Item 32 - Provide Direction for FY 2021-22 Budget

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EXHIBIT 3 ��~�nm ^�� Santa �m� ��N� m�u ��nv�u� Ana Council Policy Mavor's Authorization Subject BUDGET AND FINANCIAL POLICIES Council Approval Date: Background The severity of the recent economic recession highlighted the need to establish and maintain adequate reserve policies to offset significant economic downturns and unforeseen rising costs more effectively. In 2002,The Government Finance Officers' Association (GFOA) recommended reserve levels equal to, a minimum of 5% to 15% of operating revenues or one to two months ofoperating expenditures as a basis to establish sound reserve levels. Adoption of formal City Budget and Reserve Poky will provide a basis to manage significant financial events more effectively inthe future. PURPOSE The Cbw s reserve policy will define the recommended level for reserves for the General Fund as well as internal and enterprise operations. The policy will outline atirnefname and plan that will assist the City in meeting the minimum General Fund requirements over the course of the next few years, it will also establish criteria for the use of reserves and establish a process bywhich to replenish, reserves if used. It is the intent to focus on the Genera} Fund initially and incorporate additional reserve policies for internal and enterprise funds over the next fisca|year. The General Fund is the general operating fund for the City. It accounts for all general revenues including sales tax, property tax, business tax, hotel visitor's tax, as well as other fees and charges. It is the basis to fund general ongoing City operations such as police, fire (contract service), recreation, planning and building as well as other general support services. Furthermore, the following budget policy directives are recommended to be continued/implemented in order to maintain positive operating reserve levels: Genens|Fund8m6getPmUcyD|reutk/es It shall be established that a balanced budget will be presented annually to the City Council for adoption. A balanced budget will be defined as ongoing recurring operating revenues matching ongoing recurring operating expenditures including debt service. - One time orte,nn specific funding can only be used to match one-time non-necurrin�gexpenditures with the exception of during a budget deficit, term specific projects and programs, as well as capital expenditures. - in order to ensure a balanced budget objective, the City will continue 10 pursue internal operational efficiencies and strategies, such astechnology, that minimize City costs and impacts toCity services. Budget & Financial Polices (Rev.6/2Q17) Page