HomeMy WebLinkAboutAGENDA REPORT 2018 0516 CCSA REG ITEM 10CCITY OF MOORPARK,
CALIFORNIA
City Council Meeting
of May 16, 2018
ACTION Approved staff
recommendation
BY M. Benson
MOORPARK CITY COUNCIL
AGENDA REPORT
TO: Honorable City Council
FROM: Ron Ahlers, Finance Director
DATE: May 1, 2018 (City Council Meeting of May 16, 2018)
SUBJECT: Consider Revised City Council Policy 5.2: Fund Balance Reserve
Policy
SUMMARY
Staff has reviewed Council Policy 5.2, “Fund Balance Reserve” (Policy 5.2) and
requests the Council approve updating this policy to replace the $3 million maximum
reserve in the General Fund with a 20% Emergency/Contingency minimum reserve plus
an additional $1 million of unreserved fund balance. Policy 5.2 changes are shown in
legislative format as an attachment to this report.
BACKGROUND
City Council adopted Policy 5.2 on October 2008, which set the General Fund reserve
at $3 million and transferred the remaining reserves to the newly created Special
Projects Fund. The General Fund reserve has maintained the $3 million level for a
decade. The reserve level should be based on a percent of the General Fund operating
expenditures in order to grow as the General Fund expenditures increase over time .
Staff recommends a 20% Emergency/Contingency reserve level, which equates to
about $3.5 million for June 30, 2018. Staff recommends $1 million be set in the
unreserved fund balance in the General Fund for budget adjustments during the fiscal
year. Any excess above the 20% level, plus the $1 million, will be automatically
transferred to the Special Projects Fund.
This structure of reserves is consistent with General Accounting Acceptable Practices
for public agencies and provides for three (3) months of operating reserves in the event
of natural disaster or catastrophe. Reserve funds designated as
Emergency/Contingency shall not be used ongoing expenses, one-time allocations for
capital expenses unless a declaration of a fiscal emergency is adopted by the City
Council.
Item: 10.C.
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Honorable City Council
May 16, 2018, Regular Meeting
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FISCAL IMPACT
The Emergency/Contingency reserve requires $3.5 million plus the additional $1 million
unreserved equates to a total of $4.5 million. There is currently $3 million in the
General Fund reserve that can be used to partially fund the Emergency/Contingency
reserve. Staff recommends using the current year 2017/18 surplus to fund the
remaining amount. If more funds are required staff can transfer money from the Special
Projects fund at year-end to completely fund the $4.5 million.
STAFF RECOMMENDATION
1. Approve revisions to Policy 5.2, Fund Balance Reserve, and direct staff to
incorporate the revised Policy 5.2 into the next comprehensive update of the City
Council Policies Resolution.
2. Fully fund the Emergency/Contingency reserve of $3.5 million plus the $1 million
at year end, June 30, 2018.
Attachment:
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Honorable City Council
May 16, 2018, Regular Meeting
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Policy 5.2 Fund Balance Reserve Policy 5.2: Fund Balance Reserve
Fiscal stability is an important factor to any city. Sound financial management
includes the practice and discipline of maintaining adequate reserve funds for
known and unknown contingencies. Such contingencies and occurrences
include, but are not limited to:
Cash flow requirements
Economic uncertainties and other financial hardships or downturns in the
local, state or national economy
Local disasters or catastrophic events
Loss of major revenue source
Unanticipated operating or capital expenditures
Capital asset and infrastructure repair and replacement
The establishment of prudent financial reserve policies is important to ensure the
long-term financial health of the City.
The City will maintain a minimum General Fund reserved fund balance for
Emergency/Contingency of 20% of expenditures, plus an unreserved fund
balance of $1 million. An Emergency/Contingency Reserve will be maintained
for the purpose of sustaining General Fund operations in the case of a public
emergency such as a natural disaster or other unforeseen catastrophic event.
The Emergency/Contingency Reserve can be used to mitigate financial and
service delivery risk due to unexpected revenue shortfalls or unanticipated critical
expenditures. This reserve will not be used to fund new programs or personnel.
Any excess General Fund unreserved fund balance will be transferred out to the
Special Projects Fund. Interest generated from the Special Projects Fund will be
posted to the General Fund as interest income, which is vital to the City’s
General Fund operating budget. The Special Projects Fund will be used to
maintain and build new projects including major rehabilitation of streets, parks
and facilities (e.g. Construction of Civic Center Complex, Moorpark Library,
Street Capital Improvement Projects, etc.). These funds may also be used for
any other purpose as deemed appropriate by the City Council by a separate
vote.
Reserve levels will be adjusted annually in accordance with this policy. After the
Emergency/Contingency reserve has been fully funded and the $1 million
General Fund unreserved fund balance, then any excess will be transferred by
the Finance Director to the Special Projects Fund in conjunction with the year-
end analysis and preparation of the City’s Comprehensive Annual Financial
Report (CAFR).
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May 16, 2018, Regular Meeting
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Grant Funds
Most grant awards are reimbursement, whereby the City spends the money first
and applies for reimbursement from the granting agency. The City usually has a
negative fund balance in the grant funds until the grant money is actually
received. Therefore, there is no minimum reserve requirement for grant funds.
Grant funds shall be used to procure materials, supplies, and capital as may be
permitted by the grant rules. No recurring costs shall be funded by a grant
unless the City Council pre-approves the recurring costs.
All Other Funds
The City will maintain a minimum reserve of 10% of the annual revenue in each
fund. Annual revenue is calculated based on the average of the three prior
year’s revenue for the fund.
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