring a transfer from the reserve to the
<br /> General Fund,were outlined in the FY 1988-89 Fourth Quarter Report.
<br /> There are two principal reasons for building a reserve;
<br /> • First,large unexpected one-time expenditures are more easily funded from a reserve.Temporary or permanent
<br /> reductions in programs are avoided. For example,the current reserve allows funding of Fire and Police
<br /> retirement related personal services expenses without disruption of General Fund programs.
<br /> Second,a"counter-cyclical"reserve is required to ameliorate the effects of an economic downturn on General
<br /> Fund revenue growth. A slower regional economy will slow revenue growth relative to expenses. The result is
<br /> a resource gap that, in the absence of a reserve,can probably only be eliminated by expenditure reductions. In
<br /> addition it should be noted that actions by the State Legislature or the Public Utilities Commission(PUC) can
<br /> also adversely affect revenue growth.
<br /> IP
<br /> City of Portland,Oregon—FY 1999-00 Adopted Budget 297
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