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Home My WebLink About2010-0104 Documents Submitted L. T,^~Sw:'m:t14:l ~fYt!1:J . '55' /-':t. If) . Fiscal Stability: Financial Management Policies COES Building Siskiyou Room, 5:30 PM January 4, 2010 ~. r.. ~~. r.." . Goals . Take steps toward Fiscal Stability . Review/Educate, ourselves on existing policies, standards and guidelines . Identify areas of agreement and those needing (more) work . Lay foundation for 2011 budget preparation . Address issues common to Internal Controls project 2 Financial Management Policies and Accounting Methods ~~. r.." . Included and accepted as part of the annual budget process for years .. Consistent with Oregon Budget requ'irements . Consistent with GAAP requirements . Revised and changed over time 3 Some things that have changed r~' over time but not updated . General Fund Restrictions - Parking reserve, Forfeiture reserve, Hous'ing reserve . Ending Fund Balances (EFB) - AFN, Insurance . Contingencies - AFN, Insurances .. . Location of programs - Facilities, Airport CIP, AFN debt, Claims management . Reserve 'Fund added 4 ~... r.." Potential Discussion Groups . General Policies, Ending Fund Balances, Contingencies, TOT & Granting . Operating Budget Policies, Revenues and Assumptions . Capital Improvements and Debt . Operating Expenditures, Purchasing & Risk Management . Accounting Methods & other issues 5 ~&. r.." Scope . The Financial Management Policies apply to fiscal activities of the City of Ashland. . It should be made clear as to the applicability to Ashland Parks and Recreation Commission (APRC). If not 100% applicable it should be clear when it is or isn't. 6 The Objectives of Ashland's financial policies are: ~.. r.." . To enhance the City Council's decision-making ability by providing accurate information on program and operating costs. . To employ revenue policies that prevent undue or unbalanced reliance on anyone source, distribute the cost of municipal services fairly, and provide adequate funds to operate desired programs. . To provide and maintain essential public programs, . services, facilities, utilities, infrastructure, and capital equipment. . To protect and enhance the City's credit rating. . To ensure the legal use of all City funds through efficient systems of financial security and internal control. 7 .~~, Investments . All City funds shall be invested to provide-in order of importance-safety of principal, a sufficient level of liquidity to meet cash flow needs, and the maximum yield possible. One hundred percent of all idle cash will be continuously invested. . Definition of idle cash: Cash amounts beyond the . level deemed necessary to provide adequate cash flow or coverage of outstanding charges as determined by the City Treasurer. Recently updated by Council on November 17, 2009. 8 TOT Resolution, Projections & . Granting Process for 2011 ~... r_" . Council indicated the desire to revise Resolution 2008-35 . 2010 Budget process identified differences in perspectives in allocation criteria and desired . outcomes for Budget Committee . Staff needs direction on what directions. to . give to applicants in February 2010 and what process to use with the committee in March. 9 Operating Budgetary Policies (1 of 6) ~A. r_" . The budget committee will be appointed in conformance with state statutes. The budget - . committee's chief purpose is to review the city administrator's proposed budget and approve a budget and maximum tax levy for city council consideration. The budget committee may consider. and develop recommendations on other financial issues as delegated by the City Council. . Needs refining? Budget Committee reviews proposed budget to ensure it meets City Council objectives, provides essential services and provides . a responsible spending plan. 10 Operating Budgetary Policies (2 of 6) ~~. r_" . The City will finance all current expenditures with current revenues. The City will avoid budgetary practices that balance current expenditures through the obligation of future resources. . Propose a small revision: "current operating expenditures" 11 Operating Budgetary Policies (3 of 6) ~~, \ . The City budget will support City Council goals and priorities and the long-range needs of the community. . In contrast to the line-item budget that focuses exclusively on items to be purchased (such as supplies . and equipment), the City will use a program/objectives format that is designed to: 1) Structure budget choices and information in terms of programs and their related work activities, 2) Provide information on what each program is committed to accomplish in long-term goals and in short- term objectives, and 3) Measure the degree of achievement of program objectives (performance measures). 12 ~ Operating Budgetary Policies (4 of 6) ~~. r_" . The City will include multi-year projections in the annual budget. . To maintain fund integrity, the City will manage each . fund as an independent entity in accordance with applicable statutes and with generally accepted accounting principles. 13 Operating Budgetary Policies (5 of 6) ~4\. r_" .' The City will allocate direct and administrative costs to each fund based upon the cost of providing these services. The City will recalculate the cost of administrative services each year to identify the impact of inflation and other cost increases. -. Annual recalculation of these internal service charges may not be possible but they should be reviewed annually and recalculated at least every three years. 14 Operating Budgetary Policies (6 of 6) ~... r_" . The City will submit documentation annually to obtain the Award for DistingUished Budget , Presentation from the Government Finance Officers Association. . OK to agree upon but does it need to be a policy? ( 15 ~~. r_" Ending Fund Balance Policies . These are minimums to guarantee viability . They are based upon operations, normally in consideration of annual revenue vulnerability . Target amounts are UNRESTRICTED unless. identified otherwise (think about debt) . Annual actual total EFB reported often includes RESTRICTED amounts 16 Chart of EFB Longer-Term History (excludes APRC) $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 City Fund Balances 2005: Refinance AFN & Restore $8 million in EFB, $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ~J!.. r_" . Cemetery Tr. EI Equipment 13 Insurance Svc . Central Svc I[J Telecom m Electric Fund o Wastewater ~ Water Fund 1!11 Debt Service IiiI CIP Fund @ Airport Fund ~ Street Fund o Reserve o CDSG I!!I General 17 Ending Fund Balances - ~A~ r.. Recent History ACTUAL EFB as of 6/30 2006 2007 2008 2009 General $ 2,326,936 $ 2,367,714 $ 2,296,666 $ 2,185,456 CDBG 4,599 12,033 44,705 69,618 Reserve Street Fund ,1,464,044 2,377,220 2,170,470 2,402,258 Airport Fl!nd 54,874 55,339 86,891 99,978 CIP Fund / 803,171 656,315 1,003,916 1,433,904 Debt Service 459,095 559,263 1,246,509 1,072,785 Water Fund 6,179,246 3,241,590 1,865,418 2,323,768 Wastewater 5,301,598 4,862,001 3,764,972 3,710,771 Electric Fund 2,116,269 2,178,995 1,469,744 1,642,543 Telecom 518,687 963,896 869,719 929,945 Central Svc 439,010 726,743 368,086 161 ,163 Insurance Svc 1,060,790 974,450 1,138,699 696,071 Equipment 1,510,170 1,750,852 1,329,672 844,150 Cemetery Tr, 719,429 749,918 771,948 788,753 Total City Component / 22,957,918 21,476,329 18,427,415 18,361,163 Parks and Recreation Fund 1,507,367 1,180,912 1,201,443 1,379,752 Youth Activities Levy Fund 35,374 72,671 160,591 27,356 Parks Capital,lmprovements 165,326 195,390 263,343 166,991 Total Parks Component 1,708,067 1,448,973 1,625,377 1,574,099 Total Budget $24,665,985 $22,925,302 $20,052,792 $19,935,262 18 ~~. r_" Table of percentages & Dolrars EFB Policy 2009 Taraet 2009 Actual Unrestricted 2010 Target 2010 Budget .Unrestricted* City Component General 10% $1,609,000 $2,185,456 $ 1,770,431 $1,435,000 $ 1,332,508 $ 901,925 CDBG * - 69,618 - - - - - Reserve N/A - - - - 215,000 - Street Fund 10% 310,000 2,402,257 387,559 301,000 1,457,363 1,188,776 Airport Fund 16% 18,000 99,978 99,978 17,000 9,024 9,024 CIP Fund * 1,433,904 860,182 2,137,061 1,244,333 - . - Debt Service * 2,053,000 1,072,785 2,190,000 1,149,113 - - Water Fund 20% -921,000 2,323,766 440,657 917,000 836,814 693,983 Wastewater 15% 677,000 3,710,773 917,568 752,000 3,020,769 837,000 Electric Fund 12% 1,550,120 1,642,545 1,642,545 1,488,950 649,494 649,494 Telecom 20% 350,000 929,943 929,943 372,000 325,135 325,135 Central Service 3% 175,000 161,163 161,163 174,000 12,531 12,531 Insurance Service * 531,000 696,071 296,071 563,000 543,266 543,266 Equipment * 844,149 844,149 - 1,322,161 1,322,161 - Cemetery Trust * 788,753 - 812,948 - - - Parks Component Parks & Rec * 927,000 1,379,752 1,379,752 870,000 1,450,910 1,450,910 YAL Fund * 27,355 27,355 - 10,591 10,591 - Parks CIP * 166,991 166,991 287,239 287,239 - - 19 2009 Graph ~.. r_" $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- 2009 EFB Comparison ~ ~0..10 ~ ~~ ~~ .,,,0 ~~ ...0' ~~ ~ 0 0 ~ ~"'0" ~~ ~ 0' <:) rt-- <<:,><:' <<.;:j <<.;:j ~~'" <<.;:j ~~ <<.;:j 0,,0 ~,,, ~,C) ~0 "".;:j 'b- ~ <<.;:j ~ v ~o~#~&~~,~~~~~~~~, ,._'<$ .~q ^~ ~~ ~~ /_'0" ...~ ,,0 <<,;<>' ;;.0 tf <l ~ ~ v ~ ~ ~ ~ ~ ~ <l v0..s- v0 ,~~ ~ 2009 Target ~ 2009 Actual 0 Unrestricted \ 20 2010 Graph ~.. r_" $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- 2010 EFB Comparison ~ r. ~ ~ 0 ". ~ ~ '" '" , " ~ ~ &'li ~v .\0 ,;:.u U >:' c,v ,;:.u ...& v~u 0" ...& ~",& e,~ _,c, /Lq;,~u (J 0~0 v<::i 0'- <<,;:; <<v~ <<,;:; J.~ <<oS 'li << ~0v &~' &- 'Q~ .<..'- 'l:l- ,,- <<~ ~c, o ~$0~~~~#~~'~~~~C,~~ " ~v '" v:<:>' ~\~ ~c; u- 'It.D, <<.,($ ...0 ~ -I.' >Q . ~ ~ ~ ~ ~ ~ ~ ~ , ~ v0.;y'li v0 ,~c,. I ~ 2010 Target ~ 2010 Budget 0 Unrestricted* I 21 " . Contingencies . The City will budget a contingency appropriation to provide for unanticipated non-recurring expenditures or shortfalls in projected revenues. The minimum contingency will be maintained at not less than 3 percent of annual revenues. . Staff recommends the Contingency be calculated only on Operating Expenditures. " A 4%level '!Vould be preferable. , ~~. r_" 22 ~~. r_" , Cemetery Trust Fund . Cemetery Operations are paid for in the General . Fund and only interest earnings are transferred from the trust. Annually, the General Fund transfers $500 to the trust. Revenue from General Fund, Cemetery Operations are split with 600f<)' going into the trust. EFB balance in the trust is approximat~ly $800,000. Staff recommends that this relationship be reviewed for change so that less in general revenues in the General Fund are used to subsidize cemetery operations. It should also be determined whether the $800,000 could be legally borrowed or reduced in favor of other City needs. \. 23 ~~, Revenues (1 of 3) . The City will estimate its annual revenues by an objective, analytical process. . Because most revenues are sensitive to conditions outside the City's control, estimates will be conservative. . The City will make every effort to maintain a diversified and stable revenue base to protect its operation from short-term fluctuations in anyone revenue source. . With the exception of grants, charQes for services, and earmarked donations, the City will not earmark revenue for specific purposes in the General Fund. Needs to be revised.' ' 24 r~' Revenues (2 of 3) . The City will establish charges for enterprise funds that fully support the total cost of the enterprise. Utility rates will be reviewed annually. Rates will be adjusted as needed to account for major changes in consumption and cost increases. . The City will charge user fees to the direct , beneficiaries of City services to recover some or all of the full cost of providing that service. All user fees will be reviewed biannually to insure that direct and overhead costs are recovered in the percenta~ ~roved bv City Council. The City has not been able to review all charges every two years so this policy should be addressed. 25 ~A. r_" Revenues (3 of 3) . To the extent practicable, new development, shall pay necessary fees to meet all identified .costs associated with that development. . The City will work aggressively to collect all delinquent accounts receivable. When necessary, collection procedures will include termination of service, submission to co.llection agencies, foreclosure, and other available legal remedies. ' 26 ./ Financial Management Policies r~' Presentation . Questions? . The following categories are for future discussion: Expenditures, Purchasing, Capital, Debt, Risk Management, Accounting & Accounting Methods 27 L. 1L..~""''1 3' uP,.".., r-H"'" &... e "hT.;. S S r- '-1,'~() General Fund EFB ~ia. r_" The General Fund will maintain an unrestricted and undesignated balance of annual revenue of at least 10 percent. This is the minimum needed to maintain the City's credit worthiness and to adequately provide for economic uncertainties and cash flow needs. . Staff recommends the 10% target minimum EFB be increased to 12% plus 3% Contingency for a total of 15%. The minimum EFB should be unrestricted. . Staff recommends if EFB exceeds 20% of annual revenue after the audit, the amount over 20% should be transferred to a restricted reserve. 22 Street Fund ~~. r_" . The Street Fund will maintain an unrestricted and undesignated balance of annual revenue of at least 10 percent. This is the minimum needed to maintain the City's credit worthiness and to adequately provide for economic uncertainties and cash flow needs. . Staff recommends the 10% target minimum EFB be increased to 12% or 15% plus Contingency. 23 'Airport Fund ~.. r_" The Airport Fund will maintain an unrestricted and . undesignated balance of annual revenue of at least 16 percent. This is the minimum needed to maintain the City's credit worthiness and to adequately providefor economic uncertainties and cash flow needs. ' . Staff believes this is a little high and could be lowered to 10% or 12% but fund revenues should be adjusted to meet the target unless the City desires to guarantee Airport operations through the General Fund. 24 CIP Fund ~~1I IF.. '1 . The purpose is to accumulate funds prior to a large construction project; therefore, there is no minimum fund balance. . Facilities (an internal service) is now located in this fund so a minimum EFB (5% to 10%) based on this program's activities would be appropriate.. 25. Water Fund ~.1I IF.. '1 . The net revenues of the Water Fund were pledged in the issuance of the 1994 Water Revenue Bonds used to finance the upgrade to the water treatment plant. . Staff recommends this be reworded to recognize that net revenues are pledged. for all revenue bonds issued by this fund . for capital improvements. 26 Telecommunications EFB ~.. IF.. '1 . No fund balance policy has been established. . Council set an EFS minimum balance of , 20% of operating revenues in FY 2006- . 2007. A contingency of 4% of operating revenues should be established. ~ 27 Central Service Fund EFB ~.1I IF.. "1 . The Central Services Fund will maintain an unrestricted and undesignated balance of annual revenue of at least 3 percent. This is the minimum needed to maintain the City's credit worthiness and to adequately provide for economic uncertainties and cash flow needs. . A minimum EFB (5% to 10%) based on this program's activities would be appropriate. Any EFB over 10% would result in reduced charges to the departments in the following fiscal year. 28 Insurance Fund .EFB ~AlI IF.. '1 . The Insurance Services Fund will maintain an unrestricted and undesignated balance of $350,000 as recommended in the June 1993 Risk Financing Study. This balance will be increased annually by the Consumer Price Index (CPI) to account for - inflation. This is the minimum needed to maintain the City's insurance programs and provide for uninsured exposures.. . The original amount set in 1993 is inadequate for this fund and the City's current exposures, even when adjusted by the CPl. Staff recommends a minimum EFB of $1,000,000, growing each year by CPI or a minimum of 3%. 29 APRC Funds ~~1I IF.. '1 . Parks is using a 20% EFS policy although the City's Financial Policies do not address that . Staff recommends the Contingency be . calculated only on Operating Expenditures.. A J4%level would be preferable. . -V No EFB policy or Contingency policy exists. 30 ,'- ""'..A-JlJJ:1I1k"("~ Sf....i;:.r..... 11/ eJ- t!"-i'j'..t"'1 .,.,:, sr i.{{leV Water Fund Contingency ~.1I IF.. '1 . The City will budget a contingency appropriation to provide for unanticipated non-recurring expenditures or shortfalls in projected revenues. The minimum contingency will be maintained at not less than 3 percent of annual revenues. . Staff recommends the Contingency be calculated only on Operating Expenditures. A 5%level would be preferable due to the potential of increased treatment costs despite restricted (curtailment) wa,ter sales. . 31 Wastewater Fund Contingency ~:., . The City will budget a contingency appropriation to provide for unanticipated non-recurring expenditures or shortfalls in projected revenues. The minim.um contingency will be maintained at not less than 3 percent of annual revenues. . Staff recommends the Contingency be calculated only on Operating Expenditures. A 5%level would be preferable due to the potential of increased treatment costs to meet standards. 32