HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 06/17/2003 - RESOLUTION 2003-079 ADOPTING AMENDMENTS TO THE FIN AGENDA ITEM SUMMARY ITEM NUMBER: 16
FORT COLLINS CITY COUNCIL DATE: June 17, 2003
STAFF: John Fischbach
SUBJECT:
Resolution 2003-079 Adopting Amendments to the Financial Management Policies.
RECOMMENDATION:
Staff recommends adoption of the Resolution.
FINANCIAL IMPACT:
The Financial Management Policies are used to establish guidelines for budget preparation and long-
range financial planning.The policies reflect Council direction and commitment to sound financial
110 planning and management.
EXECUTIVE SUMMARY:
The amendments adopted by this Resolution will become part of the Financial Management Policies
of the City. The policies will remain in effect until they are subsequently amended or repealed by
Council action.
Several revisions and amendments are proposed. The amendments can be categorized as either:
• Operational (changes policy direction); and
• Housekeeping (does not change policy direction).
The two operational policy changes pertain to guidelines regarding the accounting for maintenance
and repairs of City facilities and an investment technique known as securities lending.
BACKGROUND:
The following is a listing of the proposed amendments, by section, and a brief explanation of why
an amendment is proposed. A copy of the Financial Management Policies with the original and
amended policy language is attached.
DATE: une 17,2UUJ 2 ITEM NUMBER: 16Provosed Amendments
Operational Changes
Section 5.2 a. 2(e) adds a designated reserve in the General Fund for Facilities Maintenance and
Repairs. The outside auditor has recommended that more stringent guidelines be used in
determining when certain facility maintenance or repairs are capitalized. Previously, monies for
maintenance and repairs were appropriated in the Capital Projects Fund and the dollars were non-
lapsing; the dollars could be carried over from year to year. With the new guidelines, some of the
facility maintenance and repair dollars will be appropriated in the General Fund. Unspent monies
not designated for a purpose lapse into a general usage reserve in the General Fund.In order to make
certain the monies originally appropriated for maintenance and repair use are protected, a reserve
designated for that purpose is recommended.
Section 8.6.• has been changed through the addition of one sentence to the end of the Eligible
Investments paragraph. In 2000, the State authorized itself and public entities to participate in
securities lending programs. After studying the technique in 2001, the Finance Department began
participating in a securities lending program offered by Wells Fargo Bank. The City has relied on
the state statute to improve the investment program total investment return.
Housekeeping Changes
Most of the changes are housekeeping, changing a word or sentence here and there to make the
policies more readable and understandable. In some cases, some additional background has been
added.
Section 1.1. The first sentence, a long one, has been broken into three. A reference to the annual
appropriations ordinance, which provides the basis for expenditure control was also added.
Section 1.2.a. Simplified the wording on the budget tern. Added an explanation that the Council
started using the multiyear budget in 1997 for 1998-1999 and that the cycle corresponds with the
Council election.
Section 1.2.e. Minor change to the wording of the budget as a public record.
Section 1.3. Changed"irrepealable"to"not subject to repeal". Changed"deemed"to"considered".
Section 1.3.a. Changed the structure of the first sentence slightly.
Section 1.3.a.1. Added"and valid"before "purchase orders" to clarify that not all open orders are
carried forward.
Section 1.3.6. Clarified that when a budget has been reduced by the City Manager, expenditures
shall not exceed the amount of the reduced budget.
Section 1.5.a. Added"achieve"to "To this end,the City utilizes. . . ."
Section 1.5.b Deleted the reference to the Council Finance Committee.
DATE: une - ITEM NUMBER:
Section 1.6 Eliminated the reference to previous resolution (Resolution 99-46).
Section 2.1. Added Greeley to the Denver-Boulder CPI to conform to Bureau of Labor Statistics
titling. Added a note to the enterprise section that the revenue sources for the Golf Fund make it
eligible for enterprise status under Article X,Section 20. Tried to simplify the wording that referred
to the legal principles regarding the use of excess fee revenue.
Section 2.2.c. Updated the revenue targets for sales tax as a percent of general government revenue
and general fund revenue.
Section 2.3.c. Added language previously omitted when adopted by Ordinance No. 115, 1997.
Section 2.4. Took out reference to Fort Collins-Loveland Airport Authority contribution for debt.
Modified other debt related set asides to note requirements are going away as debt is paid off and
sureties are substituted for required reserves. Noted that appropriations are required for transfers of
sales tax monies to the general fund.
Added wording to the 1/4 cent taxes that transfers may be to operating funds. The Auditors have
recommended that the Capital Projects fund not be used for operating expenditures.
Section 2.5. Clarified the contributions section.
Section 3.1.a. Changed references to "Information & Communications Systems" to "Information'
Technology."
Section 3.3. Modified the final sentence of the lease-purchase section.
Section 3.5. Updated sections and data on pensions and insurance.
Section 3.6.c. Removed reference from the early 1990s relating to the maintenance target.
Section 3.8. Changed the explanation of the regressive nature of the sales tax on low income
households.
Section 4.1. Revised estimate of the percentage of general fund that comes from sales and use tax.
Section 4.2. Added one word to the paragraph on utilities financial record keeping showing that
FERC accounting is supplemental to the regular financial record keeping.
Section 4.3. Added the fifth internal service fund to this section and noted that the Utilities
Customer Service and Administration Fund will operate according to the same guidelines that the
Utilities follow.
Section 4.4.b.2. Corrected the formatting (Item C was mislabeled.)
Section 7.4. Updated the debt target indicator for the upcoming five-year budget planning period.
RESOLUTION 2003-079
OF THE COUNCIL OF THE CITY OF FORT COLLINS
ADOPTING AMENDMENTS TO THE FINANCIAL
MANAGEMENT POLICIES
WHEREAS,City Council has adopted Financial Management Policies for the City pursuant
to Resolution 94-174; and
WHEREAS, Resolution 94-174 provides that the Council may adopt amendments to the
City's Financial Management Policies; and
WHEREAS, the City Manager and the Council Finance Committee have reviewed the
proposed amendments to the Financial Management Policies; and
WHEREAS, the City is committed to sound and efficient financial planning and
management; and
WHEREAS, the proposed amendments to the Financial Management Policies establish
guidelines for sound and efficient financial planning and management, and reflect current
requirements and laws that apply to the City's financial activities; and
WHEREAS, the City Council wishes to adopt these amendments to the City's Financial
Management Policies in pursuit of its objective of sound and efficient financial planning and
management.
NOW,THEREFORE,BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT
COLLINS as follows:
Section 1. That the Council hereby adopts the amendments to the City's Financial
Management Policies attached hereto as Exhibit"A" and incorporated herein by this reference.
Section 2. That the amendments to the Financial Management Policies adopted by the
passage of this Resolution shall be included as part of said Policies,and those Policies shall hereafter
remain in effect until the same are amended or repealed by subsequent action of the City Council.
Passed and adopted at a regular meeting of the Council of the City of Fort Collins held this
17th day of June, A.D. 2003.
Mayor
ATTEST:
City Clerk
• BUDGET POLICY
1.1. OVERVIEW
The budget islo " long-range plan by which mancial poll ie
made, im leraentedand seakelled. Throu h the budget, services are implemented
For the City of Fort Collins, direction for the budget emanates from
many distinct sources. The State Constitution and the City Charter provide the basic
legal requirements and time lines for the process. Council goals, ordinances and
resolutions provide additional direction and respond to the needs of the community.
1.2. CHARTER PROCESS REQUIREMENTS
a. Budget Term
The fiscal year of the City is the calendar year. The Citymay adopt budgets for a budget
4Ehadar 87 term of one ,� `"" or more ik
..
" fi acal,yearr;the Couiicl, op , AIG
x sue:
b. Budget Recommendation
• On or before the first Monday in September preceding each budget term, the City
Manager shall file with the City Clerk a proposed budget for the ensuing. budget term
along with an explanatory message. The proposed budget shall provide a complete
financial plan for each fund of the City and shall include appropriate financial statements
for each type of fund showing comparative figures for the last completed fiscal year,
comparative figures for the current year, and the City Manager's recommendations for
the ensuing budget term.
c. Public Record, Hearing
The City Manager's proposed budgets) shall be a public record and UjA ;� open
to the public for inspection and copying. The City Council shall, within ten (10) days
after the filing of the proposed budget* set a time for a public hearing. At the hearing,
the public may comment upon the proposed budget plan.
d. Adoption of Budget and Appropriation of Funds
After the public hearing and before the last day of November preceding the budget term,
the Council shall adopt the budget, by ordinance, for the ensuing term. Before the last
day of November of each fiscal year, the Council shall appropriate such sums of money
as it deems necessary to defray all expenditures of the City during the ensuing fiscal
year. The appropriation of funds shall be accomplished by passage of the annual
appropriation ordinance. The appropriation of funds shall be based upon the budget as
. approved by the Council but need not be itemized further than by fund with the
exception of capital projects and federal or state grants, which shall be summarized by
individual project or grant.
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1.3. CHANGES TO ADOPTED BUDGET
After the commencement of the fiscal year, the amounts a ro riated for the proposed
expenditures in the adopted budget are fj iRepealable and are
deemed ffiffif
M appropriated for the purposes specified. The expenditures of City
operating funds cannot exceed the budgeted appropriations for their respective fund. In
certain cases, however, adopted budgets may be increased, decreased, or amounts
transferred between funds.
a. Budget Increases
1. Supplemental Appropriations--The Council, upon recommendation by the City
Manager, may make supplemental appropriations from actual revequeseceived,
arid-anticipated revenues and prior year reserves provided that the total amount of
the supplemental appropriation plus previous appropriations for the fiscal year does
not exceed the actual or anticipated revenue total or the available reserve balance.
No appropriation can be made which exceeds the revenues, reserves, or other funds
anticipated or available except for emergencies due to accident or unforeseen event
arising after the adoption of the annual appropriation.
2. Unanticipated Revenue--If a fund receives revenue during the fiscal year from a
source that was not anticipated at the time of budget adoption such as grants, bond
issue or implementation of a new fee, Council may appropriate such revenue for
expenditure.
3. Encumbrance Carryover--If a fund has open aal purchase orders at the end of
a fiscal year, those related appropriations are encumbered and carried over to the
ensuing fiscal year and added to the budgeted appropriations to cover the actual
expense when it occurs.
b. Budget Decreases
The budget may also be decreased below adopted appropriations during the fiscal year.
Changes in service demand, economic conditions, projected growth limits, and Council
goals and direction may cause such budget reductions. Each service area is
responsible for developing a plan to reduce appropriations. Each plan must be in place
and ready for implementation should the need arise. If the City Manager directs budget
reductions, Council will be informed immediately and the appropriations will be set aside
through administrative action. While this
g administrative action does not lower the
a ro riations within a fund expenditures fom tf furic� shal��'�otWezceed 111 amount
reco"°r m d by the Gity,tvjanager; aF8 ffeueated. If the circumstances leading to the
implementation of reductions change, the appropriations may be made available for
expenditure.
c. Level of Control and Budget Transfers
1. Control of expenditures is exercised at the fund level. Fund managers are
responsible for all expenditures made against appropriations within their fund and
can allocate available resources within the fund.
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2. During the fiscal year, the Council may by ordinance and upon the recommendation
of the City Manager, transfer any unexpended and unencumbered appropriated
amount from one fund or capital project account to another fund or capital project
account, provided that:
a) the purpose for which the transferred funds are to be spent remains unchanged;
b) the purpose for which the funds were initially appropriated no longer exists; or
c) the transfer is from a fund or capital project account in which the amount
appropriated exceeds the amount needed to accomplish the purpose specified
by the appropriation.
1.4. LAPSED APPROPRIATIONS
All appropriations not spent or unencumbered at the end of the fiscal year lapse into the
fund balance applicable to the specific fund, except for:
a. Capital Projects - appropriations for capital projects which do not lapse until the project
is completed and closed out; and
b. Grant Funds - appropriations for federal or state grants which do not lapse until the
expiration of the grant.
. Council can terminate a capital project or a federal or state grant at any time prior to
completion of the project or expiration of the grant.
1.5. BUDGET PHILOSOPHY
a. Philosophy
The City of Fort Collins is committed to presenting a sound financial plan for operations
and capital improvements within growth limit guidelines. To gch1@y@ this end, the City
utilizes conservative growth and revenue forecasts and:
• Prepares multi-year financial plans for operations and capital improvements;
• Allows staff to manage the operating and capital budgets, with City Council deciding
allocations in both;
• Adopts financial management policies which establish guidelines for multi-year
financial plans;
• Establishes budgets for all funds based on adopted policies;
• Appropriates the budget in accordance with the City Charter and State Constitution;
• Adjusts the budget to reflect changes in the local economy, changes in priorities, and
receipt of unbudgeted revenues;
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• Organizes the budget so that revenues are related to expenditures as much as
possible;
• Provides department managers with immediate access to revenue and ,expenditure
information for controlling their annual expenditures against appropriations;
• Utilizes a performance measurement system for all activities in the City;
• Evaluates recommendations which have a budget impact in light of annual
appropriations and multi-year financial plans.
b. Budget Preparation
While the Charter establishes time limits and the essential content of the City Manager's
proposed budget and the adoption of the budget, the language is silent on the budget
preparation process.
The City's Financial and Management Policies guide the preparation of the budget. A
Budget Issues Team composed of the City Manager, Deputy City Manager, and the
Budget Director develops the guidelines, consistent with the Policies, to be used for
budget preparation. During the development of the budget, various department and
division representatives are called on to provide their expertise to the Budget Issues
Team. In addition, the City Council, , and the Executive
Lead Team provide guidance during preparation.
In March, programs develop multi-year revenue projections and submit them to the
Budget Office. Based upon the revenue projections, guided by the mandated revenue
and expenditure limitations, the Budget Office prepares target budgets for each of the
service programs. All of the budget preparation information, including target budgets,
are included in a Budget Manual that guides the programs in developing their budgets.
In April and May, Council study sessions are held. At these sessions, Council has the
opportunity to provide direction for development of the proposed budget for the ensuing
budget term.
In early June, program budgets are due into the Budget Office. All programs must stay
within their target budgets. Budget issues are identified and the target budgets may be
adjusted, within available revenue, to address the identified issues. The City Manager's
budget recommendation is submitted to City Council before the first Monday in
September. The recommended budget is made available for public inspection at this
time. In September, a recommended budget-in-brief is published in the local newspaper
for public information. In addition, two public hearings and three Council study sessions
are held in September and October. The budget for the ensuing budget term is adopted
in November.
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1.6 PRINCIPLES FOR BUDGET PLANNING
The City provides a wide variety of services to the residents of the community. It is the
responsibility of City Council to adopt a budget and manage the available resources to
best meet the service needs for the overall good of the community.
To aid in planning for the allocation of resources to meet the good of the whole
community, Council adopted Reselutien 99 46, 1at8F FeplaGed by Resolution 2001-161,
that set forth the Principles for Budget Planning. Those Principles as adopted by Council
are as follows.
a. The City should strive to attain the lowest possible interest rates on debt in order to
minimize the cost to taxpayers and users of City services.
b. The City should maintain adequate reserve levels to ensure minimal loss of service
to the community should there be unforeseen reductions in revenues or a
catastrophic occurrence.
c. Employees of the City are a valuable resource in providing services to the
community, and a compensation policy should be maintained for City employees that
reflects the value of attracting and retaining quality employees.
d. Primary services are those services that are necessary for the good of the entire
community. They are basic to the safety, health, and welfare of the community, and
the allocation of all resources necessary for the provision of primary services is the
first priority in budget preparation. Primary services are:
Police Water Wastewater
Fire Transportation Stormwater
Building Inspection Electric Natural Resources
Development Review Engineering Facilities Maintenance
Affordable Housing Pedestrian Access (all public facilities
including parks)
e. Secondary services are those services that enhance the quality of life of the
residents and to many, increase the value of living and working in the community.
While the value of secondary services is recognized, the allocation of resources to
those services shall be considered only after the necessary allocation has been
made to fund primary services. Secondary services are:
Recreation Neighborhood Resources Performing Arts
Human Rights Library Cemeteries
Golf Human Services Contract Airport
Parks Natural Areas Museum
f. Support services provide the management, guidelines, and operational assistance to
carry out the provision of primary and secondary services. Resources should be
• allocated to support services to support the level and quality of primary and
secondary services expected and desired by the community. Support services are:
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General Administration Finance Legal
Budget Human Resources City Clerk
Clerical Support Fleet Management
Information Technology Geographic Information Systems
g. No new services, other than those identified as primary services, shall be undertaken
by the City until all existing primary, secondary, and support services have received
a sufficient level of funding to meet the needs of the community.
h. Any adjustment to the existing budget shall take into account the effect that such
adjustment would have on future budget resources.
REVENUE POLICIES
2.1. REVENUE LIMITATION
In 1992, voters approved an amendment to the Colorado Constitution that places limits
on revenue and expenditures of the State and all local governments. Even though the
limit is placed on both revenue and expenditures, the constitutional amendment in reality
applies to a limit on revenue collections. Growth in revenue is limited to the increase in
the Denver-Boulder'' Consumer Price Index plus local growth (new construction
and annexation). This percentage is added to the preceding year's revenue base, giving
the dollar limit allowed for revenue collection in the ensuing year. Any revenue collected
over the limit must be refunded to the citizens. The City has the option of placing a
ballot measure before the voters asking for approval on retaining the revenue over the
limit. Federal grants or gifts to the City are not included in the revenue limit. City
"enterprises" (electric, water, wastewater and stormwater utilities are exempt from the
�....
imposed limits.
In November 1997, Fort Collins' voters approved a ballot measure that allows the City to
retain revenues that exceed the growth limit imposed by Article X, Section 20. The
measure was effective for 1996 and ensuing years. The approved measure specified
that any retained revenues over the growth limit must be used for certain designated
purposes.
• Public health and safety (including, but not limited to, environmental monitoring and
mitigation)
• Transportation
• Growth management
• Maintenance and repair of public facilities
yY!]Il6 Nnot J w part of the approved ballot measure] bkA legally 6jwpJQ§
required is that QZa revenues collected in excess of the growth limit from fees charged
or other legally restricted revenues, must be used for the purpose for which they were
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collected. In addition, these IN revenues must also be used for the designated
purposes approved by the voters.
2.2 REVENUE REVIEW, DIVERSITY, AND MONITORING
a. Review and Protections. The City reviews estimated revenue and fee schedules as
part of the budget process. Major revenue sources in the general fund are sales & use
tax, property tax, lodging tax, intergovernmental revenues, fines & forfeitures, user fees
& charges, and transfers from other funds. Conservative revenue projections are made
for the budget term. The projections are monitored and updated as necessary.
b. Diversity. For all general government operations, the City will strive to maintain diverse
revenue sources. The City recognizes that becoming too dependent upon one revenue
source would make revenue yields more vulnerable to economic cycles.
c. Targets. The City's major source of revenue for governmental activities and more
specifically for programs within the General Fund is the Sales and Use Tax. The City
will monitor the dependency on sales and use tax by tracking the percentage of the
General Fund and General Government that comes from sales and use tax. Over the
past five years, 1888-1884 , the percentage of General Government Total
Revenue from sales and use tax (the 2.25% portion not dedicated for specific uses by
the voters) has been approximately 36%. The target for this percentage shall be 40%.
For the General Fund, the percentage has been approximately 60%. When the
Comprehensive Annual Financial Report is completed each year, the Finance
Department will monitor these two percentages and report the results to Council. For
the General Fund the target shall be 60%.
d. Monitoring. The percentages will be monitored each year with the preparation of the
annual financial report. Preliminary estimates of the percentages should be available in
April and be incorporated into the budget process. The percentages will be reviewed by
the Council Finance Committee and subsequently, the full Council.
e. Policy Action. In the event the percentages exceed the targets, the City Manager will
provide an analysis of the City's revenues to the Council. The City Manager may
propose adjustments to revenue sources other than the sales and use tax (some
examples include user fees, fines & forfeitures, transfers from other funds) to meet the
targets or decrease the trend of increasing dependency on sales and use tax.
Generally, for this policy to be effective, revenues from all other sources will need to
grow at roughly the same rate as the sales and use tax collections.
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2.3. FEE POLICY
As a home rule municipality, the City of Fort Collins has the ability to determine the
extent to which fees should be used to fund City facilities, infrastructure and services.
There are two kinds of fees that the City may establish: impact fees and special service
fees. Impact fees are typically one-time charges levied by the City against new
development to generate revenue for the construction of infrastructure and capital
facilities needed to offset the impacts of the new development. Special service fees are
charges imposed on persons or property that are designed to defray the overall cost of
the particular municipal service for which the fee is imposed. This Policy sets forth
principles for identifying: the kinds of services for which fees could appropriately be
imposed by the City; methods for calculating the percentage of costs to be recovered by
such fees; and the manner in which the fees should be allocated among individual fee
payers.
a. Fees Should Be Cost Related
The amount of a fee should not exceed the overall cost of providing the facility,
infrastructure or service for which the fee is imposed. In calculating that cost, direct and
indirect costs may be included. That is:
1. costs which are directly related to the provision of the service; and,
2. support costs which are more general in nature but provide support for the provision
of the service.
b. Percentage of Cost Recovery
The extent to which the total cost of service should be recovered through fees depends
upon the following factors:
1. The nature of the facilities, infrastructure or services. In the case of fees for facilities,
infrastructure and proprietary services, total cost recovery may be warranted. In the
case of governmental services, it may be appropriate for a substantial portion of the
cost of such services to be borne by the City's taxpayers, rather than the individual
users of such services. Proprietary services are those which are provided for the
benefit and enjoyment of the residents of the City, such as parks and recreation
services. Governmental services are those which are provided by the City for the
public good such as regulating land use, maintaining streets, and providing police
and fire protection.
2. The nature and extent of the benefit to the fee Pavers. When a particular facility or
service results in substantial, immediate and direct benefit to fee payers, a higher
percentage of the cost of providing the facility or service should be recovered by the
fee. When a particular facility or service benefits not only the fee payer but also a
substantial segment of the community, lower cost recovery is warranted.
3. The level of demand for a Particular service. Because the pricing of services can
significantly affect demand, full cost recovery for services is more appropriate when
the market for the services is strong and will support a high level of cost recovery.
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• 4. Ease of collection. In the case of impact fees, which can be collected at the time of
issuance of a building permit, ease of collection is generally not a factor. In the case
of fees for services, however, such fees may prove to be impractical for the City to
utilize if they are too costly to administer.
c. Establishment and Modification of Fees and Charg2s
All fees imposed by the City will be established by the City Council by ordinance. In the
case of impact fees, utility fees and charges, and special service fees assessed against
property the ordinance establishing the fees will determine:
1. the level of cost that should be recovered through the fees according to the criteria
established in this Policy;
2. an appropriate method for apportioning the cost of providing each service among the
users of the service; and,
3. a procedure for periodically reviewing and modifying the amount of fees in order to
maintain appropriate cost recovery levels.
The amounts of these kinds of fees may be modified only by ordinance of the City
Council.
The amounts of other kinds of special service fees, such as user fees charged for the
use of City recreational and cultural facilities, may be determined by the City Manager,
according to criteria established_ b4 the City Council by ordinance, absent any provision
of the City Charter or Code fQt<tl3,gAp1[a.(y.
All fee revenues will be estimated by the City Manager and submitted to the City Council
as part of the City Manager's recommended budget.
d. Rebate Proarams
If the amount of a particular fee is considered to be too high to accommodate the needs
of particular segments of the community and the public interest would be served by
adjusting the amount or manner of payment of such fees in particular instances, the
amount of the fee may be waived, rebated, or deferred as appropriate. In the case of
fees established by ordinance, the criteria for waiving, rebating, or deferring payment of
such fees shall be established by the City Council by ordinance.
2.4. SALES AND USE TAX DISTRIBUTION
The City's Sales and Use Tax totals 3.00 cents, developed as follows:
1968 - General City uses 1.00
1980 - General City uses 1.00
1982 - General City uses .25
1998 - Natural Areas, Trails & Parks .25*
1998 - Street Maintenance &Transportation .25*
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1998 - Capital Choices .25`
3.00
'Excluding sales of grocery food.
Revenue generated by the Sales and Use Tax will be distributed, based on adopted
budgets, in the following manner:
TAX ON ALL SALES & USES: 2.25 cents
• Fixed Dollar Amounts
Annual Debt Service
Sales & Use Tax Debt Service Reserves
Street Oversizing
• General Fund
Adctual Sales and Use Tax revenue generated by the 2.25
cent tax in excess of the fixed dollar amounts listed above, will be transferred to the
General Fund.
Actual sales and use tax revenue generated by the 0.25 cent tax for Natural Areas,
Trails and Parks will be transferred to, and be retained in the Capital Projects Fund
to be used for acquisition, construction, enhancement
and maintenance of natural areas, open lands, and trails; a community horticulture
center, Fossil Creek community park construction; community park improvements; and
regional trails.
Actual sales and use tax revenue generated by the 0.25 cent tax for Street Maintenance
and Transportation will be transferred to, and retained in the Capital Projects Fund 61
"., d6 to be used for the street maintenance and overlays,
annual pedestrian improvements, phases I and II of the Mason Street Transportation
Corridor, and phase I of the North College Avenue corridor improvements.
Actual sales and use tax revenue generated by the 0.25 cent tax for Choices Capital
projects will be transferred to, and be retained in the Capital Projects Fund to be used for
street/transportation projects and other community capital projects, identified during the
Building Community Choices process, approved by the voters.
2.5. PRIVATE CONTRIBUTIONS
The City encourages the solicitation of private contributions. These services and
programs represent - �» "are extFa"Ythat the City has p been able to provide
to residents g — In times of revenue constraints the City
may not be able to provide the same level of service without additional support.
Therefore, efforts should be made to secure private contributions in support of these
programs and services, as these contributions are an integral part of their successful
operation. With respect to Article X, Section 20 of the State Constitution, the City will
make a determination as to whether a contribution is a gift and is therefore excluded
from constitutional limits.
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GENERAL POLICIES
3.1. ADMINISTRATIVE CHARGES
The Charter states that expenses for departments rendering services to other
departments shall be equitably apportioned. For Enterprise, Internal, and Special
Revenue Funds, direct charges are made to the funds receiving services when they are
rendered. Certain departments within the General Fund provide services to all funds
and do not have a direct billing mechanism. For these General Fund departments, a
cost allocation formula has been developed to apportion costs to other funds and
provide offsetting revenue to the General Fund.
a. General Fund Departmental Costs to be Allocated
Departmental costs to be allocated include City Council, City Manager, City Clerk, City
Attorney, Human Resources, Finance, and Information
GenmuaisatieR Systems j4GS} Any services in these departments which are funded by
user fees or dedicated revenues are excluded from the allocation.
The amount to be allocated is the current adopted budget for each of the departments to
be allocated. With a multi-year budget, the charge to each fund is increased by a
determined percentage for the second future year and then adjusted to the actual
calculation with the next multi-year budget.
b. How Costs Are Allocated
1. The Human Resources costs are allocated to funds based on the total number of
budgeted full-time-equivalent positions in each fund.
2. The administrative costs for tGS- IT are divided into the cost for each service and
then allocated to each fund. Each service is allocated using an appropriate
allocation method.
3. All other General Fund administrative costs are allocated to the funds based upon
adjusted budgets for the current year. Adjustments are made to recognize the lower
amount of administrative services required for Capital, Debt Service, and Purchased
Power payments. Capital project budgets are reduced by two-thirds and averaged
over three years. Debt Service budgets are reduced by three-fourths and the entire
Purchased Power budget is deducted from the Light & Power budget.
c. All Funds Receive Allocations but Not All Funds Are Charged
While Administrative Charges are allocated among all City funds, only specified funds
are charged. Charges are not made to a fund if it is not self-supporting, it is an Internal
Service fund, or if the funds role is merely to facilitate proper accounting procedures.
For example, the Sales and Use Tax fund and Debt Service fund receive amounts which
are then transferred to other funds. Charging these funds would lead to double charging
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many transactions and would not correspond to the level of service provided by the
departments in the General Fund.
d. Review
During each budget process, the Administrative Charge calculation will be reviewed.
Further refinements in the allocation formulas will be made as needed to assure that the
equitable apportionment requirement of the Charter is met.
3.2. PAYMENT IN LIEU OF TAXES (PILOT)
In accordance with the City Charter regarding municipality rates and finances, the water,
wastewater, and electric utilities "pay into the General Fund in lieu of taxes on account of
the city-owned utilities such amount as may be established by the Council by ordinance".
The established PILOT rate is based on the amount of taxes that would be levied if the
utility were privately owned.
The PILOT rate, as established by Council is 6% for the Water and Wastewater Funds
and for the Light and Power Fund. This rate is applied to the operating revenues per
year for each fund.
3.3. LEASE-PURCHASE
The City of Fort Collins uses lease-purchase financing for the provision of new and
replacement equipment, vehicles and rolling stock in order to ensure the timely
replacement of equipment and vehicles. This method may also be used to acquire real
property. Members of management staff have developed an equipment needs schedule
for rolling stock which encompasses the demands of operating departments. This
schedule is used to project equipment needs for each budget term.
The City leases the asset in installments according to a fixed payment schedule. Each
installment includes principal and interest and the City builds equity and assumes risk in
the asset over the term of the lease. The annual installments are appropriated by the
Council each year.
Advantages of lease-purchase financing over the traditional cash method of financing
are:
• Decreasing the impact of inflation on the purchase of new and replacement
equipment.
• Resolving the problem of a capital replacement needs backlog.
• Conserving operating reserves.
• Reducing the initial impact of the cost to user departments by enabling acquisition
costs to be spread over the useful life of the equipment.
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• Safeguarding the opportunity to use cash assets to earn higher interest than the
interest cost of lease-purchasing.
It should be noted that the City is able to discontinue the equipment leases at its
discretion so that future City Councils will have the option to continue or discontinue the
policy of lease-purchasing City equipment.
According to State of Colorado House Bill 90-1164, local governments are required to
identify as part of their budgets: 1) the total expenditures during the ensuing fiscal year
for all lease purchase agreements involving real and personal property; 2) the total
maximum payment liability under all lease purchase agreements over the entire term of
the agreements, including all optional renewal terms.
We FOGGgRiZO that the State does not include lease purchase in the legal definition of
debt, however rating agencies include lease purchase financing in calculating the City's
debt burden.
3.4 HUMAN RESOURCE MANAGEMENT AND PRODUCTIVITY
The City of Fort Collins' goal as an employer is to attract and retain quality employees in
recognition of their essential contribution in providing services to the citizens of Fort
Collins. As a provider of services in the community, the experience, commitment and
talent of our employees is critical to the quality and value of City services.
The City has two financial policies which address the human resource component of its
cost of providing services:
a. Employee Compensation Policy
In order to attract and retain quality employees and also to recognize and reward quality
performance, the City has established a system which guides the compensation of its
employees. The objective of the compensation policy is to pay employees fairly,
competitively and in a way that is understandable to the community and the
organization.
1. For all classified employees and unclassified management of the City, compensation
will be established through a total compensation methodology. Total compensation is
defined as the sum of the salary paid and the City's cost for benefits. This method
will use annual surveys of the relevant labor market. The labor market is defined as
employers and jurisdictions that closely approximate the size and labor force of the
City of Fort Collins. This market will primarily consist of Front Range communities,
but may also include the state of Colorado or regional data as required.
Salaries plus benefits will be calculated at the 70th percentile by taking the maximum
of comparable market data and establishing a total compensation point wherein 30%
of the salaries plus benefits are higher and 70% of the salaries plus benefits are
lower than the City's total compensation point.
. 2. This policy shall be supported by annual market data for benchmark positions. The
Council Finance committee and the Personnel Board will conduct an annual review
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of the survey methodology and data to ensure that the intent of this policy is being
met.
3. Hourly, temporary or contractual employee compensation rates will be set according
to the prevailing market rate for that type of position within the Northern Colorado
market; the existing pay plan may also be considered for similar positions. These
employees are a valuable resource in the provision of services for the community,
and the City will set those compensation rates in a manner that will attract high
quality employees.
b. City Performance Goals and Measures Policies
The goals of the City of Fort Collins are to provide our citizens with outstanding services.
In doing so, the City will commit to attracting and retaining quality employees and to
recognizing and rewarding their quality performance.
To accomplish these goals, the City will:
1. Maintain staffing at a level that will enable the City to provide the necessary services
in a high quality manner;
2. Provide ongoing assessment of customer satisfaction with the level of services
provided by the City and continuously improve the quality of those services;
3. Develop and maintain a performance review process to establish goals and to
evaluate employee work performance;
4. Assess options to streamline operations by continuing to monitor the cost
effectiveness of additional staffing vs. the cost of adding capital equipment; and
5. Measure the productivity and effectiveness of the City's work force.
3.5. MEDICAL INSURANCE AND RETIREMENT PLAN
a. Medical Insurance
In 1981, the City of Fort Collins set up a partially self-funded medical insurance program.
The objective of a self-funding program is to reduce the cost of medical insurance by
assuming the risk for certain plan expenses. Assuming a portion of the risk lowers the
amount of charges compared to a conventional full insurance plan. For most of the last
4-9 years, the City has found this funding method to be a cost-effective means of
providing a very desirable employee benefit.
To administer the self-funded and insured portions of the medical insurance plans, the
City conducts a competitive proposal process every five years or more often if required.
The insurance contracts are reviewed annually for both performance and cost. During
the annual renewal process, the City negotiates to attain more favorable rates from
insurance providers. The types of services contracted for include plan administrative
services, stop-loss protection against unexpected expenses, life and accidental death
and dismemberment insurance, and long-term disability coverage.
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b. Retirement Proarams
The City of Fort Collins contributes to three types of pension plans, including:
1. Social Security
2. 401(a) Money Purchase Plans for Service Directors, Classified and Unclassified
Management, Police and Fire, and
3. 401(a) Defined Benefit Plans, the General Employees Retirement Plan
These This plans afe is no longer open to new
participants.
For the Social Security program, the City follows the program guidelines of the Social
Security Administration. The Finance Department makes the appropriate employer and
employee contributions with the bi-weekly payroll checks.
The City uses private companies to operate the money purchase plans. For City
employees, the ICMA Retirement Corporation administers the money purchase plans.
For employees of the Poudre Fire Authority, Prudential Management Investment
Services administers the money purchase plan.
The City, through the Finance and Human Resource Departments administers the two
defined benefit plans. In 1998, the General Employees Retirement Plan offered its
members the opportunity to transfer their assets to a money purchase plan. Of over 800
members, 368 members decided to move to the money purchase plan. As of December
31, 1998, $9 million of plan assets were transferred to the plan. The rate of contribution
for the City administered plans is based upon an actuarial valuation to determine each
plan's normal cost and unfunded liability for benefits. The City will maintain contribution
rates at a level sufficient to meet all current normal costs of eaeh pension plan. Should
an unfunded liability be determined for a defined benefit plan, such liability will be
amortized over a period not to exceed twenty years.
In addition to the pension programs, the City offers deferred compensation plans to City
and Poudre Fire Authority employees as an adjunct to the general retirement plan. This
helps the City maintain comparability with benefits provided by other Front Range
communities. Employee participation in the deferred compensation plan is optional.
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The Budget incorporates the following rate requirements to provide funding support for this
retirement program policy:
Social General Money Money Purchase
Security Employee Purchase Management
Normal Costs Contribution Retirement Police Fire & Classified 1.2.s
City Contribution 7.65% 4.63533% 81= 3%-10%
Employee Contribution 7.65% none 8 Old 10% 0%-6%
1) For the City Manager, City Attorney, Municipal Judge, and Services Directors, the City contributes
at a rate of 10% of base salary. There is no employee match required.
2) For Unclassified Management and Department Heads, the City contributes either 3% if the
employee is in GERP or if the employee has the City contribute to the deferred compensation
plan or 7.5% if the employee has opted out of the GERP and does not have the City contribute to
the deferred compensation plan. Employees in this category contribute 6%.
3) For classified employees that transferred from the General Employee Retirement Plan in 1998,
the City contributes 7.5%. If the classified employee remains in the GERP, the contribution rate is
3%, and if the employee has the City contribute to the deferred compensation plan, the
contribution rate is 4.5%. Employees contribute either 0% or 3% of their salary.
4) The maximum contribution to a 401 money purchase plan is the lesser of 25% of salary or
$40,000.
The table below shows the contribution rates to the 457 deferred compensation program:
Deferred Compensation
City Contribution 3% to 7.5%
Employee Contribution up to 25% of salary,
not to exceed a total of$12,000
3.6. FACILITY MAINTENANCE AND REPAIRS
a. Maintenance. Repair& Replacement(M&R)
1. MAINTENANCE - The upkeep of building systems to realize their anticipated useful
life. Includes periodic actions to assure continued service, operational efficiency, or
to prevent breakdowns. (i.e., changing filters and belts on HVAC equipment.)
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• 2. REPAIR/REPLACEMENT - Actions needed to restore building systems/components
to a functional condition. Performed when systems/components have reached their
useful life; become obsolete; pre-maturely worn out; or have failed (i.e., roof
replacement).
b. Priorities for Maintenance and Repair Funding
1. Life, health, and safety (i.e., heating system repair)
2. Repair/Restoration
3. Protect Capital Investment (Preventive)
These priorities are used as the basis for funding recommendations in the budget
process.
c. Funding Policy/Target
The City of Fort Collins recognizes the need to maintain City buildings to adequately
support provision of services to its residents. The ongoing funding target for M&R of
General Government facilities is 4% of Current Replacement Value (CRV) of the
facilities.
• 3.7. POUDRE FIRE AUTHORITY - REVENUE ALLOCATION FORMULA
In December of 1981, the City and the Poudre Valley Fire Protection District created the
Poudre Fire Authority (PFA) through an intergovernmental agreement. The PFA
provides fire protection services to Fort Collins and the surrounding area. The
agreement specifies a Revenue Allocation Formula (RAF) for defining the City's
contribution to the PFA for operations and maintenance. For PFA's operating costs, the
City shares property tax and sales and use tax collections. In addition to operating
costs, the agreement further provides authorization for the PFA to request funds for
capital costs pursuant to the procedures set by the City and District. PFA's capital needs
include land acquisition, construction of additional stations, and acquisition of major fire
fighting apparatus. The RAF has served as the Poudre Fire Authority's funding
mechanism from 1981 through the 1993 budget. Passage of Amendment No. 1 (on
November 3, 1992), a revenue and spending limitation to the state constitution, requires
review and revision of the Revenue Allocation Formula. In its original form, the Revenue
Allocation Formula allowed the PFA to realize the full extent of growth in sales and use
tax and property tax collections. Article X, Section 20 of the State Constitution now
limits the rate of growth to a combination of the Denver-Boulder Consumer Price Index
and additions to the local property tax base primarily due to construction and annexation.
Accordingly, the Revenue Allocation Formula for the City's contribution to the PFA has
been restructured to fit within the constraints of Article X, Section 20.
The City will continue its current policy of funding PFA capital needs by dedicating one
mill of the City's total mill levy. The revenue from the dedicated mill will be managed
according to the property tax mill levy and revenue limitation provisions of Article X,
Section 20. The City's contribution to PFA for operation and maintenance will be
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calculated by the Revenue Allocation Formula. The Revenue Allocation Formula
allocates to PFA 67.09% of the property tax mills available for operations and 0.303 of
one cent of the City's 2.25 cent sales and use tax applicable to all taxable sales and
uses. The resulting contribution for operations and maintenance will then be compared
to the constitutional growth limits. The City's operation and maintenance contribution to
PFA will be the lesser of the contribution as determined by the Revenue Allocation
Formula or the allowable contribution in accordance with the limits imposed by Article
X, Section 20 of the State Constitution.
3.8. REBATE PROGRAMS
The City recognizes that certain segments of its population, specifically the disabled and
senior citizens on fixed incomes, may be unable to keep pace with increasing taxes and
utility costs. In an effort to partially offset the cost of property taxes, utility billings and
sales taxes on these segments of its population, the City has established several rebate
programs, as follows:
a. Property Tax and Utility Charae Rebate Proaram
These programs provide financial assistance to disabled residents and senior citizens, in
the form of an annual rebate on property tax and utility charges, who qualify under
residency and income guidelines.
b. Sales Tax Rebate on Food Proaram
the City specifically excluded tax
on the sale of grocery food when enacting three 0.25 cent sales and use tax extensions,
approved by the voters at an April 8, 1997, Municipal Election. The three 0.25 cent
sales and use taxes that went into effect January 1, 1998, are used to fund natural
areas, trails, and parks; street maintenance and transportation projects; and various
other capital improvements proposed in the Building Community Choices program.
In addition to these measures, the City has a Sales Tax Rebate on Food Program. This
program provides for an annual rebate to members of qualifying households on the basis
of residency and income guidelines.
FUND POLICIES
4.1. GENERAL FUND
The General Fund is the largest and most diverse of the City's operating funds. It
includes all resources not legally restricted to specific uses. The major source of
revenue to the General Fund is sales & use tax, which accounts for approximately
tom% of the revenue. Local property tax and Lodging Tax are also included, as are
revenues derived from fees for services and materials, licenses, permits, and fines.
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a. Service Productivity Incentive Policy
This Policy provides incentives for General Fund managers to improve planning and
delivery of services. General Fund managers need a means by which to save unspent
annual appropriations that result from increases in productivity. Without an incentive
policy, managers tend to spend savings on short term needs rather than long-range
service improvement. This policy creates incentives to more closely examine spending
decisions and to consider program related savings before requesting additional General
Fund resources.
Prudent cost-effective service delivery requires long range planning of both costs and
resources necessary to provide the service. This Policy provides a framework within
which managers can develop strategic plans rather than short term, line item cost
approaches. Allowing managers to save and use resources from increased productivity
emphasizes responsibility and accountability for efficient service delivery. It further
allows more flexibility for General Fund managers, similar to the management conditions
of enterprise funds.
b. Policy Structure
This Policy defines savings as unspent department or division level appropriations which
managers have not committed for future years. Committed appropriations include
encumbrances, unspent lease purchase, and any planned reappropriations. The Policy
further requires that the savings result from increased productivity in service delivery.
1. Budget Office staff will adjust department or division savings within a service area for
any over spending by another department or division within the service area.
2. Budget Office staff will determine the department and division annual savings after
the annual financial report is completed.
3. The following criteria guide the use of carry-over savings and appropriations.
a) The City Manager must review and approve requests for use of savings.
b) Increased productivity should generate the savings, rather than decreases in
services.
c) Departments and divisions should use savings for the improvement of future
service delivery.
d) City Council must approve, through an appropriation ordinance, the request
for use of savings.
e) Annual General Fund revenue collections must be equal to or greater than
the projected budget revenue.
The eligible productivity savings shall be separately accounted for in a General Fund
designated reserve account. Requests for the use of accumulated savings from prior
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year(s) held in this reserve can be made by the department or divisions at any time
during the year.
4.2. ENTERPRISE FUNDS
The City has five Enterprise Funds. These are Golf, Light & Power, Wastewater, Storm
Drainage, and Water. The Enterprise Fund classification has been used to account for
various services for which there exists a significant potential for financing through user
charges. Historically, services were accounted for in an Enterprise Fund if financed
more than 50% by user charges (of the five Enterprise Funds, all but the Golf Fund are
also treated as "enterprises" within the meaning of Article X, Section 20 of the State
Constitution). All Enterprise Funds will recover 100% of their costs.
The goal of all enterprise accounts is self-sufficiency. Toward this end, funds that are
not recovering at least 75% of costs shall incrementally adjust their rate structures to
achieve a positive income position. Those operations which cannot achieve a positive
income position within a five year time frame may be accounted for as subsidized
operations and not as Enterprise Funds.
a. Utility Services
The financial policies of the Utilities are administered in accordance with the City
Charter. Each of the four utilities has been established, and is operated as an
"enterprise" as permitted by the City Charter in accordance with Article X, Section 20 of
the Colorado Constitution.
1. Fiscal Responsibility
Per the Charter, the Financial Officer will maintain a standard system of accounting
which shall, at all times, correctly reflect all financial operations of each utility. The
Utilities may keep other sash gpp]@ppprjtal records and data as are generally used
by various segments of the utility industry.
The Financial Officer shall keep accounts of each Utility Fund separate and distinct
from all other accounts of the City. Accounts for the Utilities shall contain
proportionate charges for all services performed by other departments as well as
proportionate credits for all services rendered to other departments.
2. Utility Rates
Utility rates will be based upon the cost of service approach to reflect full distribution
of costs to appropriate rate classes in order to effect equitable sharing of costs.
Rates shall be established and maintained at a level sufficient to maintain positive
net income in each of the utility funds after paying the full cost of operating and
maintaining the utilities and keeping them in good repair and working order. Such
rates shall also be sufficient to enable each utility, where applicable, to meet rate
requirements of City or utility enterprise bond ordinances.
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• b. Electric Utility
The following policies pertain to the electric utility-Light and Power Fund. Since the utility
is debt-free, these policies pertain primarily to maintenance of reserves. The utility shall
be operated:
1. To provide an operating reserve equal to 8% of budgeted operating expenditures,
excluding the cost of purchased power;
2. To provide a future capital improvements reserve in an amount equal to the average
annual cost (excluding debt financing) of the approved five-year capital improvement
plan, considering any changes which, from time to time, may be made in such plan;
3. To provide a purchase power reserve up to approximately 25% of the annual
revenue from the sale of electrical energy. This reserve shall be used to partially off-
set, defer, or mitigate the impact of purchase power cost increases due to factors
such as federal power issues. Significant changes to the 25% level shall be reported
to the Council during the budget process.
4. Priority for the accumulation of reserves shall be as follows: reserves shall first be
accumulated in the operating reserve, second in future capital improvements
reserve, third in the purchase power reserve. In addition, 1% of specified capital
project appropriations shall be reserved and restricted for the City's Art in Public
. Places program. After reserves are funded, any remaining working capital shall be
added to the purchase power reserve.
c. Water Utility
The following policies pertain to the water utility-Water Fund.
1. Pledge of Revenues
The City's general obligation water bonds are general obligations of the City secured
by a covenant to levy taxes to make all bond payments. Thus, they are backed by
the full faith and credit of the City. In addition, the City has pledged revenues from
monthly water charges, plant investment fees, supplemental user fees (collected
pursuant to the Anheuser-Busch Master Agreement—hence "A-B supplemental user
fees"), investment earnings, and all other income derived from the operation of the
Water Fund toward payment of the bonds. The City's practice is to pay general
obligation water bonds from revenues of the water system rather than through
property taxation. The City has pledged the Water Fund revenues indicated above
toward the payment of its water enterprise revenue bonds.
2. Flow of Funds
The City has committed to maintain rates and charges sufficient to generate
sufficient"net revenues"of the water system to pay principal and interest on its water
. revenue bonds and general obligation water bonds. Net revenues include all
revenues referred to above, less operation and maintenance (O&M) expenses. O&M
expenses are those expenses necessary to operate, maintain, and repair the water
21
system, but do not include any allowance for depreciation or capital replacements
and improvements. After all O&M expenses are paid, the remaining net revenue is
pledged to pay the revenue bonds principal, interest, and related costs. After all O&M
and debt services expenses are paid, the City is required to maintain the following
revenue bond accounts:
a) Principal and Interest Reserve - at an amount equal to the accrued principal
and interest on the water revenue bonds;
b) Debt Service Reserve - at an amount specified in the bond ordinances.
Any remaining net revenues of the Water Fund may be used for any lawful
purpose. These are used, in part, to fund major and minor capital improvements
and the following reserves:
a) Operating Reserve—at an amount equal to 5% of the projected operating
revenue for the ensuing year;
b) Water Rights Reserve--at an amount equal to the amount of cash in-lieu-of
water rights payments and raw water surcharges less any expenditures for
acquiring water rights;
c) Art in Public Places Reserve--at an amount equal to 1% of eligible capital
projects whose appropriations exceed $250,000;
d) Capital Reserve--at an amount equal to remaining working capital after all
other reserves are satisfied.
3. Rate Maintenance
The Water Revenue Bond Ordinances require the City to charge and earn sufficient
revenue to produce "net pledged revenues" that are equal to 110% of the actual
annual debt service requirements for all outstanding water revenue bonds plus 100%
of all costs payable to issuers of reserve fund surities. Net pledged revenues are
defined as all revenues of the Water Fund, less O&M expenses.
4. Water Capital Cost Financing
Capital cost will be identified as either:
a) Minor Capital—relatively small capital acquisitions such as vehicles, lab
equipment, or minor improvements; or
b) Capital Projects—major additions, improvements, or expansions to utility
plant.
Financing for minor capital is through water utility revenues. Financing for capital
projects is principally through long-term debt financing.
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d. Wastewater Utility
The following policies pertain to the wastewater utility-Wastewater Fund.
1. Pledge of Revenues
In accordance with the City and Wastewater Enterprise Bond Ordinances
(together the "Bond Ordinances"), the City has pledged revenue from monthly
sewer charges, plant investment fees, A-B supplemental user fees, investment
earnings, and all other income derived from the operation of its wastewater utility
toward the payment of its sewer revenue bonds.
2. Flow of Funds
The first charge against Wastewater Fund revenue is operation and maintenance
(O&M) expenses—those expenses necessary to operate, maintain, and repair the
sewer system. After all O&M expenses have been paid, the remaining net
revenue is pledged to pay the sewer revenue bonds principal, interest, and
related costs. After all O&M and debt services expenses are paid, the City is
required to maintain the following reserve accounts (listed in pledge order):
a) Principal and Interest Reserve--at an amount equal to the accrued principal
and interest on the sewer revenue bonds;
b) Debt Service Reserve--at an amount specified in the bond ordinances;
c) Wastewater Bond Capital Reserve--at an amount equal to 25% of the O&M
expenses budgeted for the fiscal year.
Any remaining net pledged revenues of the Wastewater Fund may be used for
any lawful purpose. These are used, in part, to fund major and minor capital
improvements and the following reserves:
a) Operating Reserve—at an amount equal to 5% of the projected operating
revenue for the ensuing year;
b) Art in Public Places Reserve--at an amount equal to 1% of eligible capital
projects whose appropriations exceed $250,000;
c) Capital Reserve--at an amount equal to remaining working capital after all
other reserves are satisfied.
3. Rate Maintenance
The Bond Ordinances require the City to charge and earn sufficient revenue to
produce "net pledged revenues" that are equal to 115% of the actual annual debt
service requirements for all outstanding bonds plus 100% of all costs payable to
issuers of reserve fund sureties. Net pledged revenues are defined as all
. revenues of the Wastewater Fund indicated above, less O&M expenses.
23
4. Wastewater Capital Cost Financing
Capital cost will be identified as either:
a) Minor Capital—relatively small capital acquisitions such as vehicles, lab
equipment, or minor improvements; or
b) Capital Projects—major additions, improvements, or expansions to utility
plant.
Financing for minor capital is through utility revenues. Financing for capital
projects is principally through long-term debt financing.
e. Stormwater Utility
The following policies pertain to the stormwater utility- Storm Drainage Fund.
1. Pledge of Revenues
In accordance with the City and Storm Drainage Enterprise Bond Ordinances
(together the "Bond Ordinances"), the City has pledged revenue from monthly
charges, stormwater development fees, investment earnings, and all other income
derived from the operation of its stormwater utility toward the payment of its storm
drainage revenue bonds.
2. Flow of Funds
The first charge against Storm Drainage Fund revenue is operation and maintenance
(O&M) expenses-those expenses necessary to operate, maintain, and repair the
storm drainage system. After all O&M expenses have been paid, the remaining net
revenue is pledged to pay the storm drainage revenue bonds principal, interest, and
related costs. After all O&M and debt service expenses are paid, the City is required
to maintain the following reserve accounts (listed in pledge order):
a) Principal and interest reserve-at an amount equal to the accrued principal
and interest on the storm drainage revenue bonds;
b) Debt service reserve-at an amount specified in the bond ordinances.
Any remaining net pledged revenues of the Storm Drainage Fund may be used
for any lawful purpose. These are used, in part, to fund major and minor capital
improvements and the following reserves:
a) Operating Reserve—at an amount equal to 5% of the projected operating
revenue for the ensuing year;
b) Art in Public Places Reserve--at an amount equal to 1% of eligible capital
projects whose appropriations exceed $250,000; and
24
c) Capital Reserve--at an amount equal to remaining working capital after all
other reserves are satisfied.
3. Rate Maintenance
The Bond Ordinances require the City to charge and earn sufficient revenue to
produce "net pledged revenues" that are equal to 125% of the actual annual debt
service requirements for all outstanding bonds. Net pledged revenues are defined as
all revenues of the Storm Drainage Fund indicated above, less O&M expenses.
4. Storm Drainage Capital Cost Financing
Capital cost will be identified as either:
a) Minor Capital--relatively small capital acquisitions such as vehicles,
equipment, or minor improvements; or
b) Capital Projects--major additions, improvements, or expansions to the storm
drainage system.
Financing for minor capital is through utility revenues. Financing for capital
projects is principally through long-term debt financing.
• 4.3. INTERNAL SERVICE FUNDS
Internal Service Funds account for certain support services provided to other funds and
external agencies. By imposing charges to the users of the services, they recover their
costs. The Finance Department may recommend the creation, continuation, or ending
use of an internal service fund based on documented customer needs and financial
benefits. The City now operates few 6W internal service funds. These include the
Benefits Fund, Communications Fund, Equipment Fund, SIUkARS! QO�I�I.sSQ !liiBD�
«a„�, .. �, - ..,
Ad[pttustratlQp �) d, and the Self Insurance Fund.
The Internal Service Funds operate under the following guidelines.
1. Accounting guidelines limit internal service fund charges to the recovery of the cost
of the service, including depreciation, rather than making a profit. Each fund's prior
year financial statements and estimates of future costs form the basis for the
calculation of charges.
2. Fund managers should set charges at a level to avoid adverse financial impacts on
their customers. Fund customers and independent experts review and make
recommendations about the level of charges. The Finance Department coordinates
this analysis.
3. Internal service funds should compete with similar services offered by the private
sector. The City staff will compare rates each year. If not competitive with the private
• sector, the Finance Department will analyze whether the private sector should
provide the service.
25
4. Internal service funds may build up reserves. Customer-approved master plans and
independent third-party actuarial reviews (for the Benefit and Self-Insurance funds)
guide the level of reserves. Fund managers may spend reserves only for their
approved purpose.
5. The City may buy equipment and facilities for the internal service funds through
lease-purchase financing. Management's decision to recommend lease-purchase
financing depends on: 1) cash flow needs 2) budget constraints 3) benefit to cost
analysis and 4) level of reserves.
g. Internal service
funds operate under the same guidelines and constraints as the General Fund and
other governmental funds of the City a�.n dmipiktdAla.,.
4.4. SPECIAL REVENUE AND DEBT SERVICE FUNDS
Special Revenue Funds are used to account for the proceeds of revenue sources which
are restricted by law or administrative action to expenditures for specified purposes. The
Debt Service Fund is used for the payment of principal and interest on long-term debts.
The major source of revenue in the Debt Service Fund is the Sales & Use Tax.
a. Cultural Services & Facilities Fee Policy
The Cultural Services & Facilities Fund shall budget to recover at least 40% of its total
cost in revenue generated through implementing the following policy:
1. Total revenue from fees and charges shall cover a minimum of 55% of Lincoln
Center Operation and Maintenance and Performing and Visual Arts Programming
Budgets. This includes revenues generated at the Lincoln Center from rentals,
equipment, concessions and other miscellaneous sources and all total direct
revenues from the Performing and Visual Arts Programming. A transfer from the
General Fund will make up the difference between total revenue and expenditures.
2. The Cultural Services and Facilities Administration and Museum budgets provide
minimal financial support. These programs are funded primarily by a transfer from
the General Fund.
3. Major capital improvements and renovations will be financed through sources other
than Cultural Services and Facilities Fund.
4. Solicitation of funds through donations, fund-raising events, and non-traditional
sources shall be encouraged by the City staff, Lincoln Center League, the Cultural
Resources Board and the City Council.
Funding collected for any special purpose shall be earmarked for that purpose and
those funds will be processed through the Fort Collins Foundation.
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b. Art in Public Places
On April 18, 1995, Council adopted Ordinance No. 20, 1995, establishing legislation
creating an Art in Public Places (APP) program and guidelines for the City. The purpose
of this program is to encourage and enhance artistic expression and appreciation and to
add value to the community through acquiring, exhibiting and maintaining public art. The
legislation provides a structure for the operation of an Art in Public Places program and
ensures that public art is integrated into City construction projects. The program
provides a funding mechanism for the program and contains guidelines pertaining to the
selection and acquisition of works of art, restrictions on the usage of certain funds
available for the acquisition of art, upkeep and maintenance of public art, and other
areas pertaining to the general administration of the program.
Following is a summary of the guidelines which provide a framework for the
implementation and administration of the City's Art in Public Places program.
1. Program Funding
The APP program's link to funding is the City's Capital Improvements.
a) The program encourages City departments to include artistic and aesthetic
values in all construction projects, including those costing less than $50,000,
and all purchases of personal property that may be located or used in places
open to the public.
b) For eligible projects costing between $50,000 and $250,000, a city selected
artist must be utilized and participate in the design of the project for the
purpose of incorporating works of art into all aspects of the project to the
fullest extent possible within the project budget. Costs incurred by the artist
in providing these services to the City are to be paid from the project budget.
c) Requests for appropriations in excess of $250,000 for eligible projects must
include an amount equal to one percent (1%) of the amount appropriated at
the time of the request. One percent of the amount appropriated will be
earmarked for works of art and subsequently reserved, if not spent, in the
Cultural Services and Facilities Fund, with the exception of eligible
appropriations in the Utility Funds (Light & Power, Water, Wastewater, and
Storm Drainage). Each of the Utility Funds is required to establish their own
accounts and reserves for the APP program to account for the 1%
earmarked for works of art for eligible utility projects.
2. Program Administration
The APP Board, with the assistance of the APP Coordinator, will have the
responsibility of coordinating and making recommendations regarding:
a) acquisition of works of art,
b) process to be used to select works of art and artists,
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11d:71 a works of art selection criteria,
acquisition of donated artwork,
(f.) certain restrictions on the use of restricted program funds, and
(94 i encouraging donations for public art.
Program guidelines also include definitions of art in public places, work of art,
construction project, and APP Coordinator as well as provisions for the
installation of art and contractual agreements between the City and artists or
donors of works of art.
3. Reserves
Art in Public Places Reserve - This reserve is restricted to Art in Public Places
program use. Appropriations from this reserve and subsequent expenditures are
restricted to the acquisition or lease of works of art, the maintenance, repair or
display of works of art, and the expenses of administering the Art in Public
Places program.
The reserve is funded by amounts equal to 1% of eligible requested capital
project appropriations in excess of $250,000, excluding Light & Power, Water,
Wastewater, and Stormwater funds. These funds are required to set up their
own restricted reserve accounts for Art in Public Places.
c. Recreation Fund Fee Policy
The following fee policy for the Recreation Fund was adopted by Resolution 90-132 on
September 4, 1990. The goal of the policy is to provide for a more equitable distribution
of the costs of recreational programs between program users and General Fund tax
dollars.
Costs associated with the Recreation Fund shall be defined as either Program Costs or
Community Good Costs.
1. Program costs are directly associated with the activities and facilities used by the
citizens, and include the following:
a) Activity Costs
1) part time staff
2) materials
3) equipment
4) participant transportation
5) other costs directly associated with conducting activities
b) Facility Operation and Maintenance Costs
1) minor repairs
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• 2) custodial equipment and supplies
3) building utilities
4) specialized items
5) other operations and maintenance costs directly associated with
operating facilities
Fees should cover the cost of the direct program experience and facilities used.
However, fees may be established in accordance with the market value of the
recreational services provided. The fees charged will not exceed the cost of
providing direct services to program users.
2. Community Good costs are those costs that are necessary to provide a program but
are not directly experienced by the user. Such costs include the following:
a) full time recreation staff
b) office operation costs such as telephone and computer charges
c) training costs
d) dues and subscriptions
e) insurance
f) office supplies and equipment
g) other costs not directly experienced by the users
The General Fund shall cover "Community Good" costs. General Fund will also
• cover deficits in programs that cannot recover all their costs through fees.
Generally, these include programs designed for special populations where it is
not feasible to cover the total cost of participation, or programs, like youth sports
where Council policy requires a fee discount. Because costs that are defined as
"Community Good" costs are supported by the General Fund, they are subject to
the same operational guidelines as established for other General Fund budgets.
3. Designated Reserves
Revenues collected by the Recreation Division that exceed expenditures in any
given fiscal year are used to fund designated reserves.
a) Designated for Operations - to be maintained at 7% of the program costs
portion of the fund, excluding one-time capital items and lease purchase
payments. This reserve will only be used to cover revenue shortfalls.
b) Designated for Scholarships - established to pay fees for participants who are
unable to afford full fees for programs; targeted at 3% of the program cost
portion of the fund, but the level of funding is determined by the Recreation
Manager, based on tentative plans for future needs and the availability of net
resources.
c) Designated for Buildings and Improvements - to be used for one-time
improvements and upkeep of recreation facility infrastructure. The reserve
level is determined by the Recreation Manager, based on tentative plans for
• future needs and the availability of net resources.
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d) Designated for Life Cycle/Capital Needs - to be used for one-time
improvements and upkeep of equipment or for one-time purchases over what
was budgeted to maintain safety and improve service delivery. The reserve
level is determined by the Recreation Manager, based on tentative plans for
future needs and the availability of net resources.
e) Designated for Programs-to be used for the start-up of new or the expansion
of existing recreation activities and services which require additional revenue.
RESERVE POLICIES
5.1. POLICY STATEMENT
The accumulation of reserves protects the City from uncontrollable increases in
expenditures or unforeseen reductions in revenues, or a combination of the two. It also
allows for the prudent financing of capital construction and replacement projects.
5.2. TYPES OF RESERVES
The City of Fort Collins maintains reserves that are required by law or contract and that
serve a specific purpose. These types of reserves are considered restricted and are not
available for other uses. Within specific funds, additional reserves may be maintained
according to adopted policies. All expenditures of reserves must be approved by
Council. This may occur during the budget process or throughout the budget year.
a. GENERAL FUND
A top priority goal of the Council is to improve the fiscal health of the City. Revenue
projections are conservative and authorized expenditures are closely monitored. In
stable economic times, the combination of these two strategies leads to revenue
collections higher than actual expenditures. The net revenue is then available to first
fund the Restricted Reserve for Emergencies required under Article X, Section 20 of the
State Constitution and then the designated reserves. Year-end balances in the
designated reserves may be used as a funding source in the next budget term. The
General Fund reserves are funded from net revenues to maintain them at appropriate
levels.
1. Restricted Reserves
a) Restricted for Emergencies - this reserve is required under Article X, Section
20 of the State Constitution. Therefore the use of this reserve is restricted to
the purpose for which it was established. This reserve can be used for
declared emergencies only. In 1993, one percent or more of the City's fiscal
year spending, less bonded debt service, was reserved, with two percent
required in 1994, and three percent for all later years.
All City Funds, excluding the Utility Funds, are required to maintain a
Restricted Reserve for Emergencies. For ease in accounting for these
reserves, each fund will contribute the required percentage into the General
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Fund to be held in the General Fund Reserve for Emergencies. The General
Fund required percentage will be funded from the existing Designated
Reserve for Financial Uncertainty.
b) Restricted for Affordable Housing - this reserve is restricted to affordable
housing use. City Council may appropriate funds for affordable housing
purposes. Funds appropriated for the promotion of affordable housing and
not expended during the year shall lapse to the Affordable Housing Reserve.
Any appropriation from this reserve shall be restricted for the purpose of
affordable housing.
2. Designated Reserves
a) Designated for Financial Uncertainty - this reserve is maintained in the
General Fund and is designed to provide orderly adjustment to unforeseen
reductions in revenues in the current year if budgeted revenues are less than
actual revenues and expenditures, including encumbrances, are greater than
actual revenues. The minimum amount of money to be held in this reserve
should be approximately 3.5% of approved General Fund operating
expenditures.
If revenue shortfalls are measurable during the current budget year, the
Charter allows use of monies from this reserve to cover authorized
expenditures. Similarly, Charter authorized adjustments may be made as
part of the year-end closeout if additional monies are needed to cover
authorized expenditures. The City Manager will notify the City Council when
draws are made from this reserve.
b) Designated for Equipment Replacement Loans - this reserve provides a
revolving loan pool for the timely replacement of operating equipment
(vehicles, machinery, and computer equipment). Operating managers may
borrow from this loan pool to "bridge" the period of time when the equipment
is needed and the next available lease/purchase package. Typically,
lease/purchase packages are assembled and presented to Council twice a
year. At that time, the principal amount of any loan from this reserve will be
repaid, plus interest at the prevailing rate.
c) Designated for Productivity Savings - this reserve provides General Fund
managers the flexibility of long-range service planning through the use of
accumulated savings from increased productivity in service delivery. The
eligible productivity savings held in this reserve are separately accounted for
by the department or division that generated the savings.
Requests for the use of accumulated prior year(s) savings can be made to
the City Manager at any time during the year. City Council must approve,
through an appropriation ordinance, the use of the savings.
d) Designated for Contingencies - this reserve provides for the temporary
financing of unforeseen opportunities or needs of an emergency nature
including increases in service delivery costs. Monies held in this reserve may
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be appropriated during the current budget year and may also be used for the
ensuing budget years as a revenue source if projected expenditures needed
to maintain appropriate levels of service exceed projected revenues. Of all
General Fund reserves, this is the most flexible. The amount of money to be
held in this reserve should not exceed 10% of the approved General Fund
operating expenditures.
The combined total of the designated reserves should not exceed 20% of the
approved General Fund operating expenditures. (NOTE: this
recommendation is the high end of a range for year-end reserves from the
State of Colorado financial handbook for local governments.) The target is
15%. This does not include the reserve Designated for Productivity Savings.
b. Other Funds
1. Operating Reserves - operating reserves are held in Enterprise, Internal Service, and
some Special Revenue Funds. There are two types of Operating Reserves:
a) An appropriated contingency which provides for unexpected or unanticipated
expenditures during the year. It is typically budgeted at an amount equal to
2% of the annual operating budget by fund, but may be a fixed amount
depending upon available funds.
b) Revenue reserve of working capital is established to provide for unforeseen
revenue losses. If something happens to the economy, there is flexibility
without worrying that current expenditures will exceed the total revenue
available. The revenue reserve is calculated at an amount equal to 2% of
projected annual operating revenue by fund. This revenue reserve is not
appropriated as part of the annual budget, but may be utilized at the end of
the fiscal year, if necessary.
2. Capital Reserves - Capital reserves are established in order to provide for normal
replacement of existing capital plant and additional capital improvements financed on
a pay-as-you-go basis. Debt financed capital improvements are, by definition,
financed by proceeds of bond issues and do not require capital reserves. The
amount of the reserve is determined by averaging the dollar value of capital needs
as shown in the Capital Improvement Program.
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• A second type of capital reserve is appropriated capital contingency, typically 5% of
the amount annually appropriated for capital construction, which provides for the
conceptual study and preliminary design of unanticipated capital improvements.
3. Debt Reserves - Debt reserves are established to protect bond holders from
payment defaults. Adequate debt reserves are essential in maintaining good bond
ratings and the marketability of bonds.
The amount of debt reserves are established by bond ordinance in association with
each bond issuance.
The City Council may establish, upon recommendation of the Financial Officer,
supplemental Debt Service reserves in addition to those expressly required by Bond
Ordinance. Such reserves shall not be deemed to confer any rights upon
Bondholders over and above those set forth in the Bond Ordinance for each bond
issue.
CAPITAL IMPROVEMENT FUNDS
6.1. CITIZEN PARTICIPATION
The City has a significant investment in its streets, public facilities, parks, natural areas
. and other capital improvements. In past years, the City Council and the residents of Fort
Collins, through their actions, have demonstrated a firm commitment to, and investment
in, the City capital projects. The importance of community involvement in the process of
evaluating capital projects dates back to the 1970's. Over the years, citizen committees
have been involved in planning for capital projects, such as the Designing Tomorrow
Today (DT2) capital plan, Re-Evaluation of Capital Projects (RECAP) plan, and most
recently, the Choices 95 capital improvement plan. This tradition has continued with the
Building Community Choices capital improvement plan which went into effect on January
1, 1998.
The residents of Fort Collins on April 8, 1997, approved the extension of three 0.25 cent
sales and use taxes (excluding grocery food), packaged as the Building Community
Choices capital plan, to finance 1) natural areas, trails and various parks projects; 2)
street maintenance and transportation projects; 3) a variety of community enhancement
projects. These three sales and use tax extensions are effective January 1, 1998, and
expire on December 31, 2005.
6.2. CAPITAL IMPROVEMENT POLICY
The City will continue to operate under its existing Capital Improvement Policy:
1. The City will develop a multi-year plan for capital improvements and update it
annually;
• 2. The City will identify estimated costs and funding sources for each capital project
requested before it is submitted to City Council;
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3. All City capital improvements projects will be administered in accordance with the
Capital Projects Procedures Manual;
4. All City capital improvements will be constructed and expenditures incurred for the
purpose as approved by City Council;
5. The City will use a variety of different sources to fund capital projects, with an
emphasis on the"pay-as-you-go" philosophy;
6. Funding for operating and maintenance costs for approved capital projects must be
identified at the time projects are approved.
6.3. CAPITAL IMPROVEMENT PROGRAM
The City's Capital Improvement Program includes General City Capital, 1/4 Cent
Community Choices, 1/4 Cent Natural Areas and Parks, 1/4 Cent Street Maintenance
and Transportation, Capital Expansion, Conservation Trust, Neighborhood Parkland,
and Utility Capital.
a. General City Capital
General City Capital includes minor street repair projects, concrete sidewalk repair
projects, construction and improvements to pedestrian access ramps, repair and
maintenance of public facilities, funding for land acquisition and implementation of the
City's Civic Activity Center Plan and the General Government Services Strategic Facility
Plan, and other miscellaneous projects.
b. 114 Cent Community Choices
1/4 Cent Capital Choices projects were approved by the voters of Fort Collins, at a
municipal election on April 8, 1997. The voters approved the extension of a 1/4 cent
sales and use tax, from which the proceeds would be dedicated to finance a variety of
community projects. Projects include improvements to Prospect Road, Taft Hill Road
and Shields Street; improvements to a Northeast Truck Route; construction of a new
Northside Aztlan Center, City/School District community projects; an addition to the
EPIC ice arena; library technology enhancements; and land acquisition for future
building including a library, a performing arts center and police building.
c. 1/4 Cent Natural Areas. Trails. and Parks
1/4 Cent Natural Areas, Trails, and Parks projects were approved by the voters of Fort
Collins, at a municipal election on April 8, 1997. The voters approved the extension of a
1/4 cent sales and use tax, from which the proceeds would be dedicated to finance
natural areas, parks, and trails projects. Projects include the acquisition, construction,
enhancement, and maintenance of natural areas, open lands, and trails; a community
horticulture center; construction of Fossil Creek Community Park; improvements to
community parks; and a regional trail system.
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d. 1/4 Cent Street Maintenance and Transportation
1/4 Cent Street Maintenance and Transportation projects were approved by the voters of
Fort Collins, at a municipal election on April 8, 1997. The voters approved the extension
of a 1/4 cent sales and use tax, from which the proceeds would be dedicated to finance
street maintenance and transportation projects. Projects include the Pavement
Management Program (street maintenance and overlay project); expansion of the
annual sidewalk program; Mason Street Transportation Corridor, Phase I and II; and
North College Corridor Improvements, Phase 1.
General City Capital and the three dedicated 1/4 cent sales and use taxes are a part of
the City's Capital Projects Fund.
e. Caoltal Expansion
The Capital Expansion Fund provides for growth related capital improvements for
Library, Community Parkland, Police Services, Fire Services, and General
Governmental Facilities Services. Revenues from the capital expansion fees are a form
of development fee imposed on new development. The purpose of the fees is to ensure
that future growth and new development contribute its proportionate share of providing
capital improvements associated with such growth.
f. Utility Capital Improvements
Utility Capital Projects, specifically Light & Power, Stormwater, Wastewater and Water
are budgeted within the appropriate enterprise fund. Sources of funding for utility capital
projects are bond proceeds and specific fees and charges. Examples of projects include
undergrounding of overhead electrical lines, improvements to water and wastewater
systems, and basin improvements associated with the City's storm drainage system.
g. Conservation Trust Protects:
The Conservation Trust Fund provides for the receipt and expenditure of revenue
received from the Colorado State Lottery. The Lottery revenue finances capital projects
which relate to the acquisition and development of open space and trails including
associated administrative costs and charges. Consistent with Colorado statutes, the
operation and maintenance of existing open space and trails may also be financed by
these funds.
h. Neiahborhood Parkland Projects:
The Neighborhood Parkland Fund provides for the development of neighborhood parks,
as financed by a Parkland Fee. The Parkland Fee is collected from developers for each
new dwelling unit established within the City limits. The Neighborhood Parkland Fund
includes funds for the acquisition, development and administration of neighborhood
parks. The associated operation and maintenance costs are included in the General
Fund operating budget.
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DEBT POLICIES
7.1. POLICY STATEMENT
The City of Fort Collins recognizes the primary purpose of capital facilities is to support
provision of services to its residents. Using debt financing to meet the capital needs of
the community must be evaluated according to two tests - efficiency and equity. The
test of efficiency equates to the highest rate of return for a given investment of
resources. The test of equity requires a determination of who should pay for the cost of
capital improvements. In meeting the demand for additional capital facilities, the City will
strive to balance the load between debt financing and "pay as you go" methods. The
City realizes failure to meet the demands of growth may inhibit its continued economic
viability, but also realizes too much debt may have detrimental effects. Through the
rigorous testing of the need for additional debt financed facilities and the means by
which the debt will be repaid, the City will strike an appropriate balance between service
demands and the amount of debt. The City of Fort Collins uses lease purchase
financing for the provision of new and replacement equipment, vehicles and rolling stock
to ensure the timely replacement of equipment and vehicles and to decrease the impact
of the cost to the user department by spreading the costs over several years. This
method may also be used to acquire real property. The type of lease that the City uses
is termed a conditional sales lease, in effect a purchase rather than a rental of property.
The annual installments for all leases are appropriated by the Council each year. For
purposes of securing credit ratings and monitoring annual debt service as a percentage
of operating expenditures; lease purchase financing is considered a long-term liability of
the City and therefore will be issued under the same conditions as long-term debt.
7.2. AUTHORIZATION FOR MUNICIPAL BORROWING
The Charter authorizes the borrowing of money and the issuance of the following
securities to evidence indebtedness:
1. short-term notes,
2. general obligation securities,
3. revenue securities,
4. refunding securities,
5. special assessment securities,
6. tax increment securities, and
7. any other securities not in contravention of the Charter.
The Charter and Article X, Section 20 of the State Constitution determines which
securities may be issued only after a vote of the electors of the City and approved by a
majority of those voting on the issue.
7.3. CONDITIONS FOR USING DEBT
Debt financing of capital improvements and equipment will be done only when the
following conditions exist:
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1. When non-continuous projects (those not requiring continuous annual
appropriations) are desired;
2. When it can be determined that future users will receive a benefit from the
improvement;
3. When it is necessary to provide basic services to residents and taxpayers (for
example, purchase of water rights);
4. When the rights of bond buyers and subsequent investors are protected through full
disclosure; and
5. When total debt, including that issued by overlapping governmental entities, does not
constitute an unreasonable burden to the residents and taxpayers.
7.4. DEBT INDICATORS AND TARGET LEVELS OF DEBT
While no absolute measures of debt burden exist, the City recognizes that municipal
bond rating agencies and financial analysts have established key debt indicators by
which they evaluate the credit strength of issuers. Since debt issued by entities sharing
the same geographic area, for example, Poudre R-1 School District, cannot be
controlled by the City, the indicator that will be used will be calculated using only direct
debt issued by the City itself. The indicator does not include debt issued by the City or
by the City Council as the Board of Directors for the City's utilities, as the revenue
collected for services are the source of repayment. The City Council has chosen to use
direct debt service as a percent of General Fund and debt service expenditures to
monitor its debt.
This indicator measures how the City's debt burden compares to financial operations.
As debt service requirements increase, the flexibility to make decisions regarding other
expenditures is reduced. Excessive debt may be indicated if the percentage is
maintained at very high levels. A debt service to operating budget expenses ratio of 10
to 15 percent is considered fair; over 15 percent is generally considered poor.
THE TARGET INDICATOR IS:
Direct debt service as a percent of operating expense: 15 percent for the
4888-PON 2604-9008 period.
Using the debt indicator as defined above, the City will have some debt capacity. This
means the City could use some of its operating revenue to support additional debt during
the five-year projection period.
Since the City's sustained growth causes demand for capital improvements financed
through debt or lease financing, the City target is set at a level slightly above the median
for cities of comparable size. The indicator is a full loading of governmental debt and is
calculated in the same manner that rating agencies use.
7.5. SOUND FINANCING OF DEBT
When the City utilizes debt financing, it will ensure that the debt is soundly financed by:
• 1. Conservatively projecting the revenue sources that will be used to pay the debt;
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2. Financing the improvement over a period not greater than the useful life of the
improvements;
3. Determining that the benefits of the improvement exceed the costs, including interest
costs;
4. Maintaining a debt service coverage ratio which ensures that combined debt service
requirements will not exceed revenues pledged for the payment of debt; and
6. Evaluating proposed debt against the target debt indicators.
7.6. FINANCING METHODS
The City maintains the following policies in relation to methods of financing used to issue
debt:
1. Total General Obligation (payable from Property Tax levies) debt will not exceed
10% of assessed valuation per the City Charter;
2. Where possible, the City will use revenue or other self-supporting bonds instead of
General Obligation Bonds;
3. When appropriate, the City will issue non-obligation debt, for example, Industrial
Development Revenue Bonds, to promote community stability and economic growth;
4. Staff will maintain open communications with bond rating agencies about its financial
condition and whenever possible, issue rated securities; and
5. Staff will exchange information with Larimer County, Poudre R-1 School District, the
Poudre Valley Hospital District and other entities whose debt would contribute to the
overlapping debt indicators for the purpose of monitoring such debt burdens.
The budget includes appropriations for debt service payments and reserve requirements
for all outstanding debt and for debt anticipated to be issued within the ensuing budget
term.
7.7. BOND MARKET DISCLOSURE
The Securities and Exchange Commission (SEC) issued requirements for municipal
bond issuers in 1996. The rule (Rule 15c2-12) requires the City of Fort Collins to
covenant in its bond documents to provide bond holders certain annual financial
information. The provision of the information is done through qualified information
repositories. The rule did not establish a standard format for the financial information.
The required information may be presented in an appropriate disclosure document
determined by the City in consultation with legal counsel. The rule affects any city bonds
issued after July 1, 1996.
In addition to annual financial information, the City is required to covenant in the bond
documents that it will provide notice of the following "material events" to the information
repositories, with respect to the City's bonds:
1. principal and interest payment delinquencies;
2. non-payment related defaults;
3. unscheduled draws on debt service reserves reflecting financial difficulties;
4. unscheduled draws on credit enhancements reflecting financial difficulties;
5. substitution of credit or liquidity providers, or their failure to perform;
6. adverse tax opinions or events affecting the tax-exempt status of the City's bonds;
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7. modifications to rights of the owners of City bonds or bond calls; or
8. rating changes.
The City is further required to covenant that it will provide notice in a timely manner if it
fails to comply with its disclosure undertakings.
The City considers its Comprehensive and Financial Report (CAFR) to be the most
appropriate document in which to provide the continuing disclosure information. In
addition to the required annual financial information, the CAFR contains financial and
statistical information and related disclosures that are useful to existing and potential
investors in the secondary bond market as required by the rule. In accordance with the
City's bond ordinances, the Financial Officer is authorized and directed to report all
material events, as defined above, to the appropriate information repositories.
CASH MANAGEMENT AND INVESTMENT POLICY
(Summarizing Resolution No. 90-44)
8.1. POLICY STATEMENT
This policy was adopted by the Council of the City of Fort Collins as Resolution 90-44. It
is intended to supplement and expand upon Ordinance No. 109, 1988, "Providing for the
investment and deposit of public funds and moneys of the City of Fort Collins."
8.2. SCOPE
This policy shall apply to the investment of all general and special funds of the City of
Fort Collins (hereinafter referred to as the "City") over which it exercises financial control,
including the City of Fort Collins Firefighters Pension and General Employees
Retirement Funds.
8.3. OBJECTIVES
The City's principal cash management and investment objectives are:
1. Preservation of capital through the protection of investment principal.
2. To maximize the cash available for investment.
3. Maintenance of sufficient liquidity to meet the City's cash needs.
4. Diversification of investments to avoid incurring unreasonable risk regarding a
specific security, maturity periods, or institution.
5. To maximize the rate of return for prevailing market conditions for eligible securities.
6. Conformance with all federal, state and other legal requirements.
8.4. DELEGATION OF AUTHORITY
Responsibility for the collection and investment of all City funds is assigned to the
Financial Officer by the Charter, subject to direction of Council by resolution. The
Financial Officer may appoint other members of the Finance Department to assist in the
cash management and investment function.
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The City Manager shall appoint an investment committee consisting of the Financial
Officer and at least two (2) other employees of the City knowledgeable in the area of
governmental investments. The purpose of the committee shall be to provide advice to
the Financial Officer regarding the operation of the Cash Management and Investment
Program. The committee shall also review the actual rate of return on the portfolio as
compared to the target rate of return.
The Financial Officer shall have the discretion to appoint one or more investment
advisors registered with the Securities and Exchange Commission. All investments
made through such investment advisors shall be within the guidelines of this Cash
Management and Investment Policy.
8.5. PRUDENCE
The standard of prudence to be used for managing the City's assets is the "prudent
investor" rule, which states, "Investments shall be made with judgment and care, under
circumstances then prevailing, which persons of prudence, discretion and intelligence
exercise in the management of their own affairs, not for speculation, but for investment
considering the probable safety of their capital as well as the probable income to be
derived."
8.6. ELIGIBLE INVESTMENTS
All investments will be made in accordance with Ordinance 109, 1988 and the Cash
Management and Investment Policy adopted by the Council of the City of Fort Collins by
Resolution 90-44. The following is a summary of the authorized investments:
1. Any securities now or hereafter designated as legal investment for municipalities in
any applicable statute of the State of Colorado.
2. Interest-bearing accounts or time certificates of deposit at state or federally-chartered
savings and loan associations or national banks in Colorado which are designated as
depositories for public moneys.
3. Obligations of the United States Government and obligations issued by an agency,
instrumentality or public corporation of the United States.
4. Obligations issued by or on behalf of the City.
5. Obligations issued by or on behalf of any state, political subdivision, agency,
instrumentality or public corporation having an investment grade rating from Moody's
Investors Service or Standard & Poor's Corporation.
6. Prime-rated bankers acceptances and prime-rated commercial paper.
7. Guaranteed investment contracts of domestically-regulated insurance companies
having a claims-paying ability rating of "AA" or better from Standard & Poor's or A+
from Best Rating Services.
8. Repurchase and reverse repurchase agreements of any marketable security
described in Ordinance No. 109, 1988 which afford the City a perfected security
interest in such security.
9. Local government investment pools authorized by the State of Colorado.
10. Shares in any money market fund or account, unit investment trust or open-or close-
end investment company, all of the net assets of which are invested in securities
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described in this section, to the extent not prohibited by Colorado Constitution or
State Statutes.
Pension funds may also be invested in equipment trust certificates, real property and
loans secured by first mortgages or deeds of trust on real property, tax certificates
issued on real property in Colorado, and common or preferred stock or debt obligations
of U.S. Corporations.
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8.7. REPORTING AND REVIEW
An investment report shall be prepared on a quarterly basis and submitted to the City
Manager. An annual summary shall be published in a newspaper of local circulation.
The Financial Officer and designated investment staff shall meet at least quarterly to
review the portfolio's adherence to appropriate risk levels and to compare the portfolio's
total return to the established investment objectives and goals.
8.8. ETHICS AND CONFLICTS OF INTEREST
City officers and employees involved in the investment process shall adhere to the rules
of conduct concerning conflicts of interest as stated in Art. IV, Section 9 (B) of the
. Charter of the City of Fort Collins, Colorado.
8.9. POLICY REVISIONS
This Cash Management and Investment Policy will be reviewed periodically by the City
Manager and the Financial Officer and may be amended by City Council as conditions
warrant.
ECONOMIC DEVELOPMENT POLICY
(Summarizing Resolution 94-126)
9.1. POLICY STATEMENT
The City of Fort Collins has chosen a partnership model for economic development. The
partnership is between the public and private sector, and the citizens of Fort Collins.
The City provides many services to existing and prospective business. The City
facilitates the processes and procedures required for site development, provides data
and demographic information, invests in municipal infrastructure, and considers other
initiatives on a case-by-case basis.
The private sector shares responsibility with the public sector for the retention and
• expansion of business or industry with the City. This may include marketing and
promotion of the community, outreach to existing business, and assistance in project
financing and small business counseling.
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9.2. ROLE OF THE CITY OF FORT COLLINS
Businesses considering expansion or relocation are most concerned and interested in
the overall quality of life. Some measures of quality of life include: the quality of primary
and secondary schools, the skill of the work force, the quality of municipal services, and
the state of the natural environment.
The City's primary role in economic development focuses on those areas which directly
involve City process and procedure. The City's goal is to encourage and support
economic development and economic opportunities which provide primary employment,
increase private investment within the community and improve the quality of life for its
residents.
The City strives to achieve this goal through the following policies:
1. Promotion of the City as a good place to live and work.
2. Emphasis on comprehensive, quality municipal services as the City's primary
contribution to the community's economic development effort.
3. Create a positive climate for both local and new business.
4. Assist small business retention and expansion as appropriate.
5. Encourage and promote workforce training, retraining, education, and employee
support services to assist in the creation and expansion of meaningful employment
opportunities.
6. The City's role in dealing with prospective expansion or relocations focuses on
planning and the provision of municipal services and facilities such as streets and
utilities.
7. Financial incentives will be considered on a case by case basis after thorough staff
analysis and Council discussion of the merits of each individual proposal.
The City has identified several action steps to be used to implement the policies above:
1. Work with other public and private entities to promote policies and programs which
encourage education, training, workforce development, and basic, advanced, and
technological skills enhancement.
2. Provide prospective businesses with information regarding municipal services,
schools, recreational opportunities, health care, and other services available within
the community.
3. Notify existing and prospective businesses of the opportunities available through
Colorado State University and the private sector in the areas of product and process
development.
4. Maintain and enhance utility and technological infrastructure and strive to provide
consistently reliable and efficient service.
5. Maintain a reasonable and equitable tax structure.
6. Provide assistance to business and industry about City process and procedure.
7. Afford new and existing business and industry the opportunity to seek financial
incentives from City, state, and federal sources.
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9.3. ROLE OF THE PRIVATE SECTOR
The private sector plays a significant role in the success of the overall economic
development strategy. The private sector mission is to work with the City and other
public organizations to retain and expand basic industry within the City and county. This
effort requires the support of Fort Collins, Inc., the Chamber of Commerce and other
entities referenced below, as well as local banks, financial institutions, and existing
business and industry.
The private sector role is characterized by its ability to work with new and existing
business in a confidential manner. Real estate values, business climate, financing
options, and site options are most appropriately discussed by the private sector.
9.4. ROLE OF OUTSIDE ENTITIES
The efforts of the City and private sector to enhance the economic prosperity of the
community are directly and indirectly supported by several organizations and entities
including:
Colorado State University
Downtown Development Authority
Larimer County
Convention & Visitor's Bureau
Poudre R-1 School District
Private Industry Council
Employment and Training Service.
Though each has an independent focus, their work contributes to the overall quality of
life and prosperity enjoyed with the community. In this way, the network required to
conduct an effective community-based economic development is provided.
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