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HomeMy WebLinkAbout12-13-2011 Agenda Chair James Ostlund (2011) 1245 W. Highway 96 Committee Members Arden Hills, MN 55112 Jeff Johnson (2011) 7iRZEN HILLS 651.792.7800 Arlene Mitchell (2013) www.ci.arden-hills.mn.us John Braun (2012) Arden Hills Katy Peters(2012) David Radziej (2013) Financial Planning and Council Liaison David Grant Analysis Committee December 13, 2011 City Vision A strong community that values its unique environmental setting, strong residential neighborhoods, vital business community, well-maintained infrastructure, fiscal soundness, and our long-standing tradition as a desirable City in which to live, work, and play. Agenda Regular Committee Meeting Convenes 6:00 PM Call to Order 1. APPROVAL OF THE AGENDA 2. MINUTES A. October 11, 2011 —Regular Meeting 3. UNFINISHED AND NEW BUSINESS A. Presentation of New Fund Balance Policy and GASB 54 Statement 4. REPORTS A. Report from the City Council B. Financial Planning and Analysis Committee Comments and Requests 5. ADJOURNMENT A quorum of the City Council may be present at this meeting. • MINUTES -AREN HILLS i FINANCIAL PLANNING&ANALYSIS COMMITTEE Tuesday,October 11,2011 6:00 P.M. Council Chambers,Arden Hills City Hall CALL MEETING TO ORDER AND ROLL CALL The meeting was called to order by Jim Ostlund at 6:00 pm. MEMBERS PRESENT:Jim Ostlund,Arlene Mitchell,Jeff Johnson,John Braun,Katy Peters MEMBERS NOT PRESENT:David Radziej,David Grant;Council Liaison OTHERS PRESENT:Kyle Howard Call to Order 1. APPROVAL OF THE AGENDA Motioned:John Braun Seconded:Jeff Johnson 2. APPROVAL OF September 13,2011,MINUTES Motioned:Jeff Johnson Seconded:John Braun 3. UNFINISHED AND NEW BUSINESS A. Planning Session For Future Meetings • The Committee discusses the possibility of creating an In Lieu of Taxes Policy for Non-Profit companies.They decided that this was not something that the Committee should look at until the Council has directed them to take further action. The need to hold a monthly meeting was also discussed.It was determined that monthly meetings at this point in time were not necessary.It was decided that FPAC would change the meetings to the second Tuesday of each Quarter,with the flexibility to meet as needed if the council has a project for the Committee to analyze.2012 meeting dates will be March 13th,June 12th,September 11 ,and December 11t. 4. REPORTS A. Reports from the City Council There were no reports from the City Council. 5. ADJOURNMENT Motioned:Jim Ostlund at 6:21 pm. Seconded:Arlene Mitchell Jim Ostlund,Chair Susan K.Iverson,Finance Director City of Arden Hills 1245 West Highway 96•Arden Hills Minnesota 55112 Phone 651.792.7800•Fax 651.634.5137 www.ci.arden-hills.mn.us • EN HILLS MEMORANDUM DATE: December 13, 2011 TO: Financial Planning and Analysis Committee FROM: Sue Iverson, Director of Finance and Administrative Services Kyle Howard, Finance Analyst SUBJECT: Meeting agenda • Fund Balance Policy and the New GASB 54 Statement The Government Accounting Standards Board (GASB) issued Statement 54 "Fund Balance Reporting and Governmental Fund Type Definitions" in February 2009 and is effective with the 2011 reporting year. These new requirements will require us to change our presentation of fund balance and modify our fund balance policy. DISCUSSION New Fund Balance Classifications GASB 54 separates fund balance into five new categories. Under the old standards, there were three categories: Reserved, Designated, and Undesignated. The new categories are more descriptive, and focus o how the City plans to use its resources. A brief description of each of the new categories is listed below along with examples of each. Nonspendable fund balance — The nonspendable fund balance classification includes amounts that cannot be spent because they are either (a) not in spendable form, or (b) legally or contractually required to be maintained intact. "Not in spendable form" means items that are not expected to be converted to cash. Examples of items that are not in spendable form include inventories, prepaid items, long-term amounts of loans and notes receivable, and land held for resale. Restricted fund balance—Fund balance should be reported as restricted when constraints placed • on the use of resources are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation. Examples of items that may be considered restricted include unspent bond proceeds, unspent grant proceeds, tax increments, certain property tax levies • approved by a referendum, and accumulated funds in debt service funds. Committed fund balance — Fund balance should be reported as committed for amounts that can only be used for specific purposed uses pursuant to constraints imposed by formal action of the government's highest level of decision-making authority (City Council). Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally. An example of committed fund balance would be the City Council committing funds for economic development purposes. Assigned fund balance—Amounts that are constrained by the government's intent to be used for specific purposes, but are neither restricted nor committed, should be reported as assigned fund balance. Assigned fund balance includes (a) all remaining amounts (except for negative balances) that are reported in governmental funds other than the general fund, that are not classified as nonspendable and are neither restricted nor committed and (b) amounts in the general fund that are intended to be used for a specific purpose in accordance with first sentence of this paragraph. Intent can be expressed by the government body or by an official or body to which the governing body delegates the authority (Director of Finance and Administrative Services and/or City Administrator). An example of assigned fund balance would be the City's portion of a construction project where other funding was received with the requirement of a match. Unassigned fund balance — residual amounts that are available for any purpose in the general fund. This category can only be found in the general funds, as by being in any other fund, the City has stated its intent to use if for the purpose of that fund. Committed, assigned, and unassigned fund balance combine to make unrestricted fund balance. Changes Due to GASB 54 This does not change how the City of Arden Hills conducts business. All of the changes will be from a presentation standpoint in the City's Comprehensive Annual Financial Report (CAFR) and the Fund Balance Policies. This will also affect how we present the budget. Other than the new classifications being presented in the CAFR and budget, there are several other changes of note. One change will be related to the classification of the City's current Special Revenue Funds. I have attached an illustration of the City's current financial structure and the proposed financial structure with the implementation of GASB 54. The only funds that will remain Special Revenue Funds will be the Cable Fund and the EDA funds. The Cable Fund has external restrictions and the EDA is a blended component unit of the City which requires this to be reported as a Special Revenue Fund. The Community Service Fund and Parks Fund are used for capital purposes and thus, reassigned to Capital Funds. Since the charitable gambling revenue (currently in the Community Service Fund) is restricted for public safety capital uses, this will be folded into the Public Safety Capital Fund and the Parks Fund will just be moved to the Capital Fund category. Per GASB 54, TCAAP must be folded into the General Fund as a department, thus eliminating the need to transfer General Fund monies to sustain this fund, and Risk Management will be moved to an Internal Service Fund. The second change is related to fund balance commitments. To meet the definition of committed fund balance, the Council is required to adopt a resolution "committing" specific revenues prior • to the end of the year. This resolution will be presented to the City on November 28t. Attached is the anticipated fund balance classifications for each Governmental Fund with balances as of 2010. The commitments made by the Council cannot change without Council taking similar action to remove them. The final change is related to the City's Fund Balance Policies originally adopted on February, 25, 2008. The Fund Balance Policies need to be revised to authorize the Director of Finance and Administrative Services and/or City Administrator to assign fund balances to reflect the City's intended use of funds. This does not change the authority to actually spend resources, but to assign resources for a presentation standpoint only. The Fund Balance Policies also need to include how the City intends to use its resources when multiple categories of fund balance are available. The revised Fund Balance Policies are attached. There have been several minor changes made to reflect the new terminology used in GASB 54 and to reflect how funds are currently being used. Again, the revised policy does not change how the City conducts business or the General Fund reserve. Changes to the policies have been shown in the black-lines revision attached. 411111 Attachment A Financial System Structure City of Arden Hills • 5pancfaJSystem 2031. 17 [ 1 Special Revenue General Fund 1 Debt Service Fund Capital Projects Fund 1 Enterprise Fund Fund i „t , 1 Community Services GOTax Increment Equipment,Buildings& - Mayor&Council b.. Water Utility $ Fund Bond1998A + Replacement i EleNons {.. Cable Fund Public Safety F Sanitary �( Capital Equipment i Sewer 00iN I 1 _ 1 __—.__�_ Permanent Improvement i 1 -:1 Administration rvi.i Parks Fund Recycling 1 Revolving Fund i (PIR) r ( I Finance and Administrative Surface Water -'� Services + TCAAP Management s { MYt Planning& Zoning Risk Management b p i ----- 1 I ' I Government EDA General -- mem j Building ,Y Activities III i Publiclafety 1 r EDA Revolving Fund . tenon 1 Emergency Management. EDA TIF Dist.#2 Protective mar EDA TIT Dist.a 3 Inspections Street s EDATIF Dist.g4 Maintenance Park Maintenance (( I Recreation 1 Celebrating Arden Hills • Transfers 1 City of Arden Hills • —1 1—_ Financial System 2012 1 _ - L L� I _ ! Special Revenue General Fund j Fund . Debt Service Fund 1 Capital Projects Fund Enterprise Fund Ftemai Service Fund i Mayor&Council Cable Fund GO Tax Increment Equipment,BuilGingo& Water Utility wwil w. Risk Management 1 Bondi 998A Replacement j 2 $$• i Elections EDA General Parks Fund Sandary .w.- Engineering Activities --< ---'- Sewer Utility 9 i °f Administration EDA Revolving Fund Public Safety Recycling Central Garage 8 y g Capital Equipment Equipment i I Permanent Finance&Administrative EDA TIF Dist#2 l Improvement Surtace Water I Technology . Services Revolving Fund Management I t._.. (FIR) TCAAP EDA TIF Disl.#3 I Planning& # EDA TIF Dist.#4 Zoning I • Government Building Public Safety mergency Management 7 Protective i Inspections Street Maintenance Park Maintenance Recreation I Celebrating Arden Hills • -- Transfers I • Attachment B Fund Balance Classifications • 0 • GASB 54-2010 Fund Balance Classifications Special Revenue Funds. Capital Funds Internal Service Funds Equipment, Permanent EDATIFDist. EDATIF Dist. GO Tax Bldg,& Improvement Risk Central Garage EDA General FDA Revolving EPA TIF Dist.N2 N3(Cottage N4(Pres. Increment Replacement Public Safety Revolving Fund Management Engineering &Equipment General Fund Cable Fund Fund Fund (Round Lake) Villas) Homes) Bonds 1998A Fund Parks Fund Capital (PIR) fund Fund Fund Technology Total Nonspendable Prepaid Items $ 32,587.00 $ 32,587.00 Total nonspendable 32,587.00 - - •- - - - - - - - - - 32,587.00 Restricted for - Economic Development 1,201,847.00 127,245.00 1,329,092.00 Debt Service 2,167.00 2,167.00 Public Safety Capital 12,962.00 12,962.00 Cable TV 275,502.12 275,502.12 Total restricted - 275,502.12 - •- 1,201,847.00 127,245.00 - 2,167.00 - - 12,962.00 - - - - 1,619,723.12 I Committed for Economic Development 68,554.00 149,891.00 218,445.00 Insurance deductible/litigation 312,382.26 312,382.26 Total committed - - 68,554.00 149,891.00 - - - - - - - 312,382.26 - - - S30,827.26 I Assigned to: 2011 Budget 20,000.00 20,000.00 Severance pay 98,358.35 1,777.88 100,136.23 Capital Improvements 6,606,505.00 6,606,505.00 Wellness Activities 24,288.74 24,288.74 Capital Equipment&Buildings 88,593.00 517,344.00 605,937.00 Total assigned 118,35&35 1,777.88 - - - - - - 88,593.00 - 517,344.00 6,606,505.00 24,288.74 - - - 7,356,866.97 I Unassigned• 1,612,540.65 (376,866.00) 1,235,674.65 Total fund balances $1,763,486.00 $ 277,280.00 $ 68,554.00 $ 149,891.00 $1,201,847.00 $ 127,245.00 $ $ 2,167.00 $ 88,593.00 $(376,866.00) $ 530,306.00 $6,606,505.00 $ 336,671.00 $ S - $ - $ 10,775,679.00 I I •Added TCAAP Fund Balance to General Fund as it was reclassed to General Fund ••Added Community Services Fund Balance to Public Safety Capital as it was reclassed to Public Safety Capital Attachment C Proposed Fund Balance EN HILLS CITY OF ARDEN BILLS COUNTY OF RAMSEY STATE OF MINNESOTA FINANCIAL POLICIES- FUND BALANCE Fund Balance and Net Asset Guidelines(Fiscal Year-End) Purpose The purpose of the fund balance policies is to establish appropriate fund balance levels for each fund that is primarily supported by property tax revenues or user fees. These policies will ensure that adequate resources are available to meet cash flow needs for carrying out the regular operations of the City,as well as to meet the fund balance requirements identified in the City's Long Range Financial Management Plan. The funds that will be addressed in this policy are: General Fund,Cable Fund,EDA Funds,Equipment, Building&Replacement Fund,Parks Fund,Public Safety Capital Fund,Permanent Improvement Revolving Fund(PIR),Risk Management Fund, and Enterprise Funds. Primary Policy Considerations 1. To meet the cash flow requirements of the City. • 2. To maintain adequate fund balances and net assets in each individual fund of the City. 3. To provide for emergencies and contingency needs of the City. Policy Statements 1. The Finance Director as a part of the annual budget process shall prepare an analysis of this policy. The analysis shall project the status of the budget year ending fund balances and net assets. 2. The City Council authorizes the Director of Finance and Administrative Services and/or City Administrator to assign fund balance that reflects the City's intended use of those funds. When both restricted and unrestricted resources are available for use, it is the City's policy to first use restricted resources,and then use unrestricted resources as they are needed. When unrestricted resources are available for use, it is the City's polity to use resources in the following order; 1) committed,2)assigned,3)unassigned. These fund balance classifications apply only to Governmental Funds,not Enterprise Funds. 3. The General Fund balance shall be assigned as of December 31S`for the following purposes in the amounts described below: a. The City will strive to maintain an unassigned balance in the General Fund of 50%of the general fund's total annual operating budget(this reserve includes the designation for cash flows). Since a significant source of revenue in the General Fund comes from property taxes,maintaining a fund balance that is equal to at least six months of operating expenditures ensures that sufficient resources are available to fund basic City functions • between property tax settlements. This range is in conformance with guidance from the P:\Finance\Policies and Procedures\Policies\Fund Balance Policy-2011.doc Adopted 11/28/2011 Office of the State Auditor(OSA). Amounts that exceed 50%may be transferred out to other funds. An assignment or restriction of fund balance may be used to offset revenues • earned in one year where substantial services are required to be performed in the next fiscal period. b. The City will maintain an amount sufficient to cover accumulated vacation and compensatory time balances and that portion of PTO leave that would be payable under the City's severance pay policy or union contracts. This amount shall be adjusted annually as part of the year-end close and annual financial report process. c. For specific purposes as authorized by the City Council or the City's intended use of the funds. Funds shall be assigned first for compensated absences,second for cash flow needs and lastly for emergencies/contingencies. 4. The Cable Fund is a Special Revenue Fund that provides for cable and communication related expenses to disseminate information to the public. It receives the majority of its funding from franchise fees which are restricted for this use. The City will strive to maintain a fund balance in the Cable Fund in an amount sufficient to support the ongoing operating expenditures and capital expenditures planned in the CIP and in congruence with the Long Range Financial Management Plan. 5. EDA Funds are Special Revenue Funds that carryout economic and industrial development and redevelopment consistent with policies established by the City Council. It receives the majority 110 of its funding from specific taxes or other earmarked revenue sources. The City will strive to maintain fund balances in the EDA Funds in an amount sufficient to support the ongoing expenditures, obligations and in congruence with the Long Range Financial Management Plan. Revenues not legally restricted will be committed. 6. Fund balances in Debt Service Funds for future debt payments are restricted. 7. Capital Funds are used to account for the financing of street rehabilitations projects,equipment replacement,public safety equipment,and facility rehabilitation or renovation. Revenue sources are provided mainly through property taxes,special assessments,Park dedication fees, and charitable gambling. Street projects,equipment purchases,and renovations are programmed into the City's Capital Improvement Plan and are generally planned years in advance. The City will strive to maintain fund balances in the Equipment Building&Replacement Fund, Public Safety Capital Fund,Parks Fund,and the Permanent Revolving Improvement Fund in an amount sufficient to support the ongoing capital expenditures planned in the CIP and in congruence with the Long Range Financial Management Plan. Revenues not legally restricted will be assigned. 8. Enterprise Funds were established to account for the operation of Water, Sanitary Sewer, Recycling,and Surface Water Management. These operations are designed to be self-supporting from user charges. City enterprise funds shall have operating cash reserves sufficient to provide for monthly cash • flow,and for a reasonable level of equipment and infrastructure replacement. Major P:\Finance\Policies and Procedures\Policies\Fund Balance Policy-2011.doc Adopted 11/28/2011 reconstruction or system upgrades,may need to be funded from enterprise revenue bonds. Annual utility rate reviews will be made in regard to projected operating expenses and capital • improvements. The Council will,on an annual basis,establish rates in accordance to operating cost recovery and the projected capital improvement. 9. Internal Service Funds were established to account for operations which are designed to be self- supporting from"internal"user charges. a. Risk Management Fund This fund was established to pool dividends received the City's insurance providers for positive claims experience. This funds tracks dividend revenues and deductible costs for claims. The goal of this fund is to build a fund balance that would allow the City to increase deductible limits in order to reduce premium costs. Dividends from the City's health insurance provider are also used to provide wellness programs. Funds received from the League of Minnesota Cities Insurance Trust are committed while funds received from the City's health insurance carrier are assigned. b. Engineering This fund is used to account for the provision of engineering services to development projects, infrastructure projects,and the City in general. This fund is financed predominantly through user charges both internally and externally to developers and is normally not expected to carry a fund balance at year-end. c. Central Garage and Equipment • This fund is used to account for the materials,supplies,and expenses of the Central Garage and equipment of Public Works which is comprised of the following departments; Streets, Parks,Water, Sanitary Sewer,and Surface Water Management. This fund is financed predominantly through user charges internally to the public works departments. Fund balance is assigned for the purchase,replacement,and repair of equipment and vehicles used by public works. 10. Fund balances will be assigned according to the above guidelines up to the amount available after restrictions and other commitments. This policy is not intended to require the reporting of deficit unassigned fund balances. Nonspendable Fund Balances—consists of amounts that are not in spendable form. The City has several amounts unavailable for appropriation such as: prepaid items, inventories,etc. Restricted Fund Balance and Restricted Net Assets—consists of amounts related to externally imposed constraints established by creditors,grantors or contributors;or constraints imposed by state statutory provisions. It is the portion of fund balance that is not appropriable for expenditure or is legally segregated(restricted net assets)for specific future uses. The City has several items that are legally restricted to a certain use such as: police forfeiture funds, federal and state economic development revolving loans,park dedication fees,and bond proceeds. Committed Fund Balance—consists of internally imposed constraints. These constraints are established by Resolution of the City Council. Commitments may be changed or lifted only by the government • taking the same formal action that imposed the constraint originally. P:\Finance\Policies and Procedures\Policies\Fund Balance Policy-2011.doc Adopted 11/28/2011 Assigned Fund Balance—consists of internally imposed constraints. These constraints reflect the specific purpose for which it is the City's intended use. These constraints are established by the City • Council and/or management. Pursuant to City Council Resolution,the City's Director of Finance and Administrative Services and/or City Administrator is authorized to establish assignments of fund balance. Unassigned Fund Balance—is the residual classification for the general fund and also reflects negative residual amounts in other funds. General Fund—The uassigned fund balance should be at a minimum 50%of operating expenditures(this includes the designation for cash flows). The City's goal will be to strive to follow this recommendation. Enterprise Funds—It is expected that unrestricted net assets will be large. These funds have large investment in infrastructure that needs to be maintained. The City will periodically complete a rate study for these funds to ensure rates and unrestricted net assets are sufficient to operate and maintain these activities. Review and Approval The fund balance policy shall be formally approved and adopted by resolution of the City Council and any future changes to the policy must be approved by the City Council. Approval by the City Council the 28th Day of November,2011. • ATTEST: David Grant,Mayor Patrick Klaers,City Administrator • P:\Finance\Policies and Procedures\Policies\Fund Balance PolicY-2011.doc Adopted 11/28/2011 Attachment D Proposed Fund Balance Blacklined Version r2kRZE.IIIILLS CITY OF ARDEN HILLS COUNTY OF RAMSEY STATE OF MINNESOTA FINANCIAL POLICIES- FUND BALANCE Fund Balance and Net Asset Guidelines(Fiscal Year-End) Purpose 1nnee�a ' _t a et .The purpose of the fund balance policies is to establish appropriate fund balance levels for each fund that is primarily supported by property tax revenues or user fees. These policies will ensure that adequate resources are available to meet cash flow needs for carrying out the regular operations of the City, as well as to meet the fund balance requirements identified in the City's Long Range Financial Management Plan. The fiords that will be addressed in this policy are: General Fund, Cable Fund,EDA Funds,Equipment,Building&Replacement Fund, Parks Fund,Public Safety Capital Fund,Permanent Improvement Revolving Fund IP1RD, Risk Management Fund,and Enterprise Funds. Primary Policy Considerations 1. To meet the cash flow requirements of the City. 2. To maintain adequate fund balances and net assets in each individual fund of the City. 3. To provide for emergencies and contingency needs of the City. Policy Statements 1. The Finance Director as a part of the annual budget process shall prepare an analysis of this policy. The analysis shall project the status of the budget year ending fund balances and net assets. 2. The City Council authorizes the Director of Finance and Administrative Services and/or City Administrator to assign fund balance that reflects the City's intended use of those funds. When both restricted and unrestricted resources are available for use, it is the City's policy to first use restricted resources,and then use unrestricted resources as they are needed. When unrestricted resources are available for use, it is the City's polity to use resources in the following order; 1)committed,2)assigned,3J.unassigned. These fund balance classifications apply only to Governmental Funds,not Enterprise Funds. 3. The General Fund balance shall be designated assigned as of December 31St for the following purposes in the amounts described below: 411/ P:\Finance\Policies and Proceduresll'olicies\Funll Balance Policy-2011.docP:\Finance\Policies r ast minted > > /10rAdopted 11/28/2011 a. The City will strive to maintain an unassigned balance in the General Fund general fund • reserve of 50%of the general fund's total annual operating budget(this reserve includes the designation for cash flows). This t t a Cit> i adequate funds_ Since a significant source of revenue in the General Fund comes from property taxes, maintaining a fund balance that is equal to at least six months of operating expenditures ensures that sufficient resources are available to fund basic City functions between property tax settlements. This range is in conformance with guidance from the Office of the State Auditor(OSA). Amounts that exceed 50%may be transferred out to other funds. An assignment or restriction of fund balance may be used to offset revenues earned in one year where substantial services are required to be performed in the next fiscal period. b. The City will maintain an amount sufficient to cover accumulated vacation and compensatory time balances and that portion of PTO leave that would be payable under the City's severance pay policy or union contracts. This amount shall be adjusted annually as part of the year-end close and annual fmancial report process. c. For specific purposes as authorized by the City Council or the City's intended use of the funds. Funds shall be designated-assigned first for compensated absences,second for cash flow needs and lastly for emergencies/contingencies. .n b r d f , fund determined b ,the City r, cil. Such transfer; t to • Council ., ,al 4. The Cable Fund is a Special Revenue Funds,or Capital Project Fundsthat provides for cable and communication related expenses to disseminate information to the public. It receives the majority of its funding from franchise fees which are restricted for this use. 5. The City will strive to maintain a fund balance in the Cable Fund in an amount sufficient to support the ongoing operating expenditures and capital expenditures planned in the CIP and in congruence with the Long Range Financial Management Plan. east d + t 1 lI bli + d .•n b d s; ated_ cc-r�.€,-m�rj-vvnginccc'd�i:r oc'ov�,��.......... 5. EDA Funds are Special Revenue Funds that carryout economic and industrial development and redevelopment consistent with policies established by the City Council. It receives the majority of its funding from specific taxes or other earmarked revenue sources. The City will strive to maintain fund balances in the EDA Funds in an amount sufficient to support the ongoing expenditures,obligations and in congruence with the Long Range Financial Management Plan. Revenues not legally restricted will be committed. 6. Fund balances in Debt Service Funds for future debt payments will be designatedare restricted. 7. Capital Funds are used to account for the financing of street rehabilitations projects.equipment replacement,public safety equipment, and facility rehabilitation or renovation. Revenue sources are provided mainly through property taxes,special assessments,Park dedication fees,and P:\Finance\Policies and Procedures\Policies\Funll Balance Policy-2011.docP:\FinanceWolicies Lastr ed ' 0/2011 2:31 P p Adopted 11/28/2011 charitable gambling. Street projects,equipment purchases, and renovations are programmed into the City's Capital Improvement Plan.and are generally planned years in advance. The City will strive to maintain fund balances in the Equipment Building&Replacement Fund,Public Safety Capital Fund,Parks Fund,and the Permanent Revolving Improvement Fund in an amount sufficient to support the ongoing capital expenditures planned in the CIP and in congruence with the.Long Range Financial Management Plan. Revenues not legally restricted will be assigned. 8. Enterprise Funds were established to account for the operation of Water, Sanitary Sewer, Recycling, and Surface Water Management. These operations are designed to be self-supporting from user charges. City enterprise funds shall have operating cash reserves sufficient to provide for monthly cash flow,and for a reasonable level of equipment and infrastructure replacement. Major reconstruction or system upgrades,may need to be funded from enterprise revenue bonds. Annual utility rate reviews will be made in regard to projected operating expenses and capital improvements. The Council will,on an annual basis,establish rates in accordance to operating cost recovery and the projected capital improvement. 9. Internal Service Funds were established to account for operations which are designed to be self- supporting from"internal"user charges. a. Risk Management Fund This fund was established to pool dividends received the City's insurance providers for positive claims experience. This funds tracks dividend revenues and deductible costs for claims. The goal of this fund is to build a fund balance that would allow the City to increase deductible limits in order to reduce premium costs. Dividends from the City's health. insurance provider are also used to provide wellnessprograms. Funds received from the League of Minnesota Cities Insurance Trust are committed while funds received from the City's health insurance carrier are assigned. b. Engineering This fund is used to account for the provision of engineering services to development projects. infrastructure projects,and the City in general. This fund is financed predominantly through user charges both internally and externally to developers and is normally not expected to carry a fund balance at year-end. c. Central Garage and Equipment 7, This fund is used to account for the materials, supplies,and expenses of the Central Garage and equipment of Public Works which is comprised of the following departments., Streets,Parks,Water, Sanitary Sewer,and Surface Water Management. This fund is financed predominantly through user charges internally to the public works departments. Fund balance is assigned for the purchase,replacement,and repair of equipment and vehicles used by public works. &iO. Fund balances will be designated-assigned according to the above guidelines up to the amount available after restrictions and other designation3commitments. This policy is not intended to require the reporting of deficit undesignated-unassigned fund balances. • P:\Finance\Policies and Procedures\Policies\Funli Balance Policy-2011.docP:\Financc\Polioie5 and Proocdrrres\Policies\Fund Balance Policy.doc Last p..:.,tee r 1 it 0/one n 2 1 Pr u°dopted 11/28/2011 Nonspendable Fund Balances—consists of amounts that are not in spendable form. The City has several amounts unavailable for appropriation such as: prepaid items, inventories,etc. mod--Restricted Fund Balance and Restricted Net Assets—consists of amounts related to externally imposed constraints established by creditors,grantors or contributors; or constraints imposed by state statutory provisions. It is the Pportion of fund balance that is not appropriable for expenditure or is legally segregated(restricted net assets)for specific future uses. The City has several items that are legally restricted to a certain use such as: police forfeiture funds, federal and state economic development revolving loans,park dedication fees,and bond proceeds,—The Committed Fund Balance—consists of internally imposed constraints. These constraints are established by Resolution of the City Council. Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally. DesignatedAssigned Fund Balance— ' . Designation for cashflows- This-designation-will-be-established-fer4he-Genefal-Funfl-wilieh-is-canded largel„fr.�,.,, loc l:„ „t a:.d pertytm es „d market, al„e credit , designated f r s ch f,r;br The fund bala„co .,these f nds, ,ill all be designated f,.a pital Designation,for-eco , .consists of internally imposed constraints. These constraints reflect the specific purpose for which it is the City's intended use. These constraints are established by the City Council and/or management. Pursuant to City Council Resolution, the City's Director of Finance and Administrative Services and/or City Administrator is authorized to establish assignments of fund balance. Unassigned Fund Balance— rterrt is the residual classification for the general fund and also reflects negative residual amounts in other funds. General Fund—The unreserved uassi.gned fund balance should be at a minimum 50%of operating expenditures(this includes the designation for cash flows). The City's goal will be to strive to follow this recommendation. 10 P:\Finance\Policies and Procedures\Policies\Funll Balance Policy-2011.docP:\Finance\Policies and Proceduros\Policies\Fund Balance Policy.d oc Last printed 11110/20-14 , Adopted 11/28/2011 • Speeial-Revemte-Funds—Mest-ef-these-fand-s-wilt-be-desigHated-fec-speeifietufreses-and-the .designated fund balances should be Debt Service Funds Most of these funds will be-reserved.fer debt service and the undcsignatcd fend balance should be„ the project. Enterprise Funds—It is expected that unrestricted net assets will be large. These funds have large investment in infrastructure that needs to be maintained. The City will periodically complete a rate study for these funds to ensure rates and unrestricted net assets are sufficient to operate and maintain these activities. Review and Approval The fund balance policy shall be formally approved and adopted by resolution of the City Council and any future changes to the policy must be approved by the City Council. I Approval by the City Council the 28th Day of ,November,208511. • avid Grant,Mayor ATTEST: Date Jim Willis,InterimPatrick Klaers,City Administrator Date • P:\Finance\Policies and Procedures\Policies\Fund Balance Policy-2011.docP:\Finanoe\Polioies and P eeed„«,ems\Dol;cies1F,,..f1 R lance Policy,doe Last pr:,,ted 1 1 i10/2nl 1 -1:31 DMAdopted 11/28/2011