HomeMy WebLinkAboutPR - 39 Financial Management -
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POLICY RESOLUTION NO. 39 I
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF UKIAH
I ESTABLISHING FINANCIAL MANAGEMENT POLICIES
WHEREAS, the City Council of the City of Ukiah approves an annual operating budget, �
requiring a long-term perspective and emphasis on a policy-oriented budget process, and;
WHEREAS, clear direction on basic financial policy issues can assist in setting and prioritizing
City goals and in clarifying direction on budget issues, and;
WHEREAS. the City Council has identified a number of policy areas in which it can document
basic financial management principles.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Ukiah approves the
attached Financial Management Policies for the City of Ukiah (Exhibit A).
PASSED AND ADOPTED on November 20, 2013, by the following Roll Call Vote:
, AYES: Councilmembers Landis, Thomas, and Mayor Crane
i NOES: Councilmember Baldwin
ABSTAIN: None
ABSENT: None
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Do glas F1. rane, Mayor �
ATTEST:
;, �� ; �, c
Kristine Lawler. City Clerk
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EXHIBIT"A"
�IT`Y OF UKTAH
FINANCIAL MANAGEMENT POLICIES
Table of Contents
Paqe
A. General Financial Goals............................................................................................................ 2
B. Budget Administration.............................................................................................................. 2
C. General Revenue Management................................................................................................ 3
D. Utility Rates and Fees................................................................................................................ 4
E. Investments............................................................................................................................... 5 '
F. Expenditures ............................................................................................................................. 5
G. Equipment Replacement Funds................................................................................................ 5
H. CapitallmprovementProgram ................................................................................................. 6 �!
I. Debt Management.................................................................................................................... 7
J. Fund Balance and Reserves ...................................................................................................... 8 i
K. Accounting, Auditing and Financial Reporting.......................................................................... 8
L. Human Resources Management .............................................................................................. 9 I
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CITY OF UKIAH
FINANCIAL MANAGEMENT POLICIES 11/zo/2013
A. General Financial Goals
The general financial goals of the City of Ukiah are:
1. To maintain a financially viable City that provides an adequate level of municipal services.
2. To maintain financial flexibility in order to be able to continually adapt to local and regional
economic changes.
3. To maintain and enhance the sound fiscal condition of the City.
B. Budget Administration
1. The City will strive to adopt a balanced budget by June 30 preceding the budget period. A
balanced budget means that operating revenues must fully cover operating expenditures,
including debt service, as set forth in 6.6. below. A balanced budget allows for total
expenditures to exceed revenues; however, beginning fund balance and strategic reserve
funds can only be used to fund capital improvement projects or other one-time, non-
recurring expenditures, as set forth in B.10. below.
2. The City will prepare a budget calendar no later than January 15 preceding the budget
period.
3. The City will use a budget development process that emphasizes long-range planning and
effective program management. The process will:
a. Reinforce the importance of long-range planning in managing the City's fiscal affairs.
b. Focus on developing and budgeting for the accomplishment of significant goals.
c. Establish realistic timeframes for achieving goals.
d. Create a proactive budget that provides for stable operations and assures the City's
long-term fiscal health.
e. Promote orderly spending patterns.
4. During the budget development process, the existing budget will be thoroughly examined I
to assure removal or reduction of any services or programs that could be eliminated or
reduced in cost.
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FINANCIAL MAfVAGEMEM� ��aI...I�T�S i1/zo/zo13
5. The City will avoid budgetary and accounting procedures that balance the current budget at
the expense of future budgets.
6. The City will strive to support current operating expenditures, including debt service, with
current revenues.
7. The City will forecast its revenues and expenditures for each of the succeeding five years
and will update this forecast at least annually. i
8. The status of major program goals will be formally reported to the City Council on a
periodic, ongoing basis. I
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9. The City Council will review and amend appropriations, if necessary, on a periodic, ongoing
basis.
10. The City will strive to preserve the spending of fund balance and strategic reserve funds for
capital improvement projects, or other one-time, non-recurring expenditures.
11. Unspent, unencumbered operating and capital improvement program appropriations will
lapse at the end of the budget period. Requests for lapsed program appropriations may be
resubmitted for inclusion in the subsequent budget period. Unspent but encumbered
appropriations at the end of the budget period shall amend the budget of the subsequent
period by means of a budget amendment approved by the City Council.
C. General Revenue Management
1. The City will seek to maintain a diversified and stable revenue base to protect it from short-
term fluctuations in any one revenue source.
2. To emphasize and facilitate long-range financial planning, the City will maintain current
projections of revenues for the succeeding five years. i
3. Because revenues, especially those of the General Fund, are sensitive to both local and I,
regional economic conditions, revenue estimates adopted by the City Council must be �
conservative.
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4. The City will annually review the General Fund operating position (revenues less
expenditures) to determine if funds are available to operate and maintain future capital
facilities. If funding is not available for operations and maintenance expenses, the City will
evaluate all viable options.
5. User fees will be reviewed and updated on a periodic basis to recover the full cost of
services provided, except when the City Council determines that a subsidy from the General
Fund is within the cost recovery policy adopted by the Council. The City will strive to
establish a master fee schedule that will encompass all fees and charges of the City.
6. Any transfers between funds for operating purposes shall be clearly set forth in the Adopted
Budget. These operating transfers, under which financial resources are transferred from
one fund to another, are distinctly different from interfund borrowings, which are usually
made for temporary cash flow reasons and are not intended to result in a transfer of
financial resources by the end of the fiscal year. From time to time, interfund borrowings
may be appropriate but are subject to the following criteria:
a. The Finance Director is authorized to approve temporary interfund borrowings for
cash flow purposes whenever the cash shortfall is expected to be resolved within 60
days. The most common use of interfund borrowing under this circumstance is for
grant programs where costs are incurred before drawdowns are initiated and
received.
b. Any other interfund borrowings for cash flow or other purposes require approval by
the City Council.
D. Utility Rates and Fees
1. The City will set utility rates and user fees at levels that fully recover the total direct and
indirect costs of the activity. Indirect costs include the costs of operations, capital outlay,
debt service and annual depreciation of capital assets.
2. The City will review and adjust utility rates and user charges as required to ensure that they
remain appropriate and equitable.
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FINAN�TAI_ MAMACEMENT P�I.i�IFS 11/20/:013
E. Investments
1. The Finance Director will annually submit an investment policy to the City Council for review
and adoption. I
2. Under the guidance of the City's Investment Oversight Committee, the Finance Director will
invest the City's idle monies with an outside investment advisor in accordance with
applicable law and adopted investment policies and direct the investment of bond or note
monies on deposit with a trustee or fiscal agent in accordance with the applicable indenture
or issuance document.
F. Expenditures II
1. The City will strive to maintain a level of expenditures that will provide for the public well- '
being and safety of the residents of the community.
2. The City will strive to provide a level of expenditures that will maintain the public assets.
3. The City will maintain purchasing methods, in accordance with law and the City's adopted
purchasing policies and procedures, to secure the lowest price consistent with the quality
desirable for use intended and the needs of the City. I
4. The City Council will annually adopt a resolution establishing the City's appropriations limit
calculated in accordance with Article XIII-B of the Constitution of the State of California,
Section 7900 of the State of California Govemment Code, and any other voter approved �
amendments or state legislation that affects the City's appropriations limit. The Council will '
generally consider this resolution in connection with final approval of the City's budget.
G. Equipment Replacement Funds
1. The City will maintain a General Government Equipment Replacement Fund and a Utilities
Equipment Replacement Fund for each utility to provide for the timely replacement of
vehicles, information technology, and other short-lived capital equipment.
2. The City will strive to make an annual contribution to these funds based on the annual use
allowance, which is determined by the estimated life of the vehicles or equipment to be
replaced and their original purchase costs.
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FINANCIAL MANAGEMENT POLICIES 11/zo/zo13 I�
3. Interest earnings and sales of surplus equipment as well as any related damage and
insurance recoveries will be credited to the Equipment Replacement Funds.
H. Capital Improvement Program
1. The City will develop a five-year capital improvement program (CIP) each budget cycle. The
purpose of the CIP is to systematically plan, schedule and finance capital projects to ensure
cost-effectiveness as well as conformance with the City's established policies.
2. Questions to consider when prioritizing a capital project include:
a. Is it mandated?
b. Is there an emergency need?
c. Is there a direct or indirect economic benefit?
d. Is there full or partial funding?
, e. Does it dovetail with other capital projects that are a priority for other reasons?
f. How does it fit in with the City Council's strategic goals?
3. The City will identify the estimated costs, potential funding sources, and project schedule
for each capital project proposal in the CIP before it is submitted to the Cit Council for
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approval.
4. The City will coordinate the development of the CIP with the development of the operating
budget.
5. Construction projects that cost $20,000 or more and equipment purchases that cost
$10,000 or more will be included in the CIP, except for replacements of police squad cars
which are included in the operating program budget. Minor capital construction outlays of
i less than $20,000 and minor equipment purchases of less than $10,000 will be included in
the operating program budgets.
6. The City will make all capital improvements in accordance with an adopted and funded CIP.
7. Cost tracking procedures for current-period components of the CIP will be implemented
and updated quarterly to ensure project completion is within budget and established
timelines.
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FINANCIAL MANA��'�!1E�'T ?<?l_?f?ES 1i/zo/zo13 '
I. Debt Management II
1. The City will consider the use of debt financing only for high-priority, one-time capital
improvement projects and only under the following circumstances
a. When the project's useful life will exceed the term of financing, and;
b. When project revenues or specific resources will be sufficient to service the long-
term debt.
2. Debt financing will not be considered appropriate for any recurring purpose such as current
operating and maintenance expenditures. The issuance of short-term instruments such as
revenue, tax or bond anticipation notes is excluded from this limitation.
3. The City will carefully monitor its level of debt because debt capacity is limited. Funds
borrowed for a project today are not available to fund other projects tomorrow, and funds
committed for debt repayment today are not available to fund operations tomorrow.
4. A feasibility analysis will be prepared for each long-term financing which analyzes the
impact on current and future budgets for debt service and operations. This analysis will also
address the reliability of revenues to support debt service.
5. The City will diligently monitor its compliance with bond covenants and ensure its
adherence to federal arbitrage regulations.
6. The City will maintain good, ongoing communications with bond rating agencies about the
City's financial condition.
7. Periodic reviews of all outstanding debt will be undertaken to determine refinancing
opportunities. Refinancings will be considered under the following conditions:
a. There is a net economic benefit.
b. It is needed to modernize covenants that are adversely affecting the City's financial
position or operations.
c. The City wants to reduce the principal outstanding in order to achieve future debt
service savings, and it has available working capital to do so from other sources.
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CITY OF UKIAH
FINANCIAL MANAGEMENT POLICIES 11/2o/20i3
1. Fund Balance and Reserves
1. The City will strive to maintain a fund balance in the General Fund, including the General
Fund's Strategic Reserve Fund, of at least 25 percent of General Fund operating
expenditures. A 25-percent fund balance is equivalent to approximately three months of
operating expenditures. The primary purpose of this minimum fund balance is to meet cash
flow requirements, to protect the City's essential service programs and funding
requirements during periods of economic uncertainty, local disasters, other financial
hardships or downturns in the local economy, and to provide for unforeseen operating or
capital needs. Additionally, a fund balance of 25 percent is considered the minimum level
necessary to maintain the City's credit worthiness.
2. The City Council may assign specific fund balance levels for future development of capital
projects that it has determined to be in the best long-term interests of the City.
3. The City's enterprise funds will strive to maintain a minimum working capital balance of at
least 25 percent of operating expenses. The primary purpose of this balance is to set aside
funds to maintain cash balances sufficient to pay expenses as needed and to provide for
unanticipated or emergency expenses that could not be reasonably foreseen during the
preparation of the budget.
' 4. In addition to the assigned balances noted above, levels of fund balance and retained
' earnings will be sufficient to meet:
a. Debt service reserve requirements.
b. Reserves for encumbrances.
c. Established rate stabilization reserves.
d. Funding requirements for projects approved in prior years that are carried forward.
e. Other assignments required by contractual obligations, state law or generally
accepted accounting principles.
K. Accounting, Auditing and Financial Reporting
1. The City's accounting and financial reporting systems will be maintained in conformance
with generally accepted accounting principles and standards of the Governmental
Accounting Standards Board.
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FIfVANCIAL M,Af�lAGEM/IENT POLICxES 11/20/2013 I
2. A fixed assets system will be maintained to identify all City assets, their historical cost, and
useful life. Consistent with the accompanying policies set forth for the City's Capital
Improvement Program, the dollar threshold for fixed assets will increase from $5,000 to
$10,000 effective July 1, 2014.
3. At the beginning of the annual budget preparation cycle, a financial review will be
submitted to the City Council and will be made available to the public.
4. Full and continuing disclosure will be provided in the general financial statements and bond
representations.
5. An annual audit will be performed by an independent public accounting firm with the
subsequent issue of, at a minimum, General Purpose Financial Statements that include an
audit opinion. The City will strive to issue audited financial statements within 180 days after
year-end.
L. Human Resources Management
1. The City Council will authorize all regular positions, including part-time and extra-help
regular positions.
2. The budget will fully appropriate the resources needed for authorized regular positions and
will limit programs to the regular staffing authorized.
3. The City will strive to provide competitive compensation and benefits for its authorized
regular employees.
4. All requests for additional regular positions will include evaluations of:
a. The necessity, benefits, term and expected results of the proposed activity.
' b. Staffing and materials costs including salary, benefits, equipment, uniforms, support
and facilities.
c. Alternative means of service delivery, with consideration given to quality of service.
d. Additional revenues or cost savings that may be realized. �
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