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323 <br />Operating Fund Reserve Policy <br />324 <br />325 <br />Purpose <br />326 <br />327 <br />To provide a cushion against unexpected revenue and income interruptions <br />328 <br />329 <br />To provide working capital by ensuring sufficient cash flow to meet the City's needs <br />330 <br />throughout the year <br />331 <br />332 <br />Policy <br />333 <br />334 <br />The City will maintain a general fund reserve of 35-45% of the general fund's total annual <br />335 <br />operating budget. This ensures that the City has adequate funds on hand to provide for <br />336 <br />operations between bi-annual property tax collection periods. Any surplus beyond the <br />337 <br />required general fund reserve may be transferred to another reserve fund with a funding <br />338 <br />shortfall <br />339 <br />340 <br />The City will strive to create a reserve in the Recreation Fund to equal 25% of the annual <br />341 <br />recreation budget. This reserve will provide a cash flow cushion and reduce the inter-fund <br />342 <br />borrowing expense to the Recreation Fund. Because of more frequent cash inflows, a 25% <br />343 <br />reserve will be adequate to support the daily cash needs of the fund <br />344 <br />345 <br />The Community Development Fund is supported solely by building permit fees and charges. <br />346 <br />Because the economic environment has a major effect on this Fund, a fund balance of 25- <br />347 <br />50% of the annual budget is a reasonable target. It is expected that as economic downturns <br />348 <br />take place, this reserve will provide for a transition period during which the Council will be <br />349 <br />able to assess and to better match operations with the economic need <br />350 <br />351 <br />City enterprise funds shall have operating cash reserves sufficient to provide for monthly <br />352 <br />cash flow, and for a reasonable level of equipment and infrastructure replacement. Major <br />353 <br />reconstruction or system upgrades, may need to be funded from enterprise revenue bonds. <br />354 <br />Annual utility rate reviews will be made in regard to projected operating expenses and capital <br />355 <br />improvements. The Council will, on an annual basis, establish rates in accordance to <br />356 <br />operating cost recovery and the projected capital improvements <br />357 <br />358 <br />All other operational funds e.g. License Center, Information Technology, etc. are expected to <br />359 <br />operate with positive reserve balances of 10-25% of the annual operating budget. Each <br />360 <br />operational fund shall be reviewed on an annual basis to assure the fund balance is in line <br />361 <br />with the fund's objectives <br />362 <br />363 <br />In the event the minimum fund balance drops below prescribed levels, the City shall dedicate <br />364 <br />new incoming property tax or program revenues (where applicable) in an amount sufficient <br />365 <br />to bring fund balance levels back into compliance within three fiscal years <br />366 <br />367 <br />Unless otherwise directed by the City Council, monies held in individual Funds shall be <br />368 <br />expended first from restricted fund balances, second from committed fund balances, then <br />369 <br />from assigned fund balances, before using unassigned fund balance <br />370 <br />371 <br />Page 10 of 12 <br /> <br />