BUDGET AND FISCAL POLICY (REVISED) - 4-2017

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EXHIBIT 1 City of Santa Ana (D Council Policy Mayor's Authorization Subject Council Approval Date: BUDGET AND FINANCIAL POLICIES Rev. 04/2017 BACKGROUND Recent economic recessions highlighted the need to establish and maintain adequate reserve policies to offset significant economic downturns and unforeseen rising costs, more effectively. During September 2015, the Government Finance Officers' Association (GFOA) recommended reserve levels, regardless of size of government, to be no less than 2 months of general fund operating revenues or expenditures. Thus, the adoption of a formal City Budget along with a Reserve Policy will provide a basis to manage significant financial events more effectively in the upcoming fiscal years. PURPOSE The City's Budget and Financial Policies ( "Reserves' or "Policy ") will define the recommended level for reserves for the General Fund as well as internal and enterprise operations. Additionally, it will also establish a criteria for the use of reserves and a process by which to replenish them if utilized. It is the intent to focus on the General Fund and incorporate additional reserve policies for internal and enterprise funds over the following fiscal year(s). GENERAL FUND The General Fund is the City's chief operating fund. 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. Furthermore, the following budget policy directives are recommended to be continued /implemented in order to maintain a positive operating reserve levels: General Fund Budget Policy Directives 1) 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. 2) Budget consideration of new programs, personnel, or capital related expenditures shall only be considered if a source of funding is identified either through a corresponding cost reduction, an identified general increase in general tax revenue. Source of funding should include consideration of ongoing general maintenance and operational costs. 3) In order to ensure a balanced budget objective, the City will continue to pursue internal operational efficiencies and strategies, such as technology, which minimize costs and impacts to City services. 4) Departments will be encouraged to continually achieve savings through internal organizational efficiencies. 5) Technology will be encouraged if it can be demonstrated that a one -time capital infusion can result in savings being generated beyond two fiscal years. 65C -3