Agenda - Council - 03/28/1995 - Laserfiche WebLink

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I I I I I I I I I I I I I I ! I CASE DISCUSSION OF EXCESS REVENUE POLICY By: Jessie Hart, Finance Officer Background: In April 1993, th~ City Council Adopted Resolution//93-04-061 which established a financial policy for the pqrpose of designating the working capital portion of the General Fund fund balance. This m~ve was made primarily in response to threats that the State was considering penalizing cities v~ith healthy fund balances that were not designated or legally restricted. Cities do not receive tax se~ements for the' first six months of the fiscal year, causing the need for a healthy fund balance at ye[ar end to get them through until the the first tax settlement arrives. The policy, which is attached,itherefore designated fund balance in the General Fund as 50% of the next years operating budget for working capital. ' Because the City has been experiencing such rapid growth, excess revenues over expenditures were becoming c¢mmon and increasing fund balance to a level far above what was needed to designate for worl~ing capital. At the same time, the City was looking for additional ways to fund various revolving ~nd replacement programs, without a direct tax increase. Resolution ~)4-02-045, which is attached, addressed these concerns by formulating a financial policy for the purpose of allocation of excess/deficient General Fund reserves. This policy extends the original fund b~lance policy in two ways: · ~'~i 1) Allows forlthe increase/reduction in the unreserved/undesignated portion of the General Fund fund balance to an amount equal to 10% of the next years 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 and number one above to three specific revolving/r~placement funds. By developing the iolicy in this manner, it ensured a "reaSonable'. fund balance, and allowed for additional funding ~ if the Public Improvement Revolving Fund, Equipment Replacement Fund and the Capital Buildin :Fund (future facilities construction) by transferring any exesses to these funds in the pementages ~ecified in the policy. The policy also ad~ resses 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. The following tabli~ shows how much was transferred from 1993, the first year the policy was effective, and the ar~ounts to be transferred for 1994, after meeting fund balance requirements: 1993 1994 Public Improvemen~ Revolving Fund Equipment Replacement Fund Capital Building Furld Total Excess Tr~sferred $216,300.30 $ 63,587.00 43,260.05 12,718.00 17;3.040,24 50.870.00 $432,600.59 $127,175.00