HomeMy WebLinkAbout1999-045-04/20/1999-ADOPTING AMENDMENTS TO THE FINANCIAL MANAGEMENT POLICIES RESOLUTION 99-45
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 the 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hereafter remain in effect until the same are amended or repealed by subsequent action of the City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
20th day of April, A.D. 1999.
Mayor
ATTEST:
kv;*. -
City Clerk
EXHIBIT "A"
FINANCIAL MANAGEMENT POLICIES
TABLE OF CONTENTS
The Financial Management Policies are a compendium of all City policies that
shape the Budget. They are intended to assist the Council and the City
Manager in preparing the Budget and help communicate to residents and
customers how the community goals are being addressed.
PAGE
BUDGET POLICY
1 .1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 .2 Charter Process Requirements . . . . . . . . . . . . . . . . T
1 .3 Changes to Adopted Budget . . . . . . . . . . . . . . . . . . 2
1 .4 Lapsed Appropriations . . . . . . . . . . . . . . . . . . . . . . 3
1 .5 Budget Philosophy and Preparation . . . . . . . . . . . . . 3
REVENUE POLICIES
2.1 Revenue Limitation . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Revenue Review, Diversity, & Monitoring . . . . . . . . . 6
2.3 Fee Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Sales and Use Tax Distribution . . . . . . . . . . . . . . . . 9
2.5 Private Contributions . . . . . . . . . . . . . . . . . . . . . . 11
GENERAL POLICIES
3.1 Administrative Charges . . . . . . . . . . . . . . . . . . . . 11
3.2 Payment in Lieu of Taxes (PILOT) . . . . . . . . . . . . . 12
3.3 Lease-Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Human Resource Management and Productivity . . . 13
3.5 Medical Insurance and Retirement Plan . . . . . . . . . 16
3.6 Facility Maintenance and Repairs . . . . . . . . . . . . . 20
3.7 Poudre Fire Authority-Revenue Allocation Formula 20
3.8 Rebate Programs . . . . . . . . . . . . . . . . . . . . . . . . 21
FUND POLICIES
4.1 General Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Enterprise Funds . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.3 Internal Service Funds . . . . . . . . . . . . . . . . . . . . . 33
4.4 Special Revenue and Debt Service Funds . . . . . . . . 34
RESERVE POLICIES
5.1 Policy Statement . . . . . . . . . . . . . . . . . . . . . . . . 39
5.2 Types of Reserves . . . . . . . . . . . . . . . . . . . . . . . 39
CAPITAL IMPROVEMENT FUNDS
6.1 Citizen Participation . . . . . . . . . . . . . . . . . . . . . . 43
6.2 Capital Improvement Policy . . . . . . . . . . . . . . . . . 43
6.3 Capital Improvement Program . . . . . . . . . . . . . . . . 44
DEBT POLICIES
7.1 Policy Statement . . . . . . . . . . . . . . . . . . . . . . . . 46
7.2 Authorization for Municipal Borrowing . . . . . . . . . . 47
7.3 Conditions for Using Debt . . . . . . . . . . . . . . . . . . 47
7.4 Debt Indicators and Target Levels of Debt . . . . . . . 48
7.5 Sound Financing of Debt . . . . . . . . . . . . . . . . . . . 49
7.6 Financing Methods . . . . . . . . . . . . . . . . . . . . . . . 49
7.7 Bond Market Disclosure . . . . . . . . . . . . . . . . . . . . 50
CASH MANAGEMENT AND INVESTMENT POLICY
8.1 Policy Statement . . . . . . . . . . . . . . . . . . . . . . . . 51
8.2 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.3 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.4 Delegation of Authority . . . . . . . . . . . . . . . . . . . . 51
8.5 Prudence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.6 Eligible Investments . . . . . . . . . . . . . . . . . . . . . . 52
8.7 Reporting and Review . . . . . . . . . . . . . . . . . . . . . 54
8.8 Ethics and Conflicts of Interest . . . . . . . . . . . . . . . 54
8.9 Policy Revisions . . . . . . . . . . . . . . . . . . . . . . . . . 54
ECONOMIC DEVELOPMENT POLICY
9.1 Policy Statement . . . . . . . . . . . . . . . . . . . . . . . . 54
9.2 Role of the City of Fort Collins . . . . . . . . . . . . . . . 54
9.3 Role of the Private Sector . . . . . . . . . . . . . . . . . . 56
9.4 Role of Outside Entities . . . . . . . . . . . . . . . . . . . . 56
BUDGET POLICY
1 .1 . OVERVIEW
The budget is the long-range plan by which financial policy is made,
implemented and controlled. 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 City may adopt budgets for
a budget term of one or more fiscal year(s).
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 budget(s) shall be a public record and open to the
public for inspection and copying. The City Council shall, within ten (10) days
after the filing of the'proposed budget(s), 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
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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.
1 .3. CHANGES TO ADOPTED BUDGET
After the commencement of the fiscal year, the amounts appropriated for the
proposed expenditures in the adopted budget are irrepealable and are deemed
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 and
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 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
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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 administrative action does not lower the appropriations within a fund,
expenditures are prevented. 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.
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
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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 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;
• 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.
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
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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, the
Council Finance Committee, 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.
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
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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
Not part of the approved ballot measure but legally required is that those
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
collected. In addition, those revenues must also be used for the designated
purposes approved by the voters.
2.2 REVENUE REVIEW, DIVERSITY, AND MONITORING
a. Review and Projections. 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
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percentage of the General Fund and General Government that comes from sales
and use tax. Over the past five years, 1990-1994, 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 56%. 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.
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
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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 payers. 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.
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
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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 Charges
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 by the City Council by ordinance,
absent any provision of the City Charter or Code.
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 Programs
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:
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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*
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
Fort Collins/Loveland Airport Authority
Sales & Use Tax Debt Service Reserves
Street Oversizing
• General Fund
Actual 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 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
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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 an "extra" that the City has been able to provide to
residents. 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.
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.
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 &
Communication Systems (ICS). 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.
HOW COSTS ARE ALLOCATED
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The Human Resources costs are allocated to funds based on the total number
of budgeted full-time-equivalent positions in each fund.
The administrative costs for ICS are divided into the cost for each service and
then allocated to each fund. Each service is allocated using an appropriate
allocation method.
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.
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 many transactions and
would not correspond to the level of service provided by the departments in the
General Fund.
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. The established PII=G:F rate is approxims
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one and one half (1 .5) tirnes the franchise and pfeperty tax erneunts that-e
utility would pay if privately awmed.
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.
• 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
13
renewal terms.
We recognize 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.
For a" employees whe represent the long tefrn, eareef vvofk fefee of the
,
L91-U-1-Zly. Total
Gernpensation is defined as the surn of the sajarrpai,U on,
benefits whieh aFe provided to eengpensete an employee fer work perferrned-.
market will be pringefily within Northern Gelerade and repfesent a Fnix Of ptibi*e
and private emplayefs, to the gf
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
14
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 of the survey methodology and data to ensure
that the intent of this policy is being met.
3. Hourly, seasonal, ai-td temporary or contractual employee compensation
rates will be set according to the prevailing market rate for that type of
employee position within the Northern Colorado market; the existing pay
plan may also be considered for similar positions. These employees are
a valuable resources in the provision of services in for the community, se
and the City will set these those compensation rates in a way manner
vvhieh 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. im east, emd to
provide these serviees with fewer tham the average nurnber of engpleyees, as
. In doing so, the City will commit
to 'attracting and retaining quality employees and to recognizing and rewarding
their quality performance.
quality employees and also to reeagnize and revveFd quality performance.
To accomplish these goals, the City will:
hatirly, seasonal and tengpefery employees, at a level vvlgmeh will be, on
to the highest paid, will retain the sarne felative eempetitive pesitien
when eampared to other governmental ageneies and Private emplayem
to enstire equity to all empleyees within the eafripensation plan.
15
This peliey sl9all be suppefted annually by data that dernanstrates that
ngethodalegy and data annually with the Personnel Beefd to ensure that
the intent of this poliey us being Fnet.
-211. Maintain staffing at a levels lower then the average for other.
n9unieOpalities providing similar services that will enable the City to
provide the necessary services in a high quality manner;
-32 Provide ongoing assessment of customer
satisfaction with the quality level of services provided by the City and
continuously improve the quality of those services;
43. Gentinue to meniter the east effectiveness of previeling services--thfough
through the pf4etes� Develop and maintain a performance review
process to establish goals and to evaluate employee work performance;
s4. Gentinue Assess options to streamline operations by continuing to
monitor the cost effectiveness of adding additional staffing vs. to provide
cangperisen to the cost of adding capital equipment of
and
65. Measure the productivity and effectiveness of the City's work force.
3.5. MEDICAL INSURANCE AND RETIREMENT PLAN
a. Medical Insurance
fates.The Gity of Fort Gellims entefed unto
n E)etaber 1981 . This pregrang allowed the Gity to eut out profit paid
to a private eaffieF, imvest available meney (at l9igher rates), and maintain bettef
cash flew. The initial savings were as high as expeeted and the pregr
eentinues to provide a east effeetive and vevy �111PIVY�e fringe benefit-.
eities to ealleetively bid- _AdPAiR1*Q*Fative serveees, stop less insurance fet
_F, festilting in lower
In 1981, the City of Fort Collins set up a partially self-funded medical insurance
program. The, objective of a self-funding program is toreduce the cost of
16
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 18 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-
con
tracted for include plan administrative services, stop-loss protection against
unexpected expenses, life and accidental death and dismemberment insurance,
an'd°long=term disability coverage.
b. Retirement Programs
The City of Fort Collins contributes to six three types of pension plans,
including:
1 . Social Security
2. Police Money Purehase 401 (a) Money Purchase Plans for Service
Directors, Classified and Unclassified Management, Police and Fire, and
3. Fir. Mene y Puo ehese 401 (a) Defined Benefit Plans, including the General
Employees Retirement Plan and the Old Hire Fire Plan. These plans are no
longer open to new participants.
S.Gld I 'ire Fire [Defined Benefit
The Fire and General Employee Retirement Plans are administered by the Gity
of Fort Ge"ins. The rate of eentfibution for the Gity administered plans as ba
tipen an annual aettierial analysis for the normal cost and unfunded liability e4
the mungber of engpleyees partoeipating an eaeh pension plan. The Genera'
Employees Retirement Gengmittee has identified inequities arnang the Gity
administered plans,
The Gity will maintain contribution rates at a !evel stifficient to nieet
euFfent nofmal costs of each pension plan-,
17
amortized ever a period not to exeeed twenty years,
0 A thrift plan for City employees is an adjunet to I'll-
fet Fengent plan, to maintain e8nVaFability with benefits provided by othef
Front Range eornngunities. Engplayees Partleipatmen in this plan is optienal,.
0 Money ptnehase plans are offered to rmanagernemt level employees who,
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 December31, 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 each 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.
The Budget incorporates the following rate requirements to continue provide
funding support for this retirement program policy:
18
POLICE & FIRE MGMT.
SGGIAL: EMPLOYEE MONEY MONEY.
Social General Money Money Purchase
Security Employee Purchase Management &
Normal Costs Contribution Retirement Police & Fire Classifieds° Q
City Contribution 7.65% 4.3533% 8% 3%-10%
Employee Contribution 7.65% none 8% 0%-6%
a) 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.
b) 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%.
c) 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.
The table below shows the contribution rates to the 457 deferred compensation program:
Deferred Compensation
City;Contribution 3% to 7.5%
19
Employee Contribution up to 25% of salary,
not to"exceed a total of $8,000
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.)
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. Protects 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. Use of reserves in 1991-1995 enabled the City to
meet the 4% "target.
The fellowing chart shows post and pro:- RAO
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
20
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 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:
Property Tax and Utility Charge Rebate Program
21
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.
Sales Tax Rebate on Food Program
Recognizing the regressiveness of a sales tax on food, 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 go into effect January
1 , 1998, will be 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.
GOVERNMENTAL AND PROPRIETARY FUNDS
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 56% 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.
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
22
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.
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.
• 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.
• Budget Office staff will determine the department and division
annual savings after the annual financial report is completed.
The following criteria guide the use of carry-over savings and appropriations.
• The City Manager must review and approve requests for use of
savings.
• Increased productivity should generate the savings, rather than
decreases in services.
• Departments and divisions should use savings for the
improvement of future service delivery.
• City Council must approve, through an appropriation ordinance,
the request for use of savings.
• 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 year(s) held in this reserve can be made by the department or
divisions at any time during the year.
23
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
which 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. Beettie Utility Services
The financial policies of the Light & Power Fund Utilities are administered in
accordance with the City Charter. The budgetifive year plan is prepared on eemplienee
with the f . 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.
i Mission 173Sf07TJ"CQL G1TfGTTr
'he benefit of its eusterners and the eernfnun*
We exist to serve our etisterners by:
i . Providing safe, reliable, eeenernical eleetrie distribution relateel
seFvices faf the present and futtiFe needs of the earnmunity.
24
as- pavver quality, natural gas aggregation, teleearnngunieations, amd
5. Employing tHe best eustemer serviee, business, and organizational
preetiee3 to pfavide the Highest eustamer value in an eve!
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 such 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. Eleetrie Utility Rates
Electric 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 sufficientt 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.
0 To maintain positive met ineorne after paying the full Cos
operating and maintaining the eleetrie utility in good fepair and
war king ewer
b. Bectric 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:
25
r i
• To provide an operating reserve equal to 8% of budgeted
operating expenditures, excluding the cost of purchased power;
• 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;
• 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.
Exeess Retained Earnings
Flow of Funds
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 excess Fetained earnings remaining working capital
shall be added to the purchase power reserve.
The Light & Power Fund will maintain a standard systemg e4
operations of the system and keep other sueh feeards emel date as afe
genefelly used by the eleetrie titility industry.
The aeeeunts of the Light & Power Fund shall be kept seperate and
as weii as proportionate eredits for all sefvices rendered to ethef
b. Water Utilitmes-Serviees
financial operations of the Water Utilities Services. Policy staternemts vv
26
developed and ineafparated into the five YeaF finBneffll Plan 85 f011ews:
c' Water Fund 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 eperatien, operate,
maintain, and repair the water 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,einterest, and related costs. After
all O&M and"debt services expenses are paid,the City is required to
maintain the following revenue bond accounts:
Principal and Interest Reserve at an amount equal to the
accrued principal and interest on the water revenue bonds;
• Debt Service Reserve - at an amount specified in the bond
ordinances.
Any remaining net revenues of the Water Fund may be used for any
27
lawful purpose. These are used, in part, to fund major and minor
capital improvements and the following reserves:
• Operating Reserve--at an amount equal to 5% of the projected
operating revenue for the ensuing year;
• 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;
• Art in Public Places Reserve--at an amount equal to 1 % of
eligible capital projects whose appropriations exceed
$250,000;
• Capital Reserve--at an amount equal to remaining working
capital after all other reserves are satisfied.
3 Rate Maintenance
The-Water RevenueBond 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.
3 4. Water Capital Cost Financing
Capital cost will be identified as either:
• Minor Capital--relatively small capital acquisitions such as
vehicles, lab equipment, or minor improvements; or
• 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.
d. Wastewater Fund Utility
The following policies pertain to the wastewater utility-Wastewater Fund.
28
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 (0 & M) expenses--those expenses necessary to operate,
maintain, and repair the sewer system. After all 0 & M expenses
have been paid, the remaining net revenue is pledged to pay the
sewer revenue bonds principal, interest, and related costs. After all
0 & M and debt services expenses are paid, the City is required to
maintain the following reserve accounts (listed in pledge order):
• Principal and Interest Reserve--at an amount equal to the
accrued principal and interest on the sewer revenue bonds;
• Debt Service Reserve--at an amount specified in the bond
ordinances;
• Wastewater Fund Bond Capital Reserve--at an amount equal to
25% of the 0 & 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:
• Operating Reserve--at an amount equal to 5% of the projected
operating revenue for the ensuing year;
• Art in Public Places Reserve--at an amount equal to 1 % of
eligible capital projects whose appropriations exceed
$250,000;
• Capital Reserve--at an amount equal to remaining working
capital after all other reserves are satisfied.
29
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 0 & M expenses.
4. Wastewater Capital Cost Financing
Capital cost will be identified as either:
• Minor Capital--relatively small capital acquisitions such as
vehicles, lab equipment, or minor improvements; or
• 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.
Storm Drainage Fund
The primery purpose of the Starrm Drainage Fund is to meet the publie need fef
and the epefetiam and maintenance of drainage feeilities.
Utility rates will be set at a level to provide for the operation and
maintemenee requirer-ment for each fiseel year. The rate is based
the eategary of land usage and a pef squere fact per n9enth rate.
A master plen has been developed fef eeeh besin to identify drainage
thre
system requirements of eeeh basin where a positive eestibenefit ra
exists. To finanee this capital program, a one time basin fee i
30
property owners.
3. Storm Water U-pital Gast Fine i
the fellewing-
0 a one t*rme basin fee that is collected with new developrmen-t,-
0 bond issues that vvi" be financed over the life of the
et�erment
The annual elebt serviee will be provided frern the existing Fnenth4y,
4. Reserves
n9enthly capital fees, and new development fees
available at the enel of one fiseal yeaf t.5 be expended in the
The following Feserves Igave been established!
0 Debt to the arriatint required by the individ
bond efdinemeie-.
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,
31
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)
Principal and interest reserve-at an amount equal to the accrued
principal and interest on the storm drainage revenue bonds;
• 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::
• Operating Reserve-at an amount equal to 5% of the projected
operating revenue for the ensuing year;
• Art in Public Places Reserve-at an 'amount equal to 1 % of
eligible capital projects whose "appropriations exceed
$250,000;
•` 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.
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4. Storm Drainage Capital Cost Financing
Capital cost will be identified as either:
• Minor Capital-relatively small capital acquisitions such as
vehicles, equipment, or minor improvements; or
• 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 debtfinancing.
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 four
internal service funds. These include the Benefits Fund, Communications Fund,
Equipment Fund, and the Self Insurance Fund.
The Internal Service Funds operate under the following guidelines.
• 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.
• 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.
• 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.
• Internal service funds may build up reserves. Customer-approved
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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.
• 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.
• Internal service funds operate under the same guidelines and
constraints as the General Fund and other governmental funds of the
City.
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.
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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.
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.
Program Funding
The APP program's link to funding is the City's Capital Improvements.
• 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.
• 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.
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• 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.
Program Administration
The APP Board, with the assistance of the APP Coordinator, will have the
responsibility of coordinating and making recommendations regarding:
• acquisition of works of art,
• process to be used to select works of art and artists,
• works of art selection criteria,
• acquisition of donated artwork,
• certain restrictions on the use of restricted program funds, and
• 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.
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
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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.
Fund Structure
Costs associated with the Recreation Fund shall be defined as either: 1 ) Program
Costs; or 2> Community Good Costs.
1 . Program costs are directly associated with the activities and facilities used
by the citizens, and include the following:
Activity Costs
• part time staff
• materials
• equipment
• participant transportation
• other costs directly associated with conducting activities
Facility Operation and Maintenance Costs
• minor repairs
• custodial equipment and supplies
• building utilities
• specialized items
• 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
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program but are not directly experienced by the user. Such costs include
the following:
• full time recreation staff
• office operation costs such as telephone and computer
charges
• training costs
• dues and subscriptions
• insurance
• office supplies and equipment
• 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.
Designated Reserves
Revenues collected by the Recreation Division that exceed expenditures in any given
fiscal year are used to fund designated reserves.
• 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.
• 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.
• 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.
• Designated for Life Cycle/Capital Needs - to be used for one-time
improvements and upkeep of equipment or for one-time purchases over
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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.
• 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.
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 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.
a. Restricted Reserves
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1 . 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 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.
2. 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.
b. Designated Reserves
1 . 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.
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The City Manager will notify the City Council when draws are
made from this reserve.
2. 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.
3. 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.
4. 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 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
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financial handbook for local governments.) The target is 15%.
This does not include the reserve Designated for Productivity
Savings.
c. 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.
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
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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:
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• The City will develop a multi-year plan for capital improvements
and update it annually;
• The City will identify estimated costs and funding sources for
each capital project requested before it is submitted to City
Council;
• All City capital improvements projects will be administered in
accordance with the Capital Projects Procedures Manual;
• All City capital improvements will be constructed and
expenditures incurred for the purpose as approved by City
Council;
• The City will use a variety of different sources to fund capital
projects, with an emphasis on the "pay-as-you-go" philosophy;
• 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. 1/4 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
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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.
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 I.
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. Capital 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
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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 Projects:
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. Neighborhood 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.
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
46
r
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:
• short-term notes,
• general obligation securities,
• revenue securities,
• refunding securities,
• special assessment securities,
• tax increment securities, and
• 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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• When non-continuous projects (those not requiring continuous
annual appropriations) are desired;
• When it can be determined that future users will receive a
benefit from the improvement;
• When it is necessary to provide basic services to residents and
taxpayers (for example, purchase of water rights);
• When the rights of bond buyers and subsequent investors are
protected through full disclosure; and
• 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 1998-2002 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
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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:
• Conservatively projecting the revenue sources that will be used
to pay the debt;
• Financing the improvement over a period not greater than the
useful life of the improvements;
• Determining that the benefits of the improvement exceed the
costs including interest costs;
• Maintaining a debt service coverage ratio which ensures that
combined debt service requirements will not exceed revenues
pledged for the payment of debt; and
• 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:
• Total General Obligation (payable from Property Tax levies)
debt will not exceed 10% of assessed valuation per the City
Charter;
• Where possible, the City will use revenue or other self-
supporting bonds instead of General Obligation Bonds;
• When appropriate, the City will issue non-obligation debt, for
example, Industrial Development Revenue Bonds, to promote
community stability and economic growth;
• Staff will maintain open communications with bond rating
agencies about its financial condition and whenever possible,
issue rated securities; and
• 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 include appropriations for debt service payments and reserve
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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:
(a.) principal and interest payment delinquencies;
(b.) non-payment related defaults;
(c.) unscheduled draws on debt service reserves reflecting
financial difficulties;
(d.) unscheduled draws on credit enhancements reflecting
financial difficulties;
(e.) substitution of credit or liquidity providers, or their failure
to perform;
(f.) adverse tax opinions or events affecting the tax-exempt
status of the City's bonds;
(g.) modifications to rights of the owners of City bonds;
(h.) bond calls; or
(I.) 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
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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:
• Preservation of capital through the protection of investment
principal.
• To maximize the cash available for investment.
• Maintenance of sufficient liquidity to meet the City's cash
needs.
• Diversification of investments to avoid incurring unreasonable
risk regarding a specific security, maturity periods, or
institution.
• To maximize the rate of return for prevailing market conditions
for eligible securities.
• Conformance with all federal, state and other legal
requirements.
8.4. DELEGATION OF AUTHORITY
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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.
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:
• Any securities now or hereafter designated as legal investment
for municipalities in any applicable statute of the State of
Colorado.
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• 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.
• Obligations of the United States Government and obligations
issued by an agency, instrumentality or public corporation of
the United States.
• Obligations issued by or on behalf of the City.
• 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.
• Prime-rated bankers acceptances and prime-rated commercial
paper.
• 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.
• 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.
• Local government investment pools authorized by the State of
Colorado.
• 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 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.
9.2. ROLE OF THE CITY OF FORT COLLINS
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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:
• Promotion of the City as a good place to live and work.
• Emphasis on comprehensive, quality municipal services as the
City's primary contribution to the community's economic
development effort.
• Create a positive climate for both local and new business.
• Assist small business retention and expansion as appropriate.
• Encourage and promote workforce training, retraining,
education, and employee support services to assist in the
creation and expansion of meaningful employment
opportunities.
• The City's role in dealing with prospective expansions or
relocations focuses on planning and the provision of municipal
services and facilities such as streets and utilities.
• 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:
• Work with other public and private entities to promote
policies and programs which encourage education, training,
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workforce development, and basic, advanced, and
technological
skills enhancement.
• Provide prospective businesses with information regarding
municipal services, schools, recreational opportunities,
health care, and other services available within the
community.
• Notify existing and prospective business of the opportunities
available through Colorado State University and the private
sector in the areas of product and process development.
• Maintain and enhance utility and technological infrastructure
and strive to provide consistently reliable and efficient
service.
• Maintain a reasonable and equitable tax structure.
• Provide assistance to business and industry about City
process and procedure.
• Afford new and existing business and industry the opportunity
to seek financial incentives from City, state, and federal
sources.
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
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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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