HomeMy WebLinkAboutCouncil Policy (Finance)TITLE: Maintenance of Reserve Funds POLICY #201
ADOPTED: June 26, 1985 AMENDED: October 7, 2014
Purpose
The City will establish reserves to strengthen its ability to withstand unexpected financial
emergencies such as those that may result from national disasters, revenue shortfalls, or
unanticipated expenditures of a non -recurring nature and to accumulate funds for large-
scale purchases.
Policy
The City Manager is charged with the responsibility of accumulating and maintaining the
City's reserves at the following target levels:
• GENERAL FUND CONTINGENCY RESERVE: an amount equal to between
twenty-five percent (25%) and fifty percent (50%) of a single year's budgeted General
Fund operating expenditures. "Operating expenditures" shall be defined as all
expenditures, except those of a capital nature, plus operating subsidies provided to the
Library Fund, Parks Fund, Nutrition Fund, and Personnel Compensation Fund.
• GAS TAXES FUND CONTINGENCY RESERVE: an amount equal to a minimum
of five percent (5%) of the estimated annual revenue of the Gas Taxes Fund.
• SEWER SERVICE FUND CONTINGENCY RESERVE: an amount equal to a
minimum of five percent (5%) of the estimated annual revenue of the Sewer Service
Fund.
• LIABILITY INSURANCE RESERVE: an amount sufficient to ensure liability
insurance claim assets of the Liability Insurance Fund equal to the eighty percent (80%)
Confidence Level of Adequacy applicable to estimated liability insurance claims, as
established biennially by the City's actuary.
• WORKERS' COMPENSATION RESERVE: an amount sufficient to ensure
Workers' Compensation claim assets of the Liability Insurance Fund equal to the eighty
percent (80%) Confidence Level of Adequacy applicable to estimated Workers'
Compensation claims, as established biennially by the City's actuary.
• DEBT SERVICE RESERVES: in each fund from which debt service is paid, an
amount equal to the total required by applicable indenture(s) and/or other agreement(s),
but in no case less than one years' debt service requirement of all long-term City
obligations, excluding inter -fund loans.
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• VEHICLE REPLACEMENT RESERVE: an amount equal to between the
accumulated depreciation and estimated replacement value of the motor vehicle assets
of the Vehicle Replacement Fund. For the purposes of this policy, "motor vehicle"
shall be defined as a self-propelled, wheeled vehicle with propulsion provided by an
engine or motor which must be operated by one or more persons to perform the
function(s) for which it is designed.
The actual amount of each reserve shall be determined each year by the City Manager as
part of the budgeting process and shall be annually reported to the City Council as part of
or in conjunction with the Comprehensive Annual Financial Report (CAFR); however,
nothing in this policy shall prevent determining or reporting on the level of any reserves at
other times during the year.
The above requirements may be suspended only upon approval of Council.
Replenishment of Reserves
If its balance falls below the minimum required level, the City shall strive to restore it to
the minimum required balance by any feasible means, including, but not limited to,
adopting a budgetary surplus; applying any cost savings, over -realized revenues, and/or
surpluses realized within the applicable fund; or transferring a portion of the General Fund
Contingency Reserve. Unless otherwise noted, the following guidelines will be used to
restore a reserve fund:
• If a reserve is drawn down to 75-99% of its minimum required balance, it shall be
restored to 100% over a 1 to 3 year period.
• If a reserve is drawn down to 50-74% of its minimum required balance, it shall be
restored to 100% over a 3 to 5 year period.
• If a reserve is drawn down below 50% of its minimum required balance, it shall be
restored to 100% over a 5 to 7 year period.
These guidelines may be suspended, in whole or part, if financial or economic
circumstances prevent meeting any or all of the timelines.
All transfers and expenditures from the reserves require Council approval.
Related Policy References
None
Prior Policy Amendments
March 12, 2002
December 10, 2013
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