BUDGET AND FISCAL POLICY - 6-2012

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,~~~~:,, City of Santa Ana A~1~.+' ~-`~ Council Policy Mayor's Authorization Subject Council Approval Date: BUDGET 8. FINANCIAL POLICIES June 4. 20'12 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 of operating expenditures as a basis to establish sound reserve levels. Adoption of a formal City Budget and Reserve Policy will provide a basis to manage significant financial events more effectively in the future. PURPOSE The City'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 a timeframe 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 by which to replenish reserves if used. It is the intent to focus on the General Fund initially and incorporate additional reserve policies for internal and enterprise funds over the next fiscal year. General Fund 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 services), recreation, planning and building as well as other general support services. General Fund Budget Policy Directives - 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 or term specific funding can only be used to match one-time non recurring expenditures, term specific projects and programs, as well as capital expenditures. - In order to ensure a balanced budget objective, the City will continue to pursue internal operational efficiencies and strategies, such as technology, that minimize City costs and impacts to City services. In addition, no language shall be adopted that requires the City to maintain a minimum or required level of staffing and overtime. Budget & Financial Polices Page 1