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Attachment B <br />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 <br />throughout the year <br />To provide funds to address unexpected or unplanned events <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 <br />operations between bi-annual property tax collection periods. Any surplus beyond the <br />required general fund reserve may be transferred to another reserve fund with a funding <br />shortfall <br />The City will strive to create a reserve in theRecreation 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% <br />reserve 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 <br />charges. Because the economic environment has a major effect on this Fund, a fund <br />balance of 25-50 % of the annual budget is a reasonable target. It is expected that as <br />economic downturns take place, this reserve will provide for a transition period during <br />which the Council will be able to assess and to better match operations with the economic <br />need <br />City enterprise funds shall have operating cash reserves sufficient to provide for monthly <br />cash 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. <br />Annual utility rate reviews will be made in regard to projected operating expenses and <br />capital improvements. The Council will, on an annual basis, establish rates in accordance <br />to operating cost recovery and the projected capital improvements <br />The Communications Fund has greater cash flow variability than in prior years and <br />therefore warrants a higher reserve level than previously established. It is expected to <br />operate with balances of 10-30% of the annual operating budget <br />The License Center and Information Technology funds have consistently demonstrated <br />strong cash flows which allows for a lower overall reserve level and are expected to <br />operate with balances of 10-15% of the annual operating budget <br /> <br />