HomeMy WebLinkAbout29-91
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RESOLUTION NO.
29-91
A RESOLUTION of the city of Port Angeles
adopting the City's Financial Management
policy.
WHEREAS, the attached Financial Management Policy was
presented and discussed at a City Council workshop on July 15r
1991, and was also incorporated as part of the 1991-92 Biennial
Budget as adopted by the City Council; and
WHEREAS, the attached Financial Management Policy
serves as the clearest 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 interests of the fiscally
soqnd and administratively efficient management and operation of
City government to formally adopt a Financial Management Policy
as set forth in the attached Exhibit "A";
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF
THE CITY OF PORT ANGELES, WASHINGTONr that the Financial
Management Policy, as attached hereto in Exhibit "A", is hereby
adopted.
PASSED by the City Council of the city of Port Angeles
at a regular meeting of said Council held on the 6th day of
August, 1991.
ATTEST:
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Becky J Up n, C ty Clerk
ED AS TO FORM:
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CraA~~ 7*riuoson, City Attorney
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CITY OF PORT ANGELES
321 EAST FIFTH ST., P.O. BOX 1150 PORT ANGELES, WASHiNGTON 98362
PHONE (206) 457-0411
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August 1, 1991
TO:
City Manager Pomeranz, Mayor Sargent, and City Council
FROM:
Katherine K. Godbey. Finance Director
Yvonne Ziomkowski, Accounting Manager
ISSUE: Should the City Council approve by resolution the City's Financial Management Policy?
BACKGROUND: The Financial Management Policy was presented and discussed at a Council workshop
on July 15, and was also incorporated as part of the 1991-92 adopted biennial budget. The general goals
of the City's financial management policy are 1) to maintain a solid financial base in order to provide
adequate delivery of services, 2) to be able to withstand economic trauma and adjust to requirements of
the community and 3) to maintain a good credit rating and assure taxpayers that the City is in good
financial condition. The enclosed financial management policies serve as the clearest guide for executing
the budget and controlling the parameters of the City's programs.
RECOMMENDATION: The Finance Department recommends approval of the resolution adopting the
Financial Management Policies of the City. Staff will be available to answer your questions.
- i~,.:~~j;-d
~r~e K. Godbey . - (
Finance Director
YV~=Sk~~
Accounting Manager
FS.91.0801.01
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EXHIBIT A
Financial Management Policy
General Financial Goals
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1. To maintain an adequate financial base in order to sustain an adequate level of municipal
services.
2. To be able to withstand local and regional economic trauma, to adjust to changes in the
service requirements of the community, and to respond to other changes as they affect the
City's residents.
3. To maintain a good credit rating in the fmancial community and assure taxpayers that City
government is well managed financially and maintained in sound fiscal condition.
Primary Budget Responsibility
1. Under the City Manager's supervision, department directors have primary responsibility
for formulating budget proposals in line with City Council and City Manager priority
direction and for implementing them once they are approved.
2. The Finance Department is responsible for coordinating all aspects of the budget process
on behalf of the City Manager, analyzing department budget information, preparing budget
revenue estimates, assembling the budget document and providing overview fmancial
monitoring and reporting once the budget is adopted.
3. The Finance Department assists department directors in identifying budget problems,
formulating solutions and alternatives, and implementing corrective action approved by the
City Manager.
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Operating Budget Policies
1. The operating budget will be the City's annual financial plan which will establish the level
of services as defined by the City's goals and objectives and the available revenue. The
budget will be annually redefined by incorporating newly approved programs, inflationary
increases and uncontrollable expenses by deleting non-recurring expenses of the preceding
year.
New programs will be reviewed at least four months prior to their adoption and
incorporation in the budget.
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2. Revenues and expenditures for the General Fund and all operating funds will be projectedrfor the ensuing fiscal year.
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3. The operating budgets will provide for adequate design, construction. maintenance. and
replacement of the City's capital. plant. and equipment.
4. The City will maintain its assets at a level adequate to protect the capital investment and
to minimize future maintenance and replacement costs.
5. The City will project its equipment replacement and maintenance needs for the next several
years and will update this projection each year. From this projection a maintenance and
replacement schedule will be developed.
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6. Current operating expenditures will be paid from current revenues and cash carried over
from the prior year. Current revenues and operating expenditures will be reviewed
quarterly during the year. The City will avoid budgetary and accounting procedures which
balance the current budget at the expense of future budgets. All budgetary procedures will
conform with existing State and local laws and regulations.
7 . Year-end surpluses in the General Fund shall be used for one-time capital emergency
expenditures or dedicated to the Capital Improvement Program only if:
(a) There are surplus balances remaining after all reserve and fund allocations are made.
A surplus is defined as the difference between the actual beginning fund balance and
the budgeted beginning fund balance. It consists of under-expenditures and excess
revenues over and above the amounts included in the following year's budget.
(b) The City has made an analysis justifying that it has an adequate level of short and
long-term resources.
8. If year-end surpluses are used to support one-time capital or emergency expenditures or
are dedicated to the Capital Improvement Program, the funds must be specifically
appropriated by the City Council.
9. Appropriations requested after the original budget is adopted will be approved only after
consideration of the elasticity of revenues.
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 both local and
regional economic activities, revenue estimates will be conservative.
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3. The City will estimate its annual revenues by an objective, analytical process.
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4. The City will establish all user charges in relation to the cost of providing the service.
Each year, the City will recalculate the costs of activities supported by user fees to identify
the impact of inflation and other cost increases.
5. The City will set fees and user charges for each enterprise fund, such as Light,
WaterlWastewater, and Solid Waste, at a level that supports the total direct and indirect
cost of the activity. Indirect costs include the cost of annual depreciation of capital assets.
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6. The City will follow an aggressive policy of collecting all monies due the City to the extent
that the collection efforts are cost effective.
Expenditure Policies
1. The City will maintain a level of expenditures which will provide for the public well-being
and safety of the residents of the community.
2. Expenditures will be within the confines of generated revenue.
3. The City will maintain expenditure categories according to State statute and administrative
regulation.
Capital Improvement Budget Policies
1. The City will make all capital improvements in accordance with an adopted Capital
Improvement Program.
The Capital Improvement Program and the base operating budget will be reviewed at the
same time. This will ensure that the City's capital and operating needs will be balanced
with each other.
2. The City will develop a multi-year plan for capital improvements, including operations and
maintenance costs, and update it annually. Future capital expenditures necessitated by
changes in population, changes in real estate development, or changes in the economic base
will be calculated and included in capital budget projections.
3. The City will identify the estimated costs and potential funding sources for each capital
project proposal before it is submitted to Council for approval. The City will use
intergovernmental assistance and other outside resources whenever possible.
4. The City will maintain its practice of designating its special revenue fund revenue sources
for the funding of its Capital Improvement Program.
5. The City will maintain its strong local improvement district (LID) program.
e 6. The City will determine the least costly financing method for all new projects.
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Short- Tenn Debt Policies
1. Short-term debt covers a period of one year or less.
2. The City may use short-term debt to cover temporary cash flow shortages which may be
caused by a delay in receipting tax revenues or issuing long-term debt, or to finance
construction in capital improvement.
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3. The City may issue interfund loans rather than outside debt instruments to meet short-term
cash flow needs. Interfund loans will be permitted only if an analysis of the affected fund
indicates excess funds are available and the use of these funds will not impact the fund I s
current operations.
umg- Tenn Debt Policies
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 currently outstanding debt will
be 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 about its financial
condition. The City will follow a policy of full disclosure on financial reports and bond
prospectus.
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 fmanced.
7. Limited Tax General Obligation Bond Policies:
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(a) As a precondition to the issuance of limited tax general obligation bonds, alternative
methods of financing will be exhausted.
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(b) Limited tax general obligation bonds will be issued under certain conditions:
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A project in progress requires monies not available from alternative sources;
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Matching fund monies are available which may be lost if not applied for in a
timely manner; or
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Catastrophic or emergency conditions exist.
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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 up to .75 % and lease
purchases up to 1.5% of the City's total assessed value. RCW 39.36.020(2) and RCW
35.42.200. The 1.5% which the City Council may approve for leases overlaps the
Council's .75% capacity for general obligation bonds. Because of this overlap, the
Council should limit the amount which may be approved for financing lease purchases to
.75 % of the City's total assessed value in order to allow for the full .75 % of bonded
indebtedness without a public vote.
Financial Stability Policies (Reserve Fund Policies)
1. The City General Fund targeted unreserved fund balance will be 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; and
(b) Provide a sufficient cash flow for daily financial needs at all times.
(c) A depreciation reserve will be established to provide adequate replacement of
equipment.
2. The City will maintain the following reserves for the Light, Water/Wastewater, and Solid
Waste Funds:
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(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 Light, WaterlWastewater, and Solid Waste Funds. For budgeting
purposes, operating expenses will be calculated upon the Funds' total expense
budgets excluding ending fund balances, capital purchases. and the current year's
portion of principal paid on outstanding debt.
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(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 Light, Water/Wastewater and
Solid Waste Utilities in accordance with the provisions set forth in the bond
covenants.
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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 Firemen1s Pension Fund that was determined
actuarially sound as of December, 1989.
Investment Policies
The Finance Director will annually submit an investment policy to the City Council for review
and adoption. The City will strive to maximize the return on its investment portfolio with the
primary objective of safety and liquidity.
Special Revenue Policies
1. The City will establish and maintain special revenue funds which will be used to account
for the proceeds of specific revenue sources to finance specified activities which are
required by statute, ordinance, resolution, or executive order.
2. Special revenue funds having annual operating budgets will be reviewed by the City during
the budget process.
Accounting, Auditing and Financial Reporting Policies
1. The City will establish and maintain a high standard of accounting practices.
2. The accounting system will maintain records on a basis consistent with accepted standards
for local government accounting and the State of Washington Budgeting, Accounting and
Reporting Systems.
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3. Regular monthly and annual financial reports will present a summary of financial activity
by major types of funds.
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4. Where possible~ the reporting system will provide monthly information on the total cost
of specific services by type of expenditure and, if necessary ~ by fund.
5. A fixed asset system will be established and maintained to identify City assets and their
condition.
6. The State Auditorts Office will audit City records annually and will issue a financial
opinion.
Budget Calendar
In order to facilitate and implement the budget process, the City Manager will provide the
Council with an annual budget calendar.
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