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HomeMy WebLinkAbout1996-054-05/07/1996-BUDGET FINANCIAL MANAGEMENT POLICIES RESOLUTION 96-54 OF THE COUNCIL OF THE CITY OF FORT COLLINS ADOPTING AMENDMENTS TO THE FINANCIAL AND MANAGEMENT POLICIES FOR 1997 AND SUBSEQUENT FISCAL YEARS WHEREAS, City Council has adopted Financial and 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 and Management Policies; and WHEREAS, amendments to the Financial and Management Policies are needed to reflect certain changes in the City's financial planning that have been previously approved; and WHEREAS, the City Manager and City Council have reviewed the proposed amendments to the Financial and Management Policies in conjunction with the City's five-year financial plan and in preparation for the annual budget; and WHEREAS, the City is committed to sound financial planning; and WHEREAS,the proposed amendments to the Financial and Management Policies establish guidelines for long-range financial planning; and WHEREAS, the City Council wishes to adopt these amendments to the City's Financial and Management Policies for 1997 and subsequent fiscal years in pursuit of its objectives of sound long- range financial planning. 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 and Management Policies which are attached hereto as Exhibit "A" and incorporated herein by this reference. Section 2. That the amendments to the Financial and 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included as part of the said Policies and those Policies shall hereafter remain in effect until the same are amended or repealed by subsequent action of the City Council.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 regular meeting of Council of the City csfFprt Collins is 7th day of May, A.D. 1996. 2 s ATTEST: City Clerk EXHIBIT A 1.3. BUDGET CHARTER REQUIREMENTS a. Midget Fctimatea On or before the first Monday in September of each year, the City Manager shall submit to the City Council a proposed budget for the ensuing budget year 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 year. b. Puhlir Record„ Hearing The budget estimates are 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 budget estimates, set a time for a public hearing. At the hearing, the public may comment upon the proposed budget. C. Adoption of Budget and Appropriation of Funds After the public hearing and before the last day of November of each year, City Council shall adopt the budget for the ensuing fiscal year and shall appropriate such sums of money as the Council deems necessary to defray all expenditures of the City during the ensuing year. The adoption of the budget and appropriation of funds shall be accomplished by passage of the Annual Appropriation Ordinance and 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. d. Changgcto the Adopted Rudget 1 . Budget Increases Funds are expected to confine spending to amounts appropriated during the Budget process. In certain cases, however, appropriations may be increased during the budget year. • Carryover Encumbrances - If a department has open purchase orders at year end, related appropriations are encumbered and carried over to the next year to cover the actual expense when it occurs. • Unanticipated Revenue - If a fund receives revenue during the year from a source that was not anticipated or projected in the Budget, such as a grant or a bond issue, such revenue may be appropriated by Council for expenditure in the year received provided the appropriation does not exceed the growth limit. • Prior Year Reserves - In cases where a fund's reserves are greater than required by policies or where prior productivity savings exist in the General Fund, Supplemental Requests may be funded, with Council appropriating amounts from reserves to fund items which were not included in the adopted budget. Council may also appropriate reserves in case of an emergency or unusual circumstances, if it determines that such appropriations are in the best interests of the City. 2. Budget Decreases Annual budgets may also be decreased below adopted appropriations during the year. Changes in service demand, economic conditions, projected growth limits, and Council goals and direction may cause such budget reductions. Each service area is responsible for developing a plan to reduce appropriations. Each plan must be in place in 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. 3. Level of Control and Budget Transfers 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 as they deem appropriate. There are two general types of budget transfers: a. Within Fund - This is a transfer between line items and/or departments within a fund, and requires approval of the fund manager. b. Between Funds - This type of transfer requires the recommendation of the City Manager and formal action by the City Council. In order to provide City Council with information and control over capital improvements taking place within the City, Council approval is also required to transfer appropriations between Capital Projects. This is normally done in cases where a project is completed under budget and Council wishes to use the unused appropriations to enlarge the scope of another project. 4. Lapsed Appropriations Per the City Charter, any appropriations which are unspent at the end of the year lapse into fund balance, where they cannot be spent unless appropriated by Council with the following exceptions: a. Capital Projects - Appropriations for Capital Projects do not lapse until the project is completed and closed out. b. Grant Funds - Appropriations funded by federal or state grants do not lapse until the grant expires, or the project for which the grant was received is completed and closed out. 1.4. BUDGET PHILOSOPHY AND PREPARATION 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 separate five-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 and management policies which establish guidelines for five-year financial plans; • Establishes target budgets yearly for all funds based upon adopted policies; • Appropriates the next year's annual budget in accordance with the City Charter and State Constitution; • Adjusts the annual 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 five-year financial plans. b. R nd_�_aat Pranaratinn While the Charter establishes time limits and the essential content of the City Manager's proposed budget and the adoption of the Annual Budget, the language is silent on the budget preparation process. The City's Financial and Management Policies guide the preparation of the Annual Budget. A Budget Issues Team composed of the City Manager, Deputy City Manager, and the Budget Director develops the guidelines, consistent with the Policies, to be used for budget preparation. During the development of the budget, various department and division representatives are called on to provide their expertise to the Budget Issues Team. In addition, the City Council, the Council Finance Committee, and the Executive Lead Team provide guidance during preparation. In March, programs develop five 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. 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 is 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 year is adopted in November. 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. The major revenue sources in the general fund are sales & use tax, property tax, lodging tax, intergovernmental revenues, fines & forfeits, user fees & charges, and transfers from other funds. Conservative revenue projections are made for the budget year and the following four years. The projections are updated annually in the budget process. b. Diversity. For all general government operations, the City will strive to maintain diverse revenue sources. The City recognizes that becoming too dependent upon one revenue source would make revenue yields more vulnerable to economic cycles. c. Targets. The City's major source of revenue for governmental activities and more specifically for programs within the General Fund is the Sales and Use Tax. The City will monitor the dependency on sales and use tax by tracking the percentage of the General Fund and General Government that comes from sales and use tax. Over the past five years, 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. Monitnrina_ 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 Actinn. 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 & forfeits, 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. Sales Tax Dependency % of General Fund and General Govt. Rev 100.00% ........................... 90.00% ............. ................................ ................... ........................................................ P e80.00% ..................... .................. .......--................ ................. 0-....... ........... r70.00% . ................................................................................ .......................................... .................................. 0 c 60.00% 55.76% ........ 56;06%- .�5&16% 0 4.050/ e ............ 50.00% .... ... .................. .......... ..................... n t 40.00% - .08% .10%. 57% ...... SSW w a 30.00% 9 20.00% .. ........ ... ..... ........ e 10.0 0 Oy( 0.00% 90 91 92 93 94 Year Gen. Fund Revenue El Gen. Govt. Revenue 3.5. MEDICAL INSURANCE AND RETIREMENT PLAN a. Medical Insurance The City of Fort Collins entered into a partially self-funded medical insurance program in October 1981 . This program allowed the City to cut out profit paid to a private carrier, invest available money (at higher rates), and maintain better cash flow. The initial savings were as high as expected and the program continues to provide a cost effective and very desirable employee fringe benefit. The partially self-funded insurance program is enhanced by a consortium of cities to collectively bid administrative services, stop-loss insurance for unexpected emergencies, and life and accidental death and dismemberment insurance, resulting in lower rates. b. Retirement Programs The City of Fort Collins contributes to six types of pension plans, including: 1 . Social Security 2. Police Money Purchase 3. Fire Money Purchase 4. General Employee Retirement Defined Benefit 5. Old Hire Fire Defined Benefit 6. Management Money Purchase The Fire and General Employee Retirement Plans are administered by the City of Fort Collins. The rate of contribution for the City administered plans is based upon an annual actuarial analysis for the normal cost and unfunded liability of the number of employees participating in each pension plan. The General Employees Retirement Committee has identified inequities among the City- administered plans. The City's current pension plans consist of the following provisions: • The City will maintain contribution rates at a level sufficient to meet all current normal costs of each pension plan; • Any unfunded liability incurred by individual pension funds will be amortized over a period not to exceed twenty years; • A thrift plan for City employees is an adjunct to the general employee retirement plan, to maintain comparability with benefits provided by other Front Range communities. Employees participation in this plan is optional. • A money purchase plan is offered to City Police and Poudre Fire Authority employees who do not belong to Social Security. • Money purchase plans are offered to management level employees who are also covered by Social Security. The Budget incorporates the following rate requirements to continue this policy: POLICE & FIRE MGMT. SOCIAL EMPLOYEE MONEY MONEY. SECURITY GENERAL THRIFT PURCHASE PURCHASE NORMAL COSTS CONTRI. EMPLOYEE PLAN PLAN PLAN City Contribution 7.65% 4.093% 3% S% 3%-10% Employee Contribution 7.650/ 3-% 8% = TOTAL 15.3% 4.093% 6% 16% 3%-10% 3.6. FACILITY MAINTENANCE AND REPAIRS 1 . MAINTENANCE, REPAIR & REPLACEMENT (M&R) A. 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.) B. 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). • 2. PRIORITIES FOR MAINTENANCE AND REPAIR FUNDING A. Life, health, and safety (i.e., heating system repair) B. Repair/Restoration ' C. Protects Capital Investment (Preventive) These priorities are used as the basis for funding recommendations in the annual budget process. 3. 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. The following chart shows past and projected M&R ongoing funding levels. Use of reserves in 1991-1995 enabled the City to meet the 4% target. $2,500 FUNDING BASE S� �\� 5-YR FUNDING NEEOs f 4% TARGET $2,01 2 $2.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$1:89. S7.954 E1,788 $1,842 $1.671 \\\\\ $1,5C 51,460 w$1.500 $1.378 . 8. 23 w icl $1,000 . . . . . . . . . . . . . . x $500 $0 990 1991 1992 1993 1994 1995 1996 1 997P 1 998P 1 999P 2000P 2001 P • A money purchase plan is offered to City Police and Poudre Fire Authority employees who do not belong to Social Security. • Money purchase plans are offered to management level employees who are also covered by Social Security. The Budget incorporates the following rate requirements to continue this policy: POLICE & FIRE MGMT. SOCIAL EMPLOYEE MONEY MONEY. SECURITY GENERAL THRIFT PURCHASE PURCHASE NORMAL COSTS CONTRI. EMPLOYEE PLAN PLAN PLAN City Contribution 7.65% 4.093% 3% S% 3%-10% Employee Contribution 7 6 1;0 TOTAL 15.3% 4.093% 6% 16% 3%-10% 4.2 ENTERPRISE FUNDS a. Light & Power Utility The financial policies of the Light & Power Utility are administered in accordance with the City Charter. The budget/five year plan is prepared in compliance with the following: 1 . Mission Statement MISSION: The Fort Collins Light and Power Electric Utility is a community owned utility that delivers energy and related services for the benefit of its customers and the community. We exist to serve our customers by: 1 . Providing safe, reliable, economical electric distribution related services for the present and future needs of the community. 2. Providing a fair economic return to the community to support City government services. 3. Reflecting and supporting community values including resource conservation, the environment, and local control. 4. Leveraging organizational resources and core competencies to provide additional value to our customers and the community such as: power quality, natural gas aggregation, telecommunications, and service options. 5. Employing the best customer service, business, and organizational practices to provide the highest customer value in an evolving competitive business environment. b. Water & Wastewater Utilities Formally adopted financial policies are an important factor in planning the financial operations of the Water and Wastewater Utilities. Policy statements were developed and incorporated into the five-year financial plan as follows: 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 Utility 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. 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 general obligation water bonds. Net revenues include all revenues referred to above, less operation and maintenance (O&M) expenses. 0 & M expenses are those expenses necessary to operation, maintain, and repair the water system, but do not include any allowance for depreciation or capital replacements and improvements. Any remaining net revenues of the Water Utility 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; • 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. Wastewater Fund 1 . Pledge of Revenues In accordance with the City and Wastewater Enterprise Bond Ordinances (together the 'Bond Ordinances"), the City has pledged revenue from monthly sewer charges, plant investment fees, A-B supplemental user fees, investment earnings, and all other income derived from the operation of its wastewater utility toward the payment of its sewer revenue bonds. 2. Flow of Funds The first charge against Wastewater Fund revenue is operation and maintenance (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 O & 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 Utility 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 Utility 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 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 Utility indicated above, less 0 & M expenses. 4. Water/Wastewater Utility 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. 4.4 SPECIAL REVENUE AND DEBT SERVICE FUNDS C. RprrPation Find 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. Find Strurttirp 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: Artivity Costs • part time staff 0 materials • equipment • participant transportation • other costs directly associated with conducting activities Facility Operation and Maintennnrp 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 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 0 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. nRSIgnAlpd RBSAryps Revenues collected by the Recreation Division that exceed expenditures in any given 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 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.