HomeMy WebLinkAboutItem 8.1 - 1510 Special Designation of General Fund Reserve
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STAFF REPORT
CITY COUNCIL
DATE: June 20, 2017
TO: Honorable Mayor and City Councilmembers
FROM:
Christopher L. Foss, City Manager
SUBJECT:
Special Designation of General Fund Reserves for Fiscal Year 2016 -17
Prepared by: Colleen Tribby, Director of Administrative Services
EXECUTIVE SUMMARY:
In accordance with the City's Fund Balance and Reserves Policy, the City Council will
consider special designations of General Fund reserves for Fiscal Year 2016 -17.
STAFF RECOMMENDATION:
Adopt the Resolution Authorizing a Special Designation of General Fund Reserves for
Fiscal Year 2016-17, and direct Staff to implement the changes in the financial records.
FINANCIAL IMPACT:
Approval of special designations in the General Fund will not result in any change to
total fund balance, but would shift resources among reserve categories.
DESCRIPTION:
Background
Governmental Accounting Standards Board Statement No. 54 (GASB 54), Fund
Balance Reporting and Governmental Type Definitions, requires fund b alance to be
classified into different categories for governmental funds depending on the extent to
which the use of resources is constrained for specific purposes.
Per GASB 54, the five fund balance classifications are:
Non-Spendable – amounts that cannot be spent because they are either (a) not in
spendable form, or (b) legally or contractually required to be maintained.
Restricted – balance with constraints placed of the use of the resources which are
either (a) externally imposed by creditors, contributors, or laws and regulations of
other agencies, or (b) imposed by law through constitutional provisions or enabling
legislation.
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Committed – amounts that can only be used for specific purposes pursuant to
formal action of the agency’s governing body. These are considered legally
restricted and can only be removed or changed by formal action of the governing
body. Action to constrain resources should occur prior to the end of the fiscal year,
though the exact amount may be determined subsequently
Assigned – amounts that are constrained by the governing body’s intent to be used
for specific purposes, but are neither restricted nor committed.
Unassigned – used by General Fund for residual classification of positive funds
The City’s Fund Balance and Reserves Policy (Policy) complies with the above
reserve classifications. Furthermore, it guides the shifting of residual reserves,
including allocations to Fire Other Post Employment Benefits (OPEB, or retiree health)
and to the Service Continuity Reserve, which is set aside to complete development
project work when development revenues slow. Finally, the Policy states that any
excess fund balance, after designations to all other 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%).
Recommended Reserve Designations for Fiscal Year 2016-17
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 2016-17. 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.
This Staff Report also transmits a Resolution (Attachment 1) which confirms
designations only of Committed Reserves for Fiscal Year 2016-17, as City Council
approval of Assigned Reserves is not necessary by resolution. However, Staff seeks
City Council direction on each of the following recommended designations:
Committed Reserves:
Public Safety Reserve (NEW) – Staff recommends setting up new reserve for future
police needs, and contributing $1,000,000 in seed funding for this purpose.
Fire OPEB (Retiree Health) – The Policy calls for increasing this reserve annually by
the amount paid down against the PERS Side Fund. Because that Side Fund will be
paid off in Fiscal Year 2016-17 (with an estimated payment of $80,672), there are
no more automatic increases to this reserve. Staff recommends contributing
$250,000 annually to this source, until the next actuarial study is done that will
clarify the City’s ongoing liability to Fire retiree health.
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Assigned Reserves:
Service Continuity – this reserve was established to ensure that the City can fund
Building and Safety Division costs linked to specific projects once development
activity slows and expenditures outpace revenues. Staff recommends increasing
this by $150,000 (5%) for a new balance of $3,150,000.
Pension Rate Stabilization Plan – During the budget adoption on May 16, 2016, the
City Council approved setting up a Section 115 pension trust fund through Public
Agency Retirement Systems (PARS). This will serve as another pension investment
tool, and will supplement the City’s CalPERS fund. Staff recommends creating a
year-end reserve for the purposes of making an initial contribution of $1,500,000 to
the PARS fund in Fiscal Year 2017-18.
Chevron Debt Payoff – During the budget adoption the City Council also discussed
the option to pay off the City’s capital lease debt f or solar improvements as early as
Fiscal Year 2018-19. The result of doing so would be a savings of $410,747 in
interest payments (including a prepayment penalty) and would restore $565,000 per
year in General Fund cash flow for the term of the lease, whic h ends in Fiscal Year
2025-26. Setting up an assigned reserve for $5,238,622 will formalize the City
Council’s intention to pay off the debt.
HVAC Replacement – Staff has been planning for a replacement of the entire HVAC
system at the Civic Center in the near future. The City currently has $1,833,388 set
aside for this purpose: $1,000,000 in the General Fund Assigned Reserve, and
$833,388 in the Building Replacement Internal Service Fund. However, in
anticipation of higher costs of new HVAC equipment and installation, and to prepare
for the possibility of replacing aging HVAC systems at other City facilities, Staff
recommends increasing this funding by $500,000 in the Assigned Reserve, for total
set aside of $2,333,388 for HVAC replacements.
Contribution to Internal Service Funds – Staff recommends setting aside $500,000
for a future contribution to Internal Service Funds, which would be used for seed
funding for known future replacement needs (such as turf at Fallon Sports Park
Phase II, and playground upgrades and replacements at City parks).
Unassigned (Cash Flow) Reserve - City Policy calls for the Available Cash Flow to
be a minimum of two months and a maximum of four months of the following year’s
expenditure budget. In the current report, the shifti ng of reserves provides for
$35,530,554 in the cash flow reserve at year-end, which represents 5.7 months of
the Fiscal Year 2017-18 operating budget. While this is higher than the maximum
target, Staff recommends maintaining this cash flow reserve until a fter the City
Council has held its next Strategic Planning session, planned for the fall 2017,
during which the City’s future unfunded capital project needs will be discussed.
While the Fiscal Year 2016 -17 year -end balances are not yet final until the City
closes its financial books, Staff can make reasonable assumptions about estimated
reserve balances at this point.
Page 4 of 4
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
None.
ATTACHMENTS:
1. Resolution Authorizing a Special Designation of General Fund Reserves for F iscal
Year 2016-17
2. General Fund Reserves Summary
ATTACHMENT 1
RESOLUTION NO. XX – 17
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
*******************************
AUTHORIZING A SPECIAL DESIGNATION OF GENERAL FUND RESERVES FOR
FISCAL YEAR 2016-17
WHEREAS, the City's 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 onetime revenues during the preparation of the Fiscal Year 2017-18 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 2016-17 year
-end balance to the Committed fund balance sub - categories as follows:
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 left in the Unassigned (Available) Reserve.
PASSED, APPROVED AND ADOPTED this 20th day of June, 2017.
AYES:
NOES:
ABSENT:
ATTEST:
___________________ ___________________
City Clerk Mayor
Reserve Balances
Actual
2015-16
Increase
2016-17
Decrease
2016-17
NET
CHANGE
Projected
2016-17
Committed 38,928,756 1,330,672 (7,434,369) (6,103,697) 32,825,059
Public Safety Reserve 1,000,000 1,000,000 1,000,000
Fire Svcs OPEB 3,004,000 330,672 330,672 3,334,672
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St
a
b
i
l
i
z
a
t
i
o
n
Pl
a
n
1
,
5
0
0
,
0
0
0
1,
5
0
0
,
0
0
0
1,
5
0
0
,
0
0
0
Se
e
d
fu
n
d
i
n
g
fo
r
Se
c
t
i
o
n
11
5
pe
n
s
i
o
n
trust
Ch
e
v
r
o
n
De
b
t
Pa
y
o
f
f
5
,
2
3
8
,
6
2
2
5,
2
3
8
,
6
2
2
5,
2
3
8
,
6
2
2
Fo
r
po
t
e
n
t
i
a
l
pa
y
o
f
f
of
so
l
a
r
ca
p
i
t
a
l
le
a
s
e
debt
Pe
n
s
i
o
n
& OP
E
B
10
,
6
1
4
,
3
5
3
‐
10
,
6
1
4
,
3
5
3
Fi
s
c
a
l
l
y
Re
s
p
o
n
s
i
b
l
e
Ad
j
u
s
t
m
e
n
t
32
5
,
0
0
0
‐
32
5
,
0
0
0
Mu
n
i
c
i
p
a
l
Re
g
i
o
n
a
l
Pe
r
m
i
t
2,
2
5
0
,
0
0
0
(3
7
9
,
9
7
0
)
(3
7
9
,
9
7
0
)
1,
8
7
0
,
0
3
0
HV
A
C
Re
p
l
a
c
e
m
e
n
t
1,
0
0
0
,
0
0
0
50
0
,
0
0
0
50
0
,
0
0
0
1,
5
0
0
,
0
0
0
Fo
r
HV
A
C
re
p
l
a
c
e
m
e
n
t
at
Ci
t
y
fa
c
i
l
i
t
i
e
s
Re
l
o
c
a
t
e
Pa
r
k
s
De
p
a
r
t
m
e
n
t
25
0
,
0
0
0
‐
25
0
,
0
0
0
Sp
e
c
i
f
i
c
As
s
i
g
n
e
d
Re
s
e
r
v
e
s
Ci
v
i
c
Ce
n
t
e
r
Re
n
o
v
a
t
i
o
n
‐Po
l
i
c
e
1,
9
6
2
,
1
0
0
‐
1,
9
6
2
,
1
0
0
Co
n
t
r
i
b
u
t
i
o
n
to
IS
F
‐
50
0
,
0
0
0
50
0
,
0
0
0
50
0
,
0
0
0
Fo
r
fu
t
u
r
e
re
p
l
a
c
e
m
e
n
t
it
e
m
s
at
Ci
t
y
parks/facilities
Fi
r
e
Eq
u
i
p
m
e
n
t
Re
p
l
a
c
e
m
e
n
t
6
0
0
,
0
0
0
(4
0
9
,
1
2
7
)
(4
0
9
,
1
2
7
)
19
0
,
8
7
3
Un
a
s
s
i
g
n
e
d
2
9
,
8
6
7
,
6
9
5
11
,
5
3
3
,
8
9
0
(8
,
0
6
8
,
3
8
4
)
3,
4
6
5
,
5
0
5
33
,
3
3
3
,
2
0
0
Un
a
s
s
i
g
n
e
d
‐Un
r
e
a
l
i
z
e
d
Ga
i
n
s
(2
,
1
9
7
,
3
5
4
)
‐
(2
,
1
9
7
,
3
5
4
)
Un
a
s
s
i
g
n
e
d
(A
v
a
i
l
a
b
l
e
)
3
2
,
0
6
5
,
0
4
9
35
,
5
3
0
,
5
5
4
TO
T
A
L
RE
S
E
R
V
E
S
1
0
9
,
1
8
4
,
0
2
6
20
,
7
5
3
,
1
8
4
(1
9
,
6
0
2
,
2
7
4
)
1,
1
5
0
,
9
1
0
11
0
,
3
3
4
,
9
3
5