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149 <br />150 <br />151 <br />152 <br />153 <br />154 <br />155 <br />156 <br />157 <br />158 <br />159 <br />160 <br />161 <br />162 <br />163 <br />164 <br />165 <br />166 <br />167 <br />168 <br />169 <br />170 <br />171 <br />172 <br />173 <br />174 <br />175 <br />176 <br />177 <br />178 <br />179 <br />180 <br />181 <br />182 <br />183 <br />184 <br />185 <br />186 <br />187 <br />188 <br />189 <br />190 <br />191 <br />192 <br />193 <br />194 <br />195 <br />196 <br />Exhibit A <br />Fund Balance (Operating Fund Reserve) Policy <br />Purpose <br />❑ To provide a cushion against unexpected revenue and income interruptions <br />❑ To provide working capital by ensuring sufficient cash flow to meet the City's needs throughout <br />the year <br />Policy <br />❑ The City will maintain a general fund reserve of 35 -45% of the general fund's total annual <br />operating budget. This ensures that the City has adequate funds on hand to provide for operations <br />between bi- annual property tax collection periods. Any surplus beyond the required general fund <br />reserve may be transferred to another reserve fund with a funding shortfall <br />❑ The City will strive to create a reserve in the Recreation Fund to equal 25% of the annual <br />recreation budget. This reserve will provide a cash flow cushion and reduce the inter -fund <br />borrowing expense to the Recreation Fund. Because of more frequent cash inflows, a 25% reserve <br />will be adequate to support the daily cash needs of the fund <br />❑ The Community Development Fund is supported solely by building permit fees and charges. <br />Because the economic environment has a major effect on this Fund, a fund balance of 25 -50 % of <br />the annual budget is a reasonable target. It is expected that as economic downturns take place, this <br />reserve will provide for a transition period during which the Council will be able to assess and to <br />better match operations with the economic need <br />❑ City enterprise funds shall have operating cash reserves sufficient to provide for monthly cash <br />flow, and for a reasonable level of equipment and infrastructure replacement. Major <br />reconstruction or system upgrades, may need to be funded from enterprise revenue bonds. Annual <br />utility rate reviews will be made in regard to projected operating expenses and capital <br />improvements. The Council will, on an annual basis, establish rates in accordance to operating <br />cost recovery and the projected capital improvements <br />❑ All other operational funds e.g. License Center, Information Technology, etc are expected to <br />operate with positive reserve balances of 10 -25% of the annual operating budget. Each <br />operational fund shall be reviewed on an annual basis to assure the fund balance is in line with the <br />fund's objectives <br />❑ In the event the minimum fund balance drops below prescribed levels, the City shall dedicate new <br />incoming property tax or program revenues (where applicable) in an amount sufficient to bring <br />fund balance levels back into compliance within three fiscal years <br />❑ Unless otherwise directed by the City Council, monies held in individual Funds shall be expended <br />first from restricted fund balances, second from committed fund balances, then from assigned fund <br />balances, before using unassigned fund balance <br />Page 6 of 7 <br />