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HomeMy WebLinkAboutReso - CC - 011-2015RESOLUTION NO. 11-2015 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURLINGAME APPROVING A RESERVE POLICY FOR THE CITY'S GENERAL FUND WHEREAS, the City of Burlingame wishes to support its goal of sustaining long-term financial strength through the establishment of clearly articulated fiscal policies; and WHEREAS, reserves are the cornerstone of financial flexibility, proving options for responding to unexpected issues and a buffer against economic downturns and other forms of risk; and WHEREAS, in 2014 the City engaged the services of Research and Consulting Center of the Government Finance Officers Association (GFOA) to conduct a comprehensive analysis of the various risks that would compel the City to require a reserve; WHEREAS, the analysis of the GFOA determined that the City should retain its Economic Stability Reserve to protect and preserve City services from dramatic drops in General Fund revenues that are highly sensitive to economic conditions; and WHEREAS, the GFOA analysis also determined that the City should retain its Catastrophic Reserve to provide for the cost of repairs to City buildings and facilities caused by natural disasters or other catastrophic events; and WHEREAS, based on its analysis, the GFOA recommended that the City should establish a target reserve level of about 27 to 33 percent of the City's General Fund revenues; and WHEREAS, the City Council considered the analysis and GFOA's recommendations in establishing the parameters of a General Fund reserve strategy; and WHEREAS, a General Fund Reserve Policy maintains a basis for coping with fiscal emergencies, provides guidelines for sound financial management with an overall long-range perspective, and enhances transparency in the City's financial strategies, NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BURLINGAME DOES HEREBY RESOLVE AND ORDER AS FOLLOWS: The General Fund Reserve Policy for the City of Burlingame as shown on the attached Exhibit A is hereby adopted. Terry Nadel, M or I, Mary Ellen Kearney, City Clerk of the City of Burlingame, hereby certify that the foregoing Resolution was duly and regularly introduced and adopted at a regular meeting of the Burlingame City Council held on the 20th day of January, 2015, by the following vote to wit: AYES: Councilmembers KEIGHRAN, NAGEL, ORTIZ, ROOT NOES: Councilmembers: NONE ABSENT: Councilmembers: BROWNRIGG Mary Ellen Kearney, City berk EXHIBIT A City of Burlingame, California Financial Policy Document General Fund Reserve Adoption Date: January 20, 2015 Last Revision Date: Owner Department: Finance I. Introduction A General Fund reserve helps ensure that the City of Burlingame (the City) can provide consistent, uninterrupted municipal services in the event of economic disruption or an extreme event. Two of the City's primary revenue sources, the transient occupancy tax and sales tax, are known to be sensitive to downturns in the economy. Further, like many other California cities, Burlingame must be prepared for seismic and other catastrophic events that could threaten its long term fiscal health. This policy establishes the amounts the City will strive to maintain in the General Fund reserve, how the reserve will be funded, and the conditions under which the reserve may be spent. II. Amounts Held in Reserve The City of Burlingame will strive to hold the amount listed below as "assigned" General Fund balance, expressed as a percentage of the City's annual operating expenditures for the - General Fund. These amounts are expressed as goal ranges, recognizing that fund balance levels can fluctuate from year to year in the normal course of operations for any local government. The reserves are broken into three separate categories, each with their associated target amount of reserves: • 24 % of budgeted revenues - Economic Stability Reserve. Available to protect and preserve City services from dramatic drops in General Fund revenues that are highly sensitive to economic conditions, mainly transient occupancy taxes and sales taxes ■ 2% - 9% of budgeted revenues - Catastrophic Reserve. Available to make repairs and reconstruct City buildings and facilities that may be damaged by natural disasters or acts of war or terrorism ■ $500,000 - Contingency Reserve. Available to cover unexpected expenses that may arise during the course of the fiscal year that were not considered during budget planning If, based on the Finance Director's analysis and forecasting, the target balance is not being met or is likely not going to be met at some point within a five-year time horizon, then a plan to meet the target balance will be developed. This plan will then be presented to the City Council for consideration. III. Funding Reserve Targets Funding of unrestricted fund balance targets will come generally from one-time revenues, unusually high yields from transit occupancy taxes or sales taxes, and projected revenues in excess of projected expenditures. They will generally be reserved in the following priority order: Page 1 of 2 EXHIBIT A City of Burlingame, California Financial Policy Document General Fund Reserve 1. Economic stability reserve 2. Catastrophic reserve IV. Conditions for Use of Reserves A. Use of Reserves It is the intent of the City to limit use of the General Fund reserves to address unanticipated, non-recurring needs or known, planned future obligations. Reserves shall not normally be applied to recurring annual operating expenditures. The reserves may, however, be used to allow time for the City to restructure its operations in a deliberate manner (such as might be required in the case of a severe economic downturn), but such use will only take place in the context of an adopted long-term plan to reach a sustainable structure. The City may only use up to 50% of the reserve for Economic Stability to continue operations without reductions in any one year of economic difficulty. The use of the reserve is limited in this way so that the balance of the reserve would be available to help the City address any additional financial problems that the City could confront after adoption of a subsequent year's budget. B. Authority to Use Reserves The City Manager may authorize the use of reserves unless that use would cause the City's reserves to drop below 26% of the city's regular annual operating general fund revenues. Any proposed use that would cause the reserves to be below this amount must be approved by the City Council, by majority vote. In all cases, the City Council and management shall only use reserves for purposes consistent with the purposes described in Policy IV -A above. C. Replenishment of Reserves In the event the City Council authorizes use of the reserves, the City Manager shall propose a plan for the replenishment of the reserves to the City Council. The City will strive to replenish the reserves within one year of use, but will make every reasonable effort to fully replenish them within five years of use. V. Annual Review of Policy The General Fund Reserve policy will be reviewed at least annually, and discussed if changes are necessary, to safeguard its effectiveness and relevance to the City's long-term needs, and to ensure that the policy remains current with government financial best practices. Page 2 of 2