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16-01
RESOLUTION NO.
A RESOLUTION of the City Council of the City of
Port Angeles, Washington, adopting the City's
new Financial Management Policy and rescinding
Resolution 29-91.
WHEREAS, on August 6,1991, a Financial Management Policy for the City of
Port Angeles was adopted by Resolution 29-91; and
WHEREAS, a Financial Management Policy serves as a guide for executing the
budget and controlling the financial parameters of the various City programs and
services funded in said budget; and
WHEREAS, it is in the best interest of City government to periodically update
and revise its Financial Management Policy to ensure the legal use of financial
resources through an effective system of internal controls and to maintain appropriate
financial capacity for present and future needs.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Port Angeles that the Financial Management Policy attached hereto as Exhibit A is
hereby adopted, and Resolution 29-91 is hereby rescinded.
PASSED by the City Council of the City of Port Angeles at a regular meeting of
said Council held on the 21 st day of August, 2001.
ATTEST:
~L{m)A
Becky J. U n, ty CierI! -
APPROVED AS TO FORM:
- (L;<J~
Craig D. ~utson, City Attorney
Financial Management
Policy
August 21, 2001
Exhibit A
Table of Contents
General Financial Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Primary Budget Responsibility ............................................. 1
Operating Budget Policies .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Budgetary Control Policies ................................................ 2
Revenue Policies ........................................................ 3
Capital Improvement Policies .............................................. 4
Debt Management Policies ................................................ 5
Short Term Debt ..................................................5
Long Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Financial Stability Policies ................................................ 6
Investment Policies ...................................................... 7
Financial Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Accounting and Reporting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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General Financial Goals
1. To ensure delivery of an adequate level of municipal services by assuring reliance on
ongoing resources and by maintaining an adequate financial base.
2. To ensure that the City is in a position to respond to changes in the economy or new
service requirements without an undue amount of fmancial stress.
3. To maintain a good credit rating in the financial community, and assure taxpayers that
City Government is well managed fmancially and maintained in sound fiscal condition.
4. To adhere to the highest accounting and management policies as set by the Government
Finance Officers' Association, the Governmental Accounting Standards Board, and other
professional standards for financial reporting and budgeting.
Primary Budget Responsibility
1. The City Council has final responsibility for approving the annual Operating Budget and
Capital Facilities Plan.
2. Department directors, under the direction of the City Manager, are responsible for
proposing programs, recommending funding levels, and formulating budget proposals for
implementing service programs in accordance with established goals and directives.
3. The Finance Department is responsible for coordinating the overall preparation and
administration of the City's budget in compliance with applicable State of Washington
statutes governing local government budgeting practices.
The Finance Department provides revenue budget estimates, assists department staff in
identifying budget problems and formulating alternative solutions, and prepares and
distributes the final budget document.
4. To facilitate and implement the budget process, the Finance Director will provide the
Council with an annual budget calendar.
Operating Budget Policies
1. The operating budget will define the City's annual financial plan as developed by the
City Council and Administration in establishing goals and objectives for the ensuing
year.
The budget associated with any proposed new program will be submitted and reviewed at
least four months prior to adoption and incorporation into the budget.
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Additional personnel should be recommended only after the need has been fully
substantiated. New personnel must be approved by the City Council.
2. The budget will reflect the projection of all revenues from all sources and all
expenditures, and present the level of governmental services and method of allocating
costs in the provision ofthese services to the community.
3. Current operating expenditures will be paid from current revenues and cash carried over
from the prior year after reserve requirements are met. The City will avoid budgetary and
accounting practices which balance the current budget at the expense of future budgets.
4. The City will maintain a level of expenditures which will provide for the public well-
being and safety of the residents of the community.
5. The operating budget will provide for adequate design, construction, maintenance and
replacement of the City's capital, plant and equipment.
6. A multi-year maintenance and replacement schedule will be developed based on the
City's projections of its future replacement and maintenance needs. The projections will
be updated and the schedule revised on an annual basis.
7. The budget will provide sufficient levels of maintenance and replacement funding to
ensure that all capital facilities and equipment are properly maintained and that such
future costs will be minimized.
8. Year-end surpluses in the General Fund may be used for non-recurring emergency capital
expenditures or dedicated to the Capital Facilities Plan. The following criteria must be
met to qualify any portion of the General Fund surplus for these purposes:
a. There are surplus balances remaining after all reserves and fund
allocations are made.
b. An analysis has occurred assuring that the City has an adequate level of
short and long-term resources to support the proposed use of surplus
balances.
c. The funds are specifically appropriated by the City Council.
9. Year-end surpluses in the Street Fund and Excise Tax Funds should be designated for use
in the Capital Facilities Plan or be used for one-time capital expenditures for street and
parks projects. Use of surpluses for these purposes must be approved by the Council.
Budgetary Control Policies
1. The budget will be developed and administered in compliance with applicable State of
Washington budgetary statutes.
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2. The Finance Department will maintain a system for monitoring the City's budget
performance. The system will include provisions for amending the budget during the
year in order to address unanticipated needs or emergencies.
3. Appropriations requested after the original budget is adopted will be approved only after
consideration of the elasticity of revenues. Such appropriations will be approved by City
Council.
4. Accounting and reporting practices will be maintained to provide accurate and timely
monitoring of the City's budget performance.
5. Monthly budget reports will be issued by the Finance Department to report on actual
performance compared to budget estimates. The department assists in implementing any
needed corrective action approved by the City Manager.
6. Current revenues and operating expenditures will be reviewed quarterly by the City
Council and the Finance Director will prepare a mid-year assessment of the City's
financial position for presentation to the Council.
Revenue Policies
1. The City will try to maintain a diversified and stable revenue system to protect against
short-term fluctuations in anyone revenue source. The revenue mix should combine
elastic and inelastic revenue sources to minimize the effect of an economic downturn.
2. Because revenues, especially those of the General Fund, are sensitive to local and
regional economic conditions, revenue estimates will be conservative and will be made
by an objective, analytical process.
3. As much as is reasonably possible, City services that provide private benefit should be
supported by fees and charges in order to provide maximum flexibility in the use of
general revenues to meet the cost of services of broader public benefit. The City will
establish all user charges in relation to the cost of providing the services. The cost of
providing services tied to user fees will be recalculated annually to identify the impact of
inflation and other cost increases and to determine the need for rate adjustments.
4. Fees and user charges for services provided by the City's enterprise funds should recover
full costs, including all direct costs, indirect costs and capital costs in the form of annual
depreciation of capital assets. The City's current enterprise funds are the Light Fund,
WaterlWastewater Fund, and Solid Waste Fund.
5. Proceeds of specific revenue sources that are legally restricted to expenditures for
specified purposes will be accounted for in separate special revenue funds. Budgeted
special revenue funds will be included and reviewed in the City's annual budget process.
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6. The City will follow an aggressive policy of collecting all monies due to the extent that
the collection efforts are cost effective.
Capital Improvement Policies
1. It is the City's policy to ensure that adequate resources are allocated to preserve existing
infrastructure and other capital assets before targeting resources toward construction or
acquisition of public facilities or major equipment.
2. A long-range Transportation Improvement Plan (TIP) will provide the framework for the
City's future investment in infrastructure. This ensures that infrastructure projects
incorporated into the Capital Facilities Plan (CFP) will be the embodiment of the
officially stated direction of the City's Comprehensive Plan and supporting documents.
3. The City will develop a multi-year Capital Facilities Plan (CFP) to identify and
coordinate infrastructure, facility and equipment needs in a way that maximizes the return
to the community. All capital improvements will be made according to the adopted CFP.
The Capital Facilities Plan will be formulated using an analysis oflong-tenn, overall
resources and will include projected funding sources and ongoing operations and
maintenance costs. Future changes in economic or demographic factors identified in the
financial forecasting process will be incorporated in the capital budget projections. The
plan will be updated annually.
4. The first year of the Capital Facilities Plan will constitute the capital budget for the
ensuing budget year. The capital budget and the base operating budget will be reviewed
at the same time to assure that the City's capital and operating needs are evaluated in a
balanced manner.
5. The City will maintain its strong local improvement district (LID) program. For capital
projects whose financing depends in part or wholly on an LID, interim fmancing may be
issued to support the LID's portion of the project budget. The amount of the interim
financing shall be the current estimate of the final assessment roll as determined by the
administering department.
6. The City will determine the least costly financing method for all new projects. Whenever
possible, the City will use intergovernmental assistance and other outside resources to
fund capital projects. Additional funding may come from designated surpluses in the
General Fund and certain special revenue funds as outlined in the operating budget
policy.
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Debt Management Policies
The basic objectives of the City's debt management policy are:
a. To achieve the lowest possible cost for borrowing.
b. To ensure access to the bond market to adequately provide the capital needed to
finance public improvement and other long-term development objectives.
c. To maintain strong and sound credit demonstrated by its commitment to meet all
obligations in a timely fashion.
d. To maintain a level and structure of outstanding indebtedness that does not lead to
excessive debt service requirements, thereby avoiding unnecessary strains on the
operating budget.
e. To maintain the confidence oflending markets and the taxpayers.
A. Short Term Debt
1. It is the City's policy to avoid the use of short term indebtedness to the maximum
extent possible.
2. The City may use short-term debt to cover temporary cash flow shortages
resulting from delay in receipting tax revenues or issuing long-term debt, or to
finance capital construction.
3. Interfund loans may be used to meet short-term cash flow needs as an alternative
to outside debt instruments. Interfund loans will be permitted only if an analysis
of the lending fund indicates excess funds are available and that the use of these
funds will not adversely impact current operations.
B. Long Term Debt
1. The City will confine long-term borrowing to capital improvements that cannot be
financed from current revenues.
2. Acceptable uses of bond proceeds will include items which can be capitalized and
depreciated. Refunding bond issues designed to restructure current outstanding
debt is an acceptable use of bond proceeds.
3. Where possible, the City will use special assessment revenue, or other self-
supporting bonds, instead of general obligation bonds.
4. The City will not use long-term debt for current operations.
5. The City will maintain communications with bond rating agencies regarding its
financial condition. The City will follow a policy of full disclosure on financial
reports and bond prospectuses.
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6. General Obligation Bond Policy:
a. Projects proposed for financing through general obligation debt will be
accompanied by an analysis of the future operating and maintenance costs
associated with the project.
b. Bonds will not be issued for a longer maturity schedule than a
conservative estimate of the useful life of the asset to be financed.
7. Limited Tax General Obligation Bond Policies:
a. As a precondition to the issuance of limited tax general obligation bonds,
alternative methods of financing must be exhausted.
b. Limited tax general obligation bonds will be issued under certain
conditions:
· A project in progress which requires monies not available from
alternative sources;
· Matching fund monies are available which may be lost if not
applied for in a timely manner; or
· Catastrophic or emergency conditions exist.
8. Financing of Lease Purchases:
Under RCW 39.36.020(2), the public may vote to approve bond issues for general
government purposes in an amount not to exceed 2.5% of assessed valuation.
Within the 2.5% limit, the Port Angeles City Council may approve bond issues
and lease purchases up to 1.5% of the City's total assessed value. (RCW
39.36.020(2) and RCW 35.42.200.)
Financial Stability Policies
1. The General Fund's targeted unreserved fund balance will be a minimum of 10% of
expenditures, excluding capital expenditures.
This reserve will be established and maintained to:
a. Offset unanticipated downturns and necessary revisions in any general
municipal purpose fund;
b. Provide a sufficient cash flow for daily financial needs at all times; and
c. Establish depreciation reserve to provide adequate replacement of
equipment.
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1. The City will maintain the following reserves for the Electric, WaterfWastewater, and
Solid Waste Funds:
a. An operating reserve will be established and maintained to provide
sufficient cash flow to meet daily financial needs. This reserve will be
based upon total operating expenses of the Electric, W aterfW astewater,
and Solid Waste Funds.
For budgeting purposes, operating expenses will be calculated upon each
Fund's total expense budget excluding ending fund balances, capital
purchases, and the current year's portion of principal paid on outstanding
debt.
b. A depreciation reserve will be established by these funds to provide
adequate replacement of utility capital, plant, and equipment. This reserve
will be adjusted annually by the current year's depreciation expense
exclusive of bond reserves, principal paid on outstanding debt, and
purchases of replacement capital.
c. Bond reserves will be created and maintained by the Electric,
WaterfWastewater and Solid Waste utilities in accordance with the
provisions set forth in the bond covenants.
3. The City will maintain Reserve Funds to meet requirements for the guarantee of debt
service in compliance with bond indenture agreements.
4. The City will maintain the self-insurance funds at a sufficient level to provide health care
and worker's compensation benefits and avoid catastrophic loss.
5. The City will maintain an actuarially funded Firemen's Pension Fund which was
determined actuarially sound as of January 1997.
Investment Policies
1. The Finance Director will prepare an Investment Policy that sets forth the criteria for the
operation of the investment portfolio. The primary objective of the Investment Policy is
to establish a conservative set of investment criteria to prudently protect the City's
portfolio and enable the City to generate a fair rate of return from its investment activities
while assuring safety and liquidity to meet its cash flow needs.
2. The Finance Director will annually review the Investment Policy and submit any revised
policy to City Council for adoption.
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3. As a commitment to a quality investment program, the Investment Policy will be
developed under the guidelines published by the Municipal Treasurer's Association of the
US and Canada and will be submitted to the association's Investment Policy Certification
Program.
Financial Planning
The City engages in a financial planning process which encompasses important policy
considerations and provides guidelines for all aspects of the City's financial management
strategy .
1. Transportation Services and Facilities Plan (TSFP)
The purpose ofthe TSFP is to supplement and expand the goals and policies stated in the
Comprehensive Plan for the City of Port Angeles. The TSFP addresses the City's
transportation standards, existing deficiencies, traffic forecasting, future transportation
system needs, and funding including a planning-level cost estimate and a project
prioritization scheme for the most likely alternatives to be implemented.
2. Transportation Improvement Program (TIP)
The TIP is a six-year, specific program of transportation improvements for roadways,
transit and other transportation infrastructure including non-motorized improvements.
The TIP consists of projects drawn from the TSFP and CFP as well as local plans and
programs. The projects are directed at improving the overall efficiency and capabilities
of the existing transportation system.
3. Capital Facilities Plan (CFP)
The CFP is a comprehensive approach which allows for optimal capital planning by
considering all possible capital projects. The multi-year plan focuses on major pieces of
equipment and what facilities to construct, their location, timing, projected cost and
funding sources. The plan is directed at improving the infrastructure of municipal
servIces.
4. Financial Forecasting
The five-year forecast provides the contextual framework within which the City Council
develops its annual and long term goals and objectives and the management team
prepares its annual operating budget. The Finance Department updates the forecast each
year to adjust for changes in economic conditions and trends, changes in Council
priorities and policies, and other variables that might affect the City's ability to provide
needed services and maintain its fiscal integrity in future years. The forecasting process
allows Council and staff to make reasonable assumptions about the community to
formulate a forward-looking financial plan.
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Accounting and Reporting Policies
1. The City's accounting and fmancial reporting systems will be maintained in conformance
with current accepted principles and standards of the Governmental Accounting
Standards Board (GASB) and the Government Finance Officers Association (GFOA). As
a commitment to this policy, the Finance Department will periodically submit its
Comprehensive Annual Financial Report (CAFR) for the GFOA Certificate of Excellence
in Financial Reporting.
Annual reports issued for the year ended December 31, 2002, and thereafter will conform
with the requirements of GASB Statement No. 34.
2. The State Auditor's Office provides a standard account classification system through its
Budget and Accounting Reporting System (BARS). The City will maintain its records on
a basis consistent with BARS and current BARS manuals will be maintained in the
Finance Department.
3. The Finance Department will maintain financial systems to monitor expenditures,
revenue and performance of all municipal programs on an ongoing basis. Regular
monthly financial reports will present a summary of financial activity for the period and
the cumulative data for the budget year.
4. All applicable standard governmental accounting practices will be used to maintain the
City's financial records, including the appropriate uses of accrual and modified accrual
methods of accounting, encumbrance accounting, current financial resources and
economic resources focus for statement presentation, and the proper classification of
funds.
5. The Finance Department will maintain fixed asset and depreciation records for all capital
assets owned by the City. The threshold for capitalization of non-infrastructure assets is
$3,000.
Under GASB Statement No. 34, infrastructure will be included as capital assets in the
financial reports. The City will develop and follow a methodology of maintaining
infrastructure records, including appropriate depreciation, under the guidelines ofthe
statement.
6. The State Auditor's Office will annually perform a financial and compliance audit and
issue an audit report. Results of the annual audit will be provided to the City Council.
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