HomeMy WebLinkAbout8.2 General Fund Reserves or
19 82 STAFF REPORT CITY CLERK
` CITY COUNCIL File #330-20
DATE: June 16, 2015
TO: Honorable Mayor and City Councilmembers
FROM: Christopher L. Foss, City Manager "
SUBJECT: Resolution Authorizing Special Designations of General Fund Reserves for Fiscal
Year 2014-15
Prepared by Colleen Tribby, Director of Administrative Services
EXECUTIVE SUMMARY:
In accordance with the City of Dublin's Fund Balance and Reserves Policy, the City Council will
consider making special designations of General Fund reserves for Fiscal Year 2014-15. The
City Council will also consider an administrative amendment to the City's Fund Balance and
Reserves Policy.
FINANCIAL IMPACT:
Approving special designations of General Fund reserves will not result in any net change
to total fund balance, but would shift resources among reserve categories. Approval of the
amendment to the Fund Balances and Reserves Policy will clarify its purpose and facilitate
annual reserve designations.
RECOMMENDATION:
Staff recommends that the City Council: 1) Adopt t h e Resolution Authorizing a Special
Designation of General Fund Reserves for Fiscal Year 2014-15; 2) Direct Staff to implement
the changes in the financial records; and 3) Adopt the Resolution Amending the Fund
Balance and Reserves Policy.
Reviewed By
Assistant City Manager
DESCRIPTION:
The City of Dublin's Fund Balance and Reserves Policy (the Policy) identifies the five
classifications of fund balance to be used in the financial reporting of governmental funds, and
defines the methodology of allocating net resources before the fiscal year end. The five
classifications are: Non-Spendable, Restricted, Committed, Assigned, and Unassigned.
Specifically, the Policy states that any excess fund balance, after designations to all other
Page 1 of 3 ITEM NO. 8.2
categories, and after providing for at least two months of ongoing expenditures in the cash
flow reserve, go to the reserves for Pension and Retiree Health (50%) and Non-Streets Capital
Improvement Projects (50%).
This Staff Report transmits a Resolution authorizing special designations of General Fund
reserves as of June 30, 2015 (Attachment 1). While the Fiscal Year 2014-15 year-end balances
will not be final until the close of the City's financial books (anticipated to be October 2015), Staff
can make reasonable assumptions about estimated reserve balances at this point.
The General Fund Reserves Summary (Attachment 2) provides a listing of reserve balances by
category, and includes a description of the reason for any change. Many of the changes are due
to the spending down of Committed reserves for actual capital improvement project expenses
during Fiscal Year 2014-15. Other shifts are related to year-end accounting policies, such as the
annual adjustments to long-term General Fund advances, and the spending down of carry-over
reserves from the prior year.
For further information, Staff has included in this report a listing of all the City's reserves
(Attachment 3) and the purpose for which each was created.
Additional Amount Available to Shift - Considerations
The City's Fund Balance and Reserves Policy calls for the Available Cash Flow to be a
minimum of 2 months and a maximum of 4 months of the following year's operating budget.
Over the last five years, the City has averaged 2.9 months of the budget in that reserve. In the
current report, the shifting of reserves provides for $14.6 million in the available cash flow
reserve at year-end which represents 2.8 months of the Fiscal Year 2015-16 operating budget.
Furthermore, Staff anticipates that additional surplus will be recognized at the year-end (e.g., if
revenues come in higher than the amended budget) and would be available to allocate at the
City Council's direction. However, it is important to note that there are a number of City projects
for which there is no funding source currently identified, and which may become priorities for the
City in the next several years. These include-
- Dublin Sports Grounds renovation
- Public Safety Facility upgrades
- Master plan and citywide improvements relating to the Americans with Disabilities Act
requirements
Additionally, as part of the City Council's focus on fiscal sustainability, Staff will be exploring
pay-down options for its pension and retiree health obligations over the next year. For these
reasons, and given the 10-Year General Fund Forecast which projects deficit spending by Fiscal
Year 2020-21, Staff recommends maintaining the cash flow at $14.6 million, and allocating
residual reserves according to the Policy (split evenly between the reserves for Pension and
Retiree Health, and Non-Streets Capital Improvement Projects).
Amendments to the Fund Balance and Reserves Policy
In order to facilitate the annual process of designating reserves, Staff recommends that the City
Council adopt a Resolution (Attachment 4) amending the Policy to remove many of the specific
project reserves listings under each reserve category, leaving only those which are long-term
and/or general in nature. This will eliminate the need for Staff to amend the Policy each year if
the City Council wishes to create a new reserve for a specific project.
Page 2 of 3
As an example, under the Committed category, the amended Reserves Policy would remove
subcategories such as "Future Maintenance Facility," "Civic Center Expansion" and "Public
Safety Complex", and would replace them with a new subcategory called "Committed for
Specific Projects". Likewise, specific project reserves in the Assigned category will be replaced
by a new subcategory called "Assigned for Specific Projects".
Included in this report is a red-lined version of the current Policy, as well as a final version with
the amendments (Attachments 5 and 6). It should be noted that these changes would be for
administrative purposes only, and would not alter reserve designations in any way. The City
Council would continue to see all specific project reserves listed in the General Fund Reserves
Summary and in the Comprehensive Annual Financial Report.
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
None.
ATTACHMENTS: 1. Resolution Authorizing a Special Designation of General Fund
Reserves for Fiscal Year 2014-15
2. General Fund Reserves Summary, FY 2014-15
3. Listing of General Fund Reserves
4. Resolution Amending the Fund Balance and Reserves Policy with
Exhibit A Fund Balance and Reserves Policy
5. Fund Balance and Reserves Policy, Red-Lined Version
Page 3 of 3
RESOLUTION NO. - 15
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
***************************
AUTHORIZING A SPECIAL DESIGNATION OF GENERAL FUND RESERVES FOR
FISCAL YEAR 2014-15
WHEREAS, On June 16, 2015 the City Council adopted a revised Fund Balance and
Reserves Policy; and
WHEREAS, the Fund Balance and Reserves Policy requires special fund balance allocations
to be adopted by the City Council, and allows the City Council to take action prior to the end of the
fiscal year to direct a specific assignment of the fund balance; and
WHEREAS, Staff reviewed updated information regarding fund balance and estimated one-
time revenues during the preparation of the Fiscal Year 2014-15 and FY 2015-16 Budget;
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does
hereby make a special allocation of the estimated Fiscal Year 2014-15 year-end balance to the
Committed fund balance sub-categories as follows:
Actual total change Projected
2013-14 INCREASE DECREASE during year 2014-15
Committed $30,992,256 $5,662,908 ($6,550;133) ($887,225) $30,105,031
Economic Sta bi I ity 6,000,000 - 6,000,000
Downtown Public Impr 1,000,000 (450,042) (450,042) 549,958
Open Space Funding 45,975 (45,975) (45,975) 0
Affordable Housing 1,000,000 - 1,000,000
Emergency Communications 741,000 - 741,000
Fire Svcs OPEB 8,196,000 397,854 397,854 8,593,854
Innovations & New opport 1,372,785 - 1,372,785
Jt City/School Projects 235,873 (119,858) (70,000) (189,858) 46,015
One-Time Initiative 1,341,408 - 1,341,408
Specific Committed Reserves
Emerald Glen Aquatic Comple: 3,000,000 (102,350) (102,350) 2,897,650
Ma i ntena nce Fa ci I i ty 1,133,601 (1,133,601) (1,133,601) -
Cemetery Expansion 2,391,538 2,887,600 (816,960) 2,070,640 4,462,178
Fallon Sports Park - 2,000,000 2,000,000 2,000,000
Civic Ctr Expansion 259,076 (155,457) (155,457) 103,619
Public Safety Complex - 97,312 (97,312) - -
Storm Drain Capture 400,000 (178,436) 221,564 221,564
Shannon Center Parking Lot 775,000 - 775,000
Uti I i ty Undergroundi ng - -
Advance to Public Facility Fee 3,500,000 (3,500,000) (3,500,000) -
BE IT FURTHER RESOLVED that, any net resources remaining after special designations, and after
meeting the minimum requirement of two months cash flow in the Unassigned fund balance and a
maximum of 15% asset book value in the Catastrophic Loss reserve, will be assigned as described in
ATTACHMENT 3
the policy: a) 50% to Pension and Other Post Employment Benefits; and b) 50% to the Non-Streets
Capital Improvements Program reserve.
PASSED, APPROVED AND ADOPTED this 16th day of June, 2015.
AYES:
NOES:
ABSENT:
Mayor
ATTEST:
City Clerk
Page 2 of 2
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RESOLUTION NO. - 15
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
***************************
AMENDING THE FUND BALANCE AND RESERVES POLICY
WHEREAS, the City of Dublin incorporates into its financial records the
requirements issued by Governmental Accounting Standards Board (GASB); and
WHEREAS, On June 4, 2013 the City Council adopted Resolution 92-13 which
established the Fund Balance and Reserves Policy in Accordance with GASB
Statement 54 for the City of Dublin; and
WHEREAS, the adopted policy identified that the City Manager may recommend
to the City Council a review of this policy based on overall City initiatives and current
balances; and
WHEREAS, any adjustments to the policy shall be adopted by the City Council;
and
WHEREAS, the City Council received a report recommending certain
adjustments to the policy on June 16, 2015; and
WHEREAS, the amended language has been incorporated into the Fund
Balance and Reserves Policy ("Exhibit X); and
WHEREAS, the Fund Balances and Reserves Policy (Exhibit A) attached hereto
and made a part of this Resolution, reflects the categorization of fund balance, defines
the order of expenditures from resources available, and defines the methodology of
allocating residual resources;
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of
Dublin does hereby adopt the Fund Balance and Reserves Policy, as contained in
Exhibit A.
PASSED, APPROVED AND ADOPTED this 16th day of June, 2015.
AYES:
NOES:
ABSENT:
Mayor
ATTEST:
City Clerk
EXHIBIT A
CITY OF DUBLIN
FUND BALANCE AND RESERVES POLICY
GENERAL FUND AND OTHER GOVERNMENTAL FUNDS
This document shall establish the foundation for the components of fund balance and provide
requirements for maintaining reasonable levels of reserves in governmental funds, with a focus on the
General Fund. The presentation of fund balances is also presented in the Comprehensive Annual
Financial Report (CAFR) and the official City financial records. This document is intended to comply
with Governmental Accounting Standards Board (GASB) Statement No. 54. In the event of a conflict
between this policy and the provisions of GASB Statement No. 54 the accounting statement shall
prevail.
In accordance with the requirements of GASB, the City Council also confirms as part of this policy the
order of expenditures from resources available. The City considers "Restricted" amounts to have
been spent prior to "unrestricted" amounts when an expenditure is incurred for purposes for which
both are available ("unrestricted" would include Committed, Assigned, and Unassigned). Similarly,
when an expenditure is incurred for purposes for which amounts in any of the unrestricted
classifications of fund balance could be used, the City considers "Committed" amounts to be reduced
first, followed by assigned amounts and then the unassigned amounts.
A. POLICY OBJECTIVES
The City of Dublin's Fund Balance and Reserves Policy has four primary objectives:
- Determine available liquid resources;
- Classify fund balances in accordance with GASB 54;
- Define the methodology of allocating net resources; and
- Provide information needed to make informed financial decisions.
Periodically the City Manager may recommend to the City Council a review of this policy based on
overall City initiatives and current balances. Any adjustments to the policy shall be adopted by the
City Council.
B. CLASSIFICATION OF FUND BALANCES
In accordance with GASB Statement No. 54 and as reported in the City's financial statements, fund
balances are identified by the following five fund balance classifications:
I. Non-spendable Fund Balance
Non-spendable fund balances are amounts in a form that cannot be spent because they are either
(a) in a non-spendable form such as pre-paid items, inventories, or loans receivable; or (b) they
have external restrictions imposed by creditors, grantors, contributors, laws, regulations, etc.
However, if the use of the proceeds from the collection of those receivables or from the sale of
those properties is restricted, committed, or assigned, then they should be included in the
appropriate fund balance classification (restricted, committed, or assigned), rather than non-
spendable fund balance.
The following are items that are expected to be recorded as "Non-spendable":
Prepaid Expenditures: The portion of fund balance that represents the asset amount of prepaid
expenditures, held by a given fund.
Endowments: The portion of fund balance established as an endowment by the donor and in
which the principal balance is not intended for expenditure.
Advances To Other Funds: The portion of the fund balance that represents the asset amount of
cash advanced to other funds, held by a given fund.
Notes /Loans Receivable: The portion of fund balance that represents the asset amount of notes
or loans receivable, held by a given fund.
II. Restricted Fund Balance
Restricted Fund Balance shall reflect that portion of fund balance that reflects constraints placed
on the use of resources (other than non-spendable items) that are either: (a) externally imposed by
creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other
governments; or (b) Imposed by law through constitutional provisions or enabling legislation.
The following are items that are expected to be recorded as "Restricted":
Public Safety Special Revenue Funds: The portion of fund balances derived from funds collected
to be used for Public Safety related activities.
Transportation Special Revenue Funds: The portion of fund balances derived from funds collected
to be used for Transportation related activities.
Environmental Special Revenue Funds: The portion of fund balances derived from funds collected
to be used for Environmental related activities.
Parks Special Revenue Funds: The portion of fund balances derived from funds collected to be
used for Parks related activities.
Assessment District Special Revenue Funds: The portion of fund balances derived from funds
collected to be used for Public Safety and Transportation related activities, consistent with the
purpose under which the fee is collected.
Cultural & Arts Special Revenue Funds: The portion of fund balances derived from funds collected
to be used for Cultural & Arts related activities.
Health & Welfare Special Revenue Funds: The portion of fund balances derived from funds
collected to be used for Social Services and Housing related activities.
Impact & Mitigation Capital Proiect Funds: The portion of fund balances derived from funds
collected to be used for parks, public facilities, fire and transportation related activities, consistent
with the purpose under which the fee is collected.
Other Restricted: The portion of fund balance in any governmental fund (except the General Fund)
that is restricted under the "Restricted Fund Balance" definition as otherwise prescribed by
Governmental Accounting Standards Board Statement No. 54 and not otherwise described in this
category above.
Page 2 of 6
III. Committed Fund Balance
Committed Fund Balance shall be comprised of amounts in which the City Council has taken
action to commit the funds before the end of fiscal year. The decision to modify the amount or use
of funds designated as committed can only be changed by action of the City Council.
Economic Stability: The portion of General Fund Balance committed for the purpose of stabilizing
the delivery of City services during periods of severe operational deficits and to mitigate the effects
of uncertainties from unforeseen change in revenues and / or expenditures. City Council approval
shall be required before expending any portion of this fund balance. Reserve shall be used only if:
a) Sudden and unexpected decline in ongoing revenues greater than 5% of General Fund
operating revenues; and/or b) Elimination or reduction of State revenue source(s) received
consistently for municipal purposes, resulting in a decrease of $1,000,000 in General Fund
revenues; and/or c) Reduction in projected or actual property tax or sales tax of $1 million or more;
and/or d) An increase in contracted Police or Fire Services in excess of 10 percent more than the
previous year.
Downtown Public Improvements Seed Funding: The portion of General Fund Balance established
by the City Council for public improvements in the downtown. The use of this balance is intended
to address public improvements within the Downtown Specific Plan Area. The expenditure is to be
identified as a specific appropriation made by the City Council. The appropriation shall be a
minimum of$50,000.
Open Space Funding: The portion of General Fund Balance established by the City Council for
the acquisition and long term protection of open space in the City. The acquisition may be in
cooperation with other agencies. The expenditure is to be identified as a specific appropriation
made by the City Council.
Affordable Housing Funding: The portion of General Fund Balance established by the City Council
to support the construction, acquisition, or creation of affordable housing in the City. The
acquisition may be in cooperation with other public and private entities. The expenditure is to be
identified as a specific appropriation made by the City Council.
Emergency Communications System: The portion of General Fund Balance established by the City
Council to fund the purchase of emergency radio system equipment. This includes a pro-rata
share of regional radio infrastructure as well as City owned radios for Police, Fire, and Public
Works. Further the reserve may be used to fund the upgrade of centralized City telephone and
communication systems. The expenditure is to be identified as a specific appropriation made by
the City Council.
Fire Retiree Other Post-Employment Benefits (OPEB): The portion of General Fund Balance
established by the City Council for the future liability related to retiree medical benefits offered to
the inactive Dougherty Regional Fire Authority Staff, as well as the City share of obligations with
the OPEB benefits for Alameda County Fire Department. The expenditure is to be identified as a
specific appropriation made by the City Council.
Innovations & New Opportunities: The portion of General Fund Balance established by the City
Council to fund potential projects which require up-front costs, but would provide longer term
benefits and / or potential operating cost reductions. The expenditure is to be identified as a
specific appropriation made by the City Council.
Page 3of6
One Time InitiativesThe City Council recognizes that there may be fluctuations in revenues and
expenditures over time. Periodically the Council may determine that funds are best set-aside to
address certain one-time initiatives within the operating and/or capital budget. The expenditure is
to be identified as a specific appropriation made by the City Council.
Joint City/School Proiects This commitment shall be used to fund projects undertaken via a joint
effort of the City and the Dublin Unified School District. The expenditure is to be identified as a
specific appropriation made by the City Council.
Fund Balance-Committed: The portion of Fund Balance that is in any non-general fund
governmental fund that is committed under the "Committed Fund Balance" definition as otherwise
prescribed by Governmental Accounting Standards Board Statement No. 54 and not otherwise
described in this category above. The portion of Fund Balance that was restricted but later found
to be unrestricted shall be designated as a "Committed" balance.
Committed for Specific Projects: The portion of fund balance that is established annually by the
City Council to fund design, improvements, and equipment required for a variety of capital
improvement projects. Specific project designations will be identified with the Resolution
Authorizing Special Designations of General Fund Reserves, to be considered for adoption by
the City Council prior to the end of each fiscal year. This reserve category replaces all
subcategories for specific projects, except for the reserves listed here separately, which are more
long term in nature and/or are considered contingency reserves to be used in the case of specific
fiscal necessity.
IV. Assigned Fund Balance
Assigned fund balances are amounts constrained by the City's intent to be used for a specific
purpose, but are neither restricted nor committed.
The City Council has authorized the City Manager or his/her designee to make assignments in
accordance with this policy and in conformance with any formal direction provided by the City
Council.
Accrued Leave Subiect To Year End Calculations: Certain fund balances are calculated based on
the financial performance of the reporting period including accrued Leave. These amounts
fluctuate each year and are reflected as part of the year-end financial statements.
Carry-Over Items (Operating Budget & Capital Improvement Projects): Fund balance may be
assigned for operating expenditures (excluding personnel costs) which were not expended in the
current year and the expense will occur in the following year, i.e. encumbrances. Similarly, a
Capital Improvement Project may have funds allocated in a specific year and the project remains
incomplete at year end. The City Manager or his/her designee may assign fund balance
representing the unexpended funds. These funds are available for authorized appropriations in the
subsequent year.
Non-Streets Capital Improvement Proiects (CIP) Reserve: The portion of General Fund Balance
intended to fund future non-streets capital projects, where total funding may not currently be
known, and for which lump sum amounts will be set aside over time. These funds are available for
authorized appropriations in the subsequent year.
Page 4 of 6
Carry-Over Fiscally Responsible Adjustment: In any year that an appropriation was made to the
contingency For Fiscally Responsible Adjustment the unused fund balance may be assigned as a
carry-over for personnel costs. The City Manager or his/her designee may assign fund balance
representing the unexpended funds. These funds are available for authorized appropriations in the
subsequent year in conformance with personnel policies and procedures.
Catastrophic Facility/Infrastructure Loss & City Business Recovery: The City Council recognizes
the importance to maintain funds to recover from a catastrophic loss which are unexpected and
incur more than $500,000 in expenses to public facilities and infrastructure. This may also be used
for short-term recovery and business operations following a catastrophic loss pending the
reimbursement from insurance or grants to the extent that they are available. The balance is
established in the General Fund and the expenditure shall be made only by City Council
appropriation, which shall include a special emergency appropriation. The target established for
the maximum balance in this category is an amount equal to 15% of the reported book value of the
City owned Buildings and Improvements recorded as Capital assets.
Service Continuity Obligations: The City Council recognizes the importance to maintain funds for
continued obligations to provide Building and Safety inspections in the event that program
supporting fees are collected in one year and the expenditures occur in a subsequent year. The
City Council hereby establishes as policy that the assigned funds shall not exceed 125% of the
budgeted Building and Safety Division operating cost.
Pension and Other Post-Employment Benefits: The City Council recognizes that investment
earnings can fluctuate from year to year and they are an important component of the funding of
retiree benefits. Investment performance impacts annual contributions and expenditures made
towards retiree obligations. The intent of the City Council is to establish a fund balance that can
provide supplemental financing to lessen the impacts from decreases in investment performance
on retiree obligations. The City Manager or designee may allocate from what would otherwise be
"Unassigned" fund balance to increase the fund balance. The use of funds from this fund balance
may be used: (a) if the City Employer share of the Public Employee Retirement System (PERS)
rate increases by 3 percent; and / or (b) If the City Annual Required Contribution (ARC) for retiree
medical benefits increases by 3 percent or more; and / or (c) If the City Council by majority vote
authorizes a lump sum use of the fund balance to reduce pension or OPEB liabilities.
Assigned for Specific Projects: The portion of fund balance that is intended to be used to fund
design, improvements, and equipment required for a variety of capital improvement projects, via
recommendation of either the City Council or the City Manager. Specific assigned reserves will be
identified with the Resolution Authorizing Special Designations of General Fund Reserves, to be
considered for adoption by the City Council prior to the end of each fiscal year. This reserve
category replaces all subcategories for specific projects, except for the reserves listed here
separately, which are more long term in nature and/or are considered contingency reserves to be
used in the case of specific fiscal necessity.
IV. Unassigned Fund Balance (General Fund Only)
Unassigned fund balance represents amounts that have not been restricted, committed, or
assigned and is available for any purpose. The City Council at its discretion may modify
unassigned fund balance, and designate in the future an intended "Commitment" or "Assignment".
Page 5of6
Unrealized Gain on Investments: Used to account for that portion of fund balance that is the result
of unrealized investment gains that have been recorded in accordance with Governmental
Accounting Standards Board Statement No. 31.
Unassigned For Cash Flow Purposes: The City Council recognizes the importance to maintain
funds for cash flow purposes to balance the fact that the receipt of major revenues and major
expenditure disbursements are not evenly distributed throughout the year. The City Council
establishes as policy that this fund balance shall be at a minimum equal to two months of budgeted
operating expenditures with a goal to achieve a maximum of four months. As part of the annual
budget appropriation the City Council may also appropriate as a source of funding "Unrestricted —
Capital Contribution" from this source. This shall typically be done only for high priority one time
capital expenditures, provided the minimum fund balance would remain.
C. CHANGES IN GENERAL FUND RESOURCES
In accordance with the requirements of GASB the City Council also confirms as part of this policy how
General Fund resources shall impact changes in balances.
Revenue Sources Allocated to Fire OPEB: The entire amount of the General Fund resources
derived from the repayment of funds advanced to the PERS Side Fund, shall be assigned to the
Fire OPEB Committed Balance, until such time that either there are no longer any repayments
made, or the balance equals $8.6 million, whichever occurs first.
Revenue Sources Allocated to Service Continuity: If the "Assigned" balance is below the target
maximum of 125% of Building & Safety Expenditures, the following criteria shall be used for
calculating an adjustment only if annual building permit revenue exceeds annual Building and
Safety expenditures. The Administrative Services Director shall complete an analysis of major
building permits issued in the period April — June and shall assign an allocation of the portion of
revenue that is expected to be related to expenditures occurring in the subsequent year. The
amount derived shall be recommended to the City Manager. If annual building permit revenue is
less than the annual Building and Safety expenditures, the City Manager is authorized to reduce
the assigned amount by the amount necessary to balance revenues and expenditures.
Allocation of Residual Resources. When there are net resources in excess of what is classified as
Non-spendable, Restricted, Committed, and/or Assigned, and after maintaining the minimum level
of unassigned cash-flow funding, those resources shall be allocated as follows: a) 50% to Pension
and Other Post Employment Benefits; and b) 50% to Non-Streets CIP Reserve.
Page 6of6
Red Lined Version
CITY OF DUBLIN
FUND BALANCE AND RESERVES POLICY
GENERAL FUND AND OTHER GOVERNMENTAL FUNDS
This document shall establish the foundation for the components of fund balance and provide
requirements for maintaining reasonable levels of reserves in governmental funds, with a focus on the
General Fund. The presentation of fund balances is also presented in the Comprehensive Annual
Financial Report (CAFR) and the official City financial records. This document is intended to comply
with Governmental Accounting Standards Board (GASB) Statement No. 54. In the event of a conflict
between this policy and the provisions of GASB Statement No. 54 the accounting statement shall
prevail.
In accordance with the requirements of GASB, the City Council also confirms as part of this policy the
order of expenditures from resources available. The City considers "Restricted" amounts to have
been spent prior to "unrestricted" amounts when an expenditure is incurred for purposes for which
both are available ("unrestricted" would include Committed, Assigned, and Unassigned). Similarly,
when an expenditure is incurred for purposes for which amounts in any of the unrestricted
classifications of fund balance could be used, the City considers "Committed" amounts to be reduced
first, followed by assigned amounts and then the unassigned amounts.
A. POLICY OBJECTIVES
The City of Dublin's Fund Balance and Reserves Policy has four primary objectives:
- Determine available liquid resources;
- Classify fund balances in accordance with GASB 54;
- Define the methodology of allocating net resources; and
- Provide information needed to make informed financial decisions.
Periodically the City Manager may recommend to the City Council a review of this policy based on
overall City initiatives and current balances. Any adjustments to the policy shall be adopted by the
City Council.
B. CLASSIFICATION OF FUND BALANCES
In accordance with GASB Statement No. 54 and as reported in the City's financial statements, fund
balances are identified by the following five fund balance classifications:
I. Non-spendable Fund Balance
Non-spendable fund balances are amounts in a form that cannot be spent because they are either
(a) in a non-spendable form such as pre-paid items, inventories, or loans receivable; or (b) they
have external restrictions imposed by creditors, grantors, contributors, laws, regulations, etc.
However, if the use of the proceeds from the collection of those receivables or from the sale of
those properties is restricted, committed, or assigned, then they should be included in the
appropriate fund balance classification (restricted, committed, or assigned), rather than non-
spendable fund balance.
The following are items that are expected to be recorded as "Non-spendable":
ATTACHMENT 5
Prepaid Expenditures: The portion of fund balance that represents the asset amount of prepaid
expenditures, held by a given fund.
Endowments: The portion of fund balance established as an endowment by the donor and in
which the principal balance is not intended for expenditure.
Advances To Other Funds: The portion of the fund balance that represents the asset amount of
cash advanced to other funds, held by a given fund.
Notes /Loans Receivable: The portion of fund balance that represents the asset amount of notes
or loans receivable, held by a given fund.
II. Restricted Fund Balance
Restricted Fund Balance shall reflect that portion of fund balance that reflects constraints placed
on the use of resources (other than non-spendable items) that are either: (a) externally imposed by
creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other
governments; or (b) Imposed by law through constitutional provisions or enabling legislation.
The following are items that are expected to be recorded as "Restricted":
Public Safety Special Revenue Funds: The portion of fund balances derived from funds collected
to be used for Public Safety related activities.
Transportation Special Revenue Funds: The portion of fund balances derived from funds collected
to be used for Transportation related activities.
Environmental Special Revenue Funds: The portion of fund balances derived from funds collected
to be used for Environmental related activities.
Parks Special Revenue Funds: The portion of fund balances derived from funds collected to be
used for Parks related activities.
Assessment District Special Revenue Funds: The portion of fund balances derived from funds
collected to be used for Public Safety and Transportation related activities, consistent with the
purpose under which the fee is collected.
Cultural & Arts Special Revenue Funds: The portion of fund balances derived from funds collected
to be used for Cultural & Arts related activities.
Health & Welfare Special Revenue Funds: The portion of fund balances derived from funds
collected to be used for Social Services and Housing related activities.
Impact & Mitigation Capital Proiect Funds: The portion of fund balances derived from funds
collected to be used for parks, public facilities, fire and transportation related activities, consistent
with the purpose under which the fee is collected.
Other Restricted: The portion of fund balance in any governmental fund (except the General Fund)
that is restricted under the "Restricted Fund Balance" definition as otherwise prescribed by
Governmental Accounting Standards Board Statement No. 54 and not otherwise described in this
category above.
Page 2of7
III. Committed Fund Balance
Committed Fund Balance shall be comprised of amounts in which the City Council has taken
action to commit the funds before the end of fiscal year. The decision to modify the amount or use
of funds designated as committed can only be changed by action of the City Council.
Economic Stability: The portion of General Fund Balance committed for the purpose of stabilizing
the delivery of City services during periods of severe operational deficits and to mitigate the effects
of uncertainties from unforeseen change in revenues and / or expenditures. City Council approval
shall be required before expending any portion of this fund balance. Reserve shall be used only if:
a) Sudden and unexpected decline in ongoing revenues greater than 5% of General Fund
operating revenues; and/or b) Elimination or reduction of State revenue source(s) received
consistently for municipal purposes, resulting in a decrease of $1 ,000,000 in General Fund
revenues; and/or c) Reduction in projected or actual property tax or sales tax of $1 million or more;
and/or d) An increase in contracted Police or Fire Services in excess of 10 percent more than the
previous year.
Downtown Public Improvements Seed Funding: The portion of General Fund Balance established
by the City Council for public improvements in the downtown. The use of this balance is intended
to address public improvements within the Downtown Specific Plan Area. The expenditure is to be
identified as a specific appropriation made by the City Council. The appropriation shall be a
minimum of$50,000.
Open Space Funding: The portion of General Fund Balance established by the City Council for
the acquisition and long term protection of open space in the City. The acquisition may be in
cooperation with other agencies. The expenditure is to be identified as a specific appropriation
made by the City Council.
Affordable Housing Funding: The portion of General Fund Balance established by the City Council
to support the construction, acquisition, or creation of affordable housing in the City. The
acquisition may be in cooperation with other public and private entities. The expenditure is to be
identified as a specific appropriation made by the City Council.
Emergency Communications System: The portion of General Fund Balance established by the City
Council to fund the purchase of emergency radio system equipment. This includes a pro-rata
share of regional radio infrastructure as well as City owned radios for Police, Fire, and Public
Works. Further the reserve may be used to fund the upgrade of centralized City telephone and
communication systems. The expenditure is to be identified as a specific appropriation made by
the City Council.
Fire Retiree Other Post-Employment Benefits (OPEB): The portion of General Fund Balance
established by the City Council for the future liability related to retiree medical benefits offered to
the inactive Dougherty Regional Fire Authority Staff, as well as the City share of obligations with
the OPEB benefits for Alameda County Fire Department. The expenditure is to be identified as a
specific appropriation made by the City Council.
Page 3of7
Innovations & New Opportunities: The portion of General Fund Balance established by the City
Council to fund potential projects which require up-front costs, but would provide longer term
benefits and / or potential operating cost reductions. The expenditure is to be identified as a
specific appropriation made by the City Council.
I.
One Time Initiatives—QoeFatipqTThe City Council recognizes that there may be fluctuations in
revenues and expenditures over time. Periodically the Council may determine that funds are best
set-aside to address certain one-time initiatives within the operating and/or capital budget. The
expenditure is to be identified as a specific appropriation made by the City Council.
Joint City/School Proiects This commitment shall be used to fund projects undertaken via a joint
effort of the City and the Dublin Unified School District. The expenditure is to be identified as a
specific appropriation made by the City Council.
Fund Balance-Committed: The portion of Fund Balance that is in any non-general fund
governmental fund that is committed under the "Committed Fund Balance" definition as otherwise
prescribed by Governmental Accounting Standards Board Statement No. 54 and not otherwise
described in this category above. The portion of Fund Balance that was restricted but later found
to be unrestricted shall be designated as a "Committed" balance.
Committed for Specific Protects: The portion of fund balance that is established annually by the
City Council to fund design, improvements, and equipment required for a variety of capital
improvement projects. Specific project designations will be identified with the Resolution
Authorizing Special Designations of General Fund Reserves, to be considered for adoption by
the City Council prior to the end of each fiscal year. This reserve category replaces all
subcategories for specific projects, except for the reserves listed here separately, which are more
Page 4 of 7
long term in nature and/or are considered contingency reserves to be used in the case of specific
fiscal necessity.
IV. Assigned Fund Balance
Assigned fund balances are amounts constrained by the City's intent to be used for a specific
purpose, but are neither restricted nor committed.
The City Council has authorized the City Manager or his/her designee to make assignments in
accordance with this policy and in conformance with any formal direction provided by the City
Council.
Accrued Leave Subiect To Year End Calculations: Certain fund balances are calculated based on
the financial performance of the reporting period including accrued Leave. These amounts
fluctuate each year and are reflected as part of the year-end financial statements.
Carry-Over Items (Operating Budget & Capital Improvement Proiects): Fund balance may be
assigned for operating expenditures (excluding personnel costs) which were not expended in the
current year and the expense will occur in the following year, i.e. encumbrances. Similarly, a
Capital Improvement Project may have funds allocated in a specific year and the project remains
incomplete at year end. The City Manager or his/her designee may assign fund balance
representing the unexpended funds. These funds are available for authorized appropriations in the
subsequent year.
Non-Streets Capital Improvement Proiects (CIP) Reserve: The portion of General Fund Balance
intended to fund future non-streets capital projects, where total funding may not currently be
known, and for which lump sum amounts will be set aside over time. These funds are available for
authorized appropriations in the subsequent year.
Carry-Over Fiscally Responsible Adiustment: In any year that an appropriation was made to the
contingency For Fiscally Responsible Adjustment the unused fund balance may be assigned as a
carry-over for personnel costs. The City Manager or his/her designee may assign fund balance
representing the unexpended funds. These funds are available for authorized appropriations in the
subsequent year in conformance with personnel policies and procedures.
Catastrophic Facility/Infrastructure Loss & City Business Recovery: The City Council recognizes
the importance to maintain funds to recover from a catastrophic loss which are unexpected and
incur more than $500,000 in expenses to public facilities and infrastructure. This may also be used
for short-term recovery and business operations following a catastrophic loss pending the
reimbursement from insurance or grants to the extent that they are available. The balance is
established in the General Fund and the expenditure shall be made only by City Council
appropriation, which shall include a special emergency appropriation. The target established for
the maximum balance in this category is an amount equal to 15% of the reported book value of the
City owned Buildings and Improvements recorded as Capital assets.
Service Continuity Obligations: The City Council recognizes the importance to maintain funds for
continued obligations to provide Building and Safety inspections in the event that program
supporting fees are collected in one year and the expenditures occur in a subsequent year. The
City Council hereby establishes as policy that the assigned funds shall not exceed 125% of the
budgeted Building and Safety Division operating cost.
Page 5of7
Pension and Other Post-Employment Benefits: The City Council recognizes that investment
earnings can fluctuate from year to year and they are an important component of the funding of
retiree benefits. Investment performance impacts annual contributions and expenditures made
towards retiree obligations. The intent of the City Council is to establish a fund balance that can
provide supplemental financing to lessen the impacts from decreases in investment performance
on retiree obligations. The City Manager or designee may allocate from what would otherwise be
"Unassigned" fund balance to increase the fund balance. The use of funds from this fund balance
may be used: (a) if the City Employer share of the Public Employee Retirement System (PERS)
rate increases by 3 percent; and / or (b) If the City Annual Required Contribution (ARC) for retiree
medical benefits increases by 3 percent or more; and / or (c) If the City Council by majority vote
authorizes a lump sum use of the fund balance to reduce pension or OPEB liabilities.
Assigned for Specific Proiects: The portion of fund balance that is intended to be used to fund
design, improvements, and equipment required for a variety of capital improvement protects, via
recommendation of either the City Council or the City Manager. Specific assigned reserves will be
identified with the Resolution Authorizing Special Designations of General Fund Reserves, to be
considered for adoption by the City Council prior to the end of each fiscal year. This reserve
category replaces all subcategories for specific projects, except for the reserves listed here
separately, which are more long term in nature and/or are considered contingency reserves to be
used in the case of specific fiscal necessity.
IV. Unassigned Fund Balance (General Fund Only)
Unassigned fund balance represents amounts that have not been restricted, committed, or
assigned and is available for any purpose. The City Council at its discretion may modify
unassigned fund balance, and designate in the future an intended "Commitment" or "Assignment".
Unrealized Gain on Investments: Used to account for that portion of fund balance that is the result
of unrealized investment gains that have been recorded in accordance with Governmental
Accounting Standards Board Statement No. 31.
Unassigned For Cash Flow Purposes: The City Council recognizes the importance to maintain
funds for cash flow purposes to balance the fact that the receipt of major revenues and major
expenditure disbursements are not evenly distributed throughout the year. The City Council
establishes as policy that this fund balance shall be at a minimum equal to two months of budgeted
operating expenditures with a goal to achieve a maximum of four months. As part of the annual
budget appropriation the City Council may also appropriate as a source of funding "Unrestricted —
Capital Contribution" from this source. This shall typically be done only for high priority one time
capital expenditures, provided the minimum fund balance would remain.
C. CHANGES IN GENERAL FUND RESOURCES
In accordance with the requirements of GASB the City Council also confirms as part of this policy how
General Fund resources shall impact changes in balances.
Revenue Sources Allocated to Fire OPEB: The entire amount of the General Fund resources
derived from the repayment of funds advanced to the PERS Side Fund, shall be assigned to the
Fire OPEB Committed Balance, until such time that either there are no longer any repayments
made, or the balance equals $8.6 million, whichever occurs first.
Page 6of7
Revenue Sources Allocated to Service Continuity: If the "Assigned" balance is below the target
maximum of 125% of Building & Safety Expenditures, the following criteria shall be used for
calculating an adjustment only if annual building permit revenue exceeds annual Building and
Safety expenditures. The Administrative Services Director shall complete an analysis of major
building permits issued in the period April — June and shall assign an allocation of the portion of
revenue that is expected to be related to expenditures occurring in the subsequent year. The
amount derived shall be recommended to the City Manager. If annual building permit revenue is
less than the annual Building and Safety expenditures, the City Manager is authorized to reduce
the assigned amount by the amount necessary to balance revenues and expenditures.
Allocation of Residual Resources: When there are net resources in excess of what is classified as
Non-spendable, Restricted, Committed, and/or Assigned, and after maintaining the minimum level
of unassigned cash-flow funding, those resources shall be allocated as follows: a) 50% to Pension
and Other Post Employment Benefits; and b) 50% to Non-Streets CIP Reserve.
Page 7of7