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SEP-28-2007 13:20 CITY OF SHOREVIEW 6514904699 P.02/06 <br /> TO: Terry Schwerm., City Manager <br /> Mayor and City Council <br /> 40 <br /> FROM: Jeanne A. Haapala, Finance Director <br /> DATE: March 31, 1998 <br /> RE: Proposed General fund Balance Policy Revision <br /> INTRODUCTION <br /> In April of 1990 the City of Shoreview adopted a policy designating a portion of the <br /> City's General Fund balance for cash flow purposes. The policy was necessary then and <br /> is still necessary today because: 1)property taxes and state aids represent 75 percent of <br /> General Fund revenues,and 2) property tax and aid payments are received in July and <br /> December of each year. <br /> This means that the City's primary operating fund must operate during the first 6 months <br /> of the year without tax and state aid revenues. Consistent with the cash flow needs <br /> dictated by the items mentioned above, the City's policy requires that 50 percent of the <br /> ensuing year's General Fund tax levy and state aids be designated for cash flow purposes. <br /> From time to time Council and staff have also discussed the possibility of determining <br /> • guidelines for a maximum General Fund balance. The mechanism for establishing the <br /> maximum fund balance has been discussed as an allowance for unanticipated General <br /> Fund expenditures or revenue shortfalls. <br /> Proposed Revision <br /> During the budget and capital improvement program (CIP) workshops held last <br /> November, and at a Council workshop in early March, staff described a proposed plan to <br /> revise and expand the City's fund balance policy to include an unanticipated expenditure <br /> designation. The proposed annual designation would equal 5 percent of General Fund <br /> expenditures, and the policy would require that at year-end any fund balance in excess of <br /> the combined cash flow and expenditure designations would be transferred to the City's <br /> • General Fixed Asset Revolving (GFAR) Fund_ <br /> In effect the policy establishes a minimum and maximum General Fund balance. The <br /> minimum balance would be equal to the cash flow designation, and the maximum would <br /> be equal to the sum of the cash flow designation and the expenditure designation <br /> combined. <br />