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Case ~r2: Discussion of Excess Revenue Policy Finance Officer Hart stated that in April 1993, Council established a financial policy for the purpose of designating the working capital portion of the General Fund fund balance. This move was made primarily in response to threats that the State was considering penalizing cities with healthy fund balances that were not designated or legally restricted. The policy extends the original fund balance policy in two ways: 1) allows for the increase/reduction in the unreserved/undesignated portion of the General Fund fund balance to an amount equal to 10 percent of the next year's operating budget; and 2) allows for the final distribution/recovery of anything over, or short of the fund balance requirements, as indicated in the original policy. This ensures a reasonable fund balance and allows for additional funding of the Public Improvement Revolving Fund, Equipment Replacement Fund and the Capital Building Fund by transferring any excess to these funds in the percentages specified in the policy. The policy also addresses the process if it happens to be a year in which excess revenues are not enough to meet the fund balance requirements or there is an operating deficit in the General Fund. Ms. Hart recommended that the policy be utilized to cover potential deficits in the General Fund rather than delaying capital included in the 1995 budget and to allow proceeding in the appropriate manner with the remaining capital for 1995. Motion by Councilmember Beyer and seconded by Mayor Hardin to ratify the continuation of the policy the City has had in the past to deal with excess revenue. Motion carded. Voting Yes: Mayor Hardin, Councilmembers Beyer, Beahen, Peterson and Zimmerman. Voting No: None. Consensus of the Finance Committee was to proceed with the computer purchase process. Case #3: Review Information Regarding Squad Rotation Finance Officer Hart stated that in the past, the squads in the City fleet had been kept in service as patrol vehicles for 100,000 to 150,000 miles. It had been determined several years ago that it was most cost effective to replace the squads at about 60,000 to 70,000 miles. This determination was based on utilizing "trade-in" values from the National Automobile Dealer's Association book as well as utilizing policies for replacement based on discussions with agencies such as Hertz, Avis, 3M Fleet Management and Elk River Ford. She explained that the analysis incorporated age and mileage at various levels, maintaining the assumption the squad would be traded rather than rotated into the Administrative Fleet. Based on this analysis, it was determined that the squads should be replaced, or rotated at 60,000 to 70,000 miles which would provide the highest trade in value when compared to replacement costs, and caused the replacement at about two and one-half years because of delivery and set-up time frames. Ms. Hart continued that, based on the replacement analysis, it has been the practice the last couple of years to rotate the squads at the 60,000 to 70,000 miles, or approximately every two and one-half years. This has been done based on the current size of the fleet. No Committee action required. Councilmember Peterson stated that we are at four squads and inquired if Chief Auspos sees it at 5 before the year 2000. Chief Auspos felt it would be wise to look at five or six squads by then. Finance Committee/March 28, 1995 Page 2 of 3