BUDGET AND FISCAL POLICY (REVISED) - 4-2017

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Page 2 GENERAL FUND (continued) General Fund Budget Policy Directives (continued) 6) One time or term specific funding may only be used to match one -time non- recurring expenditures, term specific projects and programs, as well as capital expenditures unless specifically authorized by the Mayor and City Council. 7) In order to ensure proper maintenance of a continued balanced budget, the City Council should adopt a compensation and retirement benefit directive that provides guidance and conforms with established budget directives and reserve requirements as outlined in this policy. Unassigned Fund Balance In accordance with Governmental Accounting Standards Board (GASB) 54 and continuing to ensure a continued orderly operation of City Government and address any unforeseen economic occurrences, the City shall establish the following Reserve Accounts within the Unassigned Fund Balance category: • Operating Reserve • Economic Uncertainty Reserve • Unallocated Amount Operating Reserve Account As a measure of strong fiscal health and recommendations made by GFOA the City created an Operating Reserve Account, disclosing where two months (approximately 16.67 %) of recurring General Fund (011) operating revenues or expenditures (including transfers) are maintained. At no time is it permissible for the Operating Reserve requirement to fall below the above - referenced threshold. However, it is the intent of the City to ensure a significant Operating Reserve position is maintained and permitting should strive for a maximum amount of 20% for the Unassigned Reserve Account. Such Operating Reserves shall not be used to fund any form of operating expenditures or to cover any budgetary shortfall other than to preserve ongoing cash flow needs for the City. If at any point in time it is deemed that the City budget is performing at a structural deficit, the use of the unassigned fund balance account(s) is permissible upon approval by two thirds of the City Council. If approved, a corresponding plan to replenish the reserves should be adopted by the same vote. Use of the Operating Reserve account beyond two consecutive years is strictly prohibited unless a corresponding plan to balance the budget is submitted for approval to the Mayor and City Council. As a matterof prudence and fiscal solvency and in the event of a projected and /or realized structural deficit (budget basis), the City will utilize Economic Uncertainty (see below for account description) account funds prior to accessing the Operating Reserve account. Economic Uncertainty Account The reserve for Economic Uncertainty is established to offset any major variations in tax receipts as well as fees and charges or unforeseen cost increases. It is hereby established the City maintain within its Economic Uncertainty account a minimum level of 1% to 5% of recurring General Fund revenues with an objective of attaining a maximum goal of 5 %. Upon determination by the Finance Department, that negative variations in projected revenues from the largest revenue sources defined as Sales tax, Property tax, Property tax in Lieu, Utility Users tax, Business Tax, and Hotel Visitors tax exceed 2% with no corresponding General Fund expenditure offset, then the City Council may authorize use of the Economic Uncertainty Reserve by a two - thirds vote to offset the revenue loss prior to the close of the fiscal year end. A corresponding plan to replenish the reserve account must be adopted by the same vote. Budget and Financial Polices 65C -4