HomeMy WebLinkAbout1988-158-10/04/1988-1989 BUDGET FINANCIAL MANAGEMENT POLICIES RESOLUTION 88- 158
OF THE COUNCIL OF THE CITY OF FORT COLLINS
ADOPTING THE FINANCIAL AND MANAGEMENT POLICIES
RELATING TO THE 1989 ANNUAL BUDGET
WHEREAS, the City Manager and City Council have reviewed various
financial and management policies in conjunction with the annual budget
process and five year plan; and
WHEREAS, the City of Fort Collins is committed to sound financial
planning and direction; and
WHEREAS, these policies form the basis for various decisions affecting
the 1989 Annual Budget; and
WHEREAS, City Council wishes to formally adopt these financial and
management policies in conjunction with the adoption of the budget for the
fiscal year beginning January 1, 1989 and ending December 31, 1989.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT
COLLINS, that the 1989 Financial and Management Policies attached hereto as
Exhibit "A" , and incorporated herein by reference, be, and the same hereby
are, adopted as the basis for the Resolution adopting the 1989 Annual
Budget for the City of Fort Collins.
Passed and adopted at the regular meeting of the City Council held
this 4th day of October, A.D. 1988.
Mayor
ATTEST:
City Clerk
TABLE OF CONTENTS
Section 1. General Information
Paoe
I . I . Budget Submittal and Presentation. . . . . . . . . . . . . . 1
1 .2. Budget Process and Philosophy. . . . . . . . . . . . . . . . 2
1 .3. Categorization of Services . . . . . . . . . . . . . . . . . 6
Section 2. Revenue Policies
2.1 . Revenue Review and Projection. . . . . . . . . . . . . . . . 7
2.2. Sales & Use Tax Distribution . . . . . . . . . . . . . . . . 7
2.3. General Fund Fees and Taxes. . . . . . . . . . . . . . . . . 8
2.4. Revenue Sharing. . . . . . . . . . . . . . . . . . . . . . . 9
2.5. Private Contributions. . . . . . . . . . . . . . . . . . . . 9
Section 3. Financial Administration
3. 1 . Administrative Charges . . . . . . . . . . . . . . . . . . . 10
3.2. Building Maintenance Costs . . . . . . . . . . . . . . . . . 10
3.3. Energy . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4. Lease/Purchase . . . . . . . . . . . . . . . . . . . . . . . 11
3.5. Medical Insurance. . . . . . . . . . . . . . . . . . . . . . 12
3.6. Payment in Lieu of Taxes . . . . . . . . . . . . . . . . . . 12
3.7. Pension Funds. . . . . . . . . . . . . . . . . . . . . . . . 13
3.8. Performance Pay Plan . . . . . . . . . . . . . . . . . 14
3.9. Revenue Allocation Formula . . . . . . . . . . . . . . . . . 14
3.10. Rebate Programs. . . . . . . . . . . . . . . . . . . . . . . 15
Section 4. Governmental and Proprietary Funds
4. 1 . General Fund . . . . . . . . . . . . . . . . . . . . . . 16
4.2. Enterprise Funds . . . . . . . . . . . . . . . . . . . 16
4.3. Internal Service Funds . . . . . . . . . . . . . . . . 20
4.4. Special Revenue and Debt Service Funds . . . . . . . . . . . 21
Section 5. Capital Improvement Funds
5.1. Citizen Participation. . . . . . . . . . . . . . . . . . . . 24
5.2. Capital Improvement Policy . . . . . . . . . . . . . . . 24
5.3. Categorization of Capital Projects . . . . . . . . . . . 25
5.4. Prioritization of General City Capital . . . . . . . . . . . 26
5.5. Funds Included in Capital Improvement Program. . . . . . . . 27
Section 6. Reserve Policies
6. 1 . Policy Statement . . . . . . . . . . . . . . . . . . . . . . 28
6.2. Types of Reserves. . . . . . . . . . . . . . . . . . . . . . 28
Section 7. Investment Program
7. 1 . Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.2. Types of Investments . . . . . . . . . . . . . . . . . . 30
7.3. Administration of Investment Program . . . . . . . . . . . . 31
Section 8. Debt Policy
8.1. Conditions for Using Debt. . . . . . . . . . . . . . . . . . 32
8.2. Sound Financing of Debt. . . . . . . . . . . . . . . . . . . 32
8.3. Financing Methods. . . . . . . . . . . . . . . . . . . . . . 32
GENERAL
1.1. BUDGET SUBMITTAL AND PRESENTATION
(a) 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. It shall also 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 recommendation for the ensuing year.
The budget estimates are open to the public for inspection and
copy. Within ten days City Council sets times for public hearings,
at which time the public may comment upon the proposed budget.
Before the last day of October of each year, the Council shall
adopt the budget for the ensuing fiscal year.
(b) The City of Fort Collins is committed to presenting a sound
financial plan for operations and capital improvements. To this
end, the City utilizes conservative revenue forecasts and:
1 . Prepares separate five-year financial plans for operations and
capital improvements;
2. Allows staff to manage the operating and capital budgets, with
City Council deciding allocations in both;
3. Adopts financial and management policies which establish
guidelines for five-year financial plans;
4. Establishes target budgets yearly for all funds based upon
adopted policies;
5. Appropriates the next year's annual budget in accordance with
the City Charter;
6. Adjusts the annual budget to reflect changes in the local
economy, changes in priorities, and receipt of unbudgeted
revenues.
7. Organizes the budget so that revenues are related to
expenditures as much as possible;
8. Provides department managers with immediate access to revenue
and expenditure information for controlling their annual
expenditures against appropriations;
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9. Utilizes a performance measurement system for all activities
in the City;
10. Evaluates recommendations which have a budget impact in light
of annual appropriations and five-year financial plans.
1.2. BUDGET PROCESS AND PHILOSOPHY
(a) Charter Requirements
The City Charter requires a budget to be adopted for the ensuing
fiscal year "before the last day of October of each year. " A
single appropriation is presented to Council at the first meeting
in October of each year, containing the appropriations for all
City funds for the ensuing year.
(b) Basis of Accounting
The accounts of the City are organized on the basis of funds and
account groups, each of which is considered a separate accounting
entity. The operations of each fund are accounted for with a
separate set of self-balancing accounts that comprise its assets,
liabilities, fund equity, revenues, and expenditures or expenses.
In Governmental Funds (General Fund, Special Revenue and Debt
Service Funds, and Capital Projects Funds) , the modified accrual
basis of accounting is used. Revenues are recognized in the
accounting period in which they become available and measurable.
Expenditures are recognized in the accounting period in which the
liability is incurred.
In Proprietary Funds (Enterprise Funds and Internal Service
Funds) , the accrual basis of accounting is used. Revenues are
recognized in the accounting period in which they are earned and
become measurable. Expenses are recognized in the accounting
period incurred.
Although classified as Special Revenue Funds for budgetary
purposes, the City's three Pension Funds are classified as Trust
and Agency Funds for accounting purposes. Trust and Agency Funds
are used to account for assets held by the City in a trustee
capacity, or as an agent for others. Revenues and expenditures in
these funds are recognized on the basis consistent with the fund's
accounting measurement objective. For Pension Funds, the accrual
method of accounting is used.
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(c) Adoption Process
The annual budget process is based upon Charter requirements and
City Council adopted Financial and Management Policies. In March,
departments develop five year revenue projections and submit them
to the Budget and Research Office, which develops target budgets
for each department, based upon projected available resources.
Departments begin their budget development in April , based upon
targets and a Budget Manual compiled by Budget and Research.
Budget proposals are turned into Budget and Research in May, along
with policy analyses relating to matters involving policy
decisions that must be made by Council prior to development of the
Recommended Budget.
All funds are expected to stay within their targets. Requests for
funds above target amounts must be submitted in the form of
Supplemental Requests. These requests are reviewed by the City
Manager, and those having the greatest merit are incorporated into
the Recommended Budget, if adequate resources are available. Each
department meets with the City Manager to justify its budget
submittal and Supplemental Requests.
In June, the Budget and Research Office prepares a list of policy
issues for Council , containing summary information on the upcoming
budget and policy analyses for review. This memo forms the basis
for discussion at two Council worksessions, which provide staff
with direction in developing the Recommended Budget.
The Recommended Budget is submitted to Council in late August and
is made available to the public at the same time. During
September, two additional Council worksessions are held; public
input is solicited at two Public Hearings, and at a Community
Meeting.
The budget for the upcoming year is adopted in October per Charter
requirements, and a final adopted budget document is then printed.
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(d) Changes to the Adopted Budget
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 in the
following circumstances:
Carryover Encumbrances - If a department has open
purchase orders at year end, related appropriations
are encumbered and carried over into 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.
Prior Year Reserves - In cases where a fund's
reserves are greater than required by policies,
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
emergency or unusual circumstances , if it
determines that such appropriations are in the best
interests of the City.
2. Budget Decreases
When economic developments dictate, budgets may be decreased
during the year to levels below adopted appropriations. As part
of the budget process departments submit Program Reductions,
detailing in order of preference which appropriations they would
relinquish should such action become necessary. If this action
becomes necessary in the opinion of the City Manager, Budget and
Research moves these appropriations to a line item called "Frozen
Appropriations. " While this does not lower the appropriations
within a fund, it prevents them from being spent. If the economic
situation should later change, the appropriations may be returned
to other line items for expenditure.
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(e) 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:
1 . Within Fund - This is a transfer between line items and/or
departments within a fund, and requires approval of the fund
manager.
2. 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.
(f) Lapsing of 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:
Capital Projects - Appropriations for Capital Projects do not
lapse until the project is completed and closed out.
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.
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1.3. CATEGORIZATION OF CITY SERVICES
The City Council has reviewed and categorized all City services in
order to set priorities for allocating available money. These
categories are:
Basic or Core Services - services that are best performed at the
local level and are most closely linked to protecting the health
and safety of citizens. Legally mandated services or commitments
are also included in this category.
Maintenance of Effort Services - services which the City has
traditionally provided or which reflect a major capital investment
requiring an expenditure of funds to maintain.
Quality of Life - activities which are provided for more
specialized groups and enhance the desirability of Fort Collins as
a place to live.
These categories were applied to City services in the following
manner:
Basic or Core Services Quality of Life
Building Inspection
Debt Payments Community Services
Fire Golf
Light & Power Lincoln Center
Police Museum
Storm Drainage Open Space
Streets Recreation
Water & Wastewater
Maintenance of Effort Services
Cemeteries
Engineering
Facilities
General Administrative Services
Internal Service Activities
Library
Natural Resources
Park Maintenance
Planning
Street Lighting
Transfort
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REVENUE POLICIES
2.1. REVENUE REVIEW AND PROJECTION
The City reviews estimated revenue and fee schedules as part of
the budget process. Estimated revenue is conservatively projected
for five years and updated annually. Proposed rate increases are
based upon:
fee policies applicable to each fund or activity;
0 the related cost of the service provided;
0 the impact of inflation in the provision of
services;
equity of comparable fees.
The City of Fort Collins maintains a diversified and stable
revenue system to shelter the City from short-run fluctuations in
any one revenue source.
2.2. SALES AND USE TAX DISTRIBUTION
The City's Sales & Use Tax totals 2.75 cents, developed as
follows:
1968 - General City uses 1.00
1980 - General City uses 1.00
1982 - General City uses .25
1984 - "Necessary" General City Capital Projects .25*
1985 - Pool/Ice Rink Facility .25*
-2.75
*Excluding sales of grocery food.
TAX ON ALL SALES & USES-EXCLUDING GROCERY FOOD: 0.50 cents
Capital Projects Fund
General City Capital Projects (necessary) 50%
Debt Service Fund
Pool/Ice Rink Facility 50%
TOTAL 100%
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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
(1) Fixed Dollar Amounts
Debt Service Fund
Ft. Collins/Loveland Airport Authority
Sales & Use Tax Reserves
Street Oversizing
(2) General Fund
NOTE: The entire 2.25% Sales & Use Tax collections are dedicated to the
General Fund, excluding the amount necessary to fund debt service
payments. Thus, the Sales & Use Tax revenue previously dedicated
to capital projects is available in the General Fund. With this
change, ongoing street maintenance projects, previously funded by
the capital revenue, will now be funded by the General Fund.
These projects are considered an ongoing cost of the General Fund
to maintain the City's existing infrastructure.
Actual Sales & Use Tax revenue generated by the 2.25 cent tax in
excess of budgeted amounts will be transferred to the General
Fund.
Actual Sales & Use Tax revenue generated by the $0.25 cent tax for
General City Necessary Capital Projects will be transferred to,
and be retained in, the Capital Projects Fund until all projects,
previously authorized by Council , have been completed. Upon
completion of those designated projects, excess revenue will be
used to fund other necessary street projects in accordance with
the original ordinance.
Actual Sales & Use Tax revenue generated by the $0.25 cent tax for
the Pool/Ice Rink facility will be retained in the Sales & Use Tax
Fund until the $9,000,000 of Bond Anticipation Notes (BANS) issued
in 1985 to construct this facility have been retired.
2.3. GENERAL FUND FEES AND TAXES
The City of Fort Collins imposes a number of miscellaneous
licenses, fees and taxes, which are reviewed annually in
conjunction with the Revenue Policy, to determine rates and fee
schedules for the ensuing year.
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2.4. REVENUE SHARING
In order to avoid dependency upon federal funds for basic or core
service areas, the City has utilized Revenue Sharing funds for
one-time and/or capital costs. The exception to this policy has
been the use of funds for social service programs on an ongoing
basis. The Federal Revenue Sharing program was discontinued in
1986. Since 1987 the City has been able to use remaining
carryover funds to provide for the continuation of Social Service
Agency contracts.
2.5 PRIVATE CONTRIBUTIONS
The City encourages the solicitation of private contributions for
"Quality of Life Services". 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.
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FINANCIAL ADMINISTRATION
3. 1. ADMINISTRATIVE CHARGES
The General Fund provides services to all funds, requiring a
formula for the allocation of Administrative Charges. The formula
utilized in the allocation is as follows:
9 50% of the cost is allocated based on the ratio of
each fund's budget to the total City budget
(excluding Light & Power's Purchased Power) and;
1 50% of the cost is allocated based on a ratio of
the number of City employees in each fund to the
total number of City employees.
This policy is applied to all funds, with the exception of those
funds subsidized by the General Fund.
3.2. BUILDING MAINTENANCE COSTS
As part of the 1985 Budget process, Council considered the City's
policy relating to the maintenance of City buildings. Such
maintenance has been classified into three categories:
1 . General
2. Renovation
a. Minor
b. Major
3. Replacement
Priorities associated with the categories have also been
established:
1. Life, Health, and Safety
2. Repair
3. Protecting Capital Investment
4. Quality/Enhancement
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3.3. ENERGY
The City recognizes a responsibility in energy management. The
City's roles are:
1 a consumer of energy in municipal facilities;
1 a corporate agency of the community to facilitate
energy objectives of the community;
1 a supplier of energy and energy services.
The City of Fort Collins strives to maintain an energy
consciousness within the community. As a consumer of energy the
City has undertaken several exemplary projects at municipal
facilities. As an advocate of energy conservation and a supplier
of energy services, the City has initiated an aggressive outreach
effort to provide energy education and facilitate the expanded use
of conservation and renewable energy.
3.4. LEASE/PURCHASE
The City of Fort Collins has used 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.
Other advantages that lease/purchase financing can offer over the
traditional cash method of financing are:
1 Decreasing the impact of inflation on the purchase
of new and replacement equipment.
1 Reducing the initial impact of the cost to user
departments by enabling acquisition costs to be
spread over the useful life of the equipment.
1 Safeguarding the opportunity to use cash assets to
earn higher interest than the interest cost of
lease/purchasing.
Finally, 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.
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3.5. 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.
3.6. PAYMENT IN LIEU OF TAXES (PILOT)
In accordance with the City Charter regarding municipality rates
and finances, the water, sewer, and electric utilities "pay into
the General Fund in lieu of taxes an amount at least equivalent to
City taxes and franchise permits as if the utility were privately
owned. "
The PILOT rate, as established by Council is 5% for the Water and
Wastewater Utilities, and 6% for the Light and Power Utility.
This rate is applied to the operating revenues per year for each
utility. The PILOT establishes a rate approximately one and
one-half (1.5) times the rate that would be charged if the
utilities were privately owned.
NOTE: Staff has analyzed the return on investment that the City realizes
from its utilities. Our analysis indicates that the return on
investment we receive from utilities is lower than most other
communities in Colorado. As a result of this analysis, the PILOT
which is paid by Light and Power into the General Fund has been
increased by one percent.
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3.7. PENSION FUNDS
The City of Fort Collins contributes to five pension plans,
including:
Police
Fire
General Employee Retirement
State Pension - Police
State Pension - Fire
The Police, 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 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. Employee participation in this
plan is optional .
The Budget incorporates the following rate requirements to
continue this policy:
General Employee
Normal Costs Police Fire Employee Thrift Plan
City Contribution 8% 8% 3.553% 3%
Employee Contribution 8% 8% -- 3%
TOTAL 16% 16% 3.553% 6%
General
Unfunded Liability Police Fire Employee Total
City Contribution $ 0 $84,000 $ 0 $84,000
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3.8. PERFORMANCE PAY PLAN
The City's goal as an employer is to attract and keep quality
employees. To help accomplish this goal , the City has established
a performance pay plan. The performance pay philosophy has been
maintained for five general reasons:
1. to attract quality employees;
2. to retain quality employees;
3. to operate the City with fewer employees than
comparable jurisdictions;
4. to provide an incentive and reward for
productivity, and;
5. to recognize cost savings generated by productive
employees.
Every effort will be made to provide the economic adjustment
necessary for the performance pay plan by January of each year.
If this is not financially feasible, as much as can be provided
(given the priority demands on available resources) will be given
in January.
In the area of compensation, the City initiated, in 1986, a
three-year program to address the issue of comparable worth, which
is concerned with compensation of individuals based upon their
value to the organization.
3.9. POUDRE FIRE AUTHORITY - REVENUE ALLOCATION FORMULA
(a) In December 1981, the City entered into an agreement with the
Poudre Fire Protection District, creating the Poudre Fire
Authority (PFA) , which provides fire protection services to the
City. The Revenue Allocation Formula outlines the City's
contribution to the PFA:
Annual Operations and Maintenance Budget
The City will contribute funding for maintenance and operation
costs of the Poudre Fire Authority which shall be established
annually based upon a percentage of Sales & Use Tax revenues and a
portion of the operating mill levy of the City's Property Tax.
These funds are in addition to funds contributed by Poudre Valley
Fire Protection District.
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(b) The City allocates Property Taxes to the PFA, maintaining the
relative proportion (64.9%) of Property Tax mills as allocated to
the PFA in Resolution 83-7. In accordance with Resolution 87-148
the City currently contributes 4.676 mills of existing Property
Tax to PFA.
The City increased the Sales & Use Tax rate by one-quarter cent on
July 1 , 1984 for "necessary" General City Capital projects and by
another one-quarter cent on January 1, 1985 for a Pool/Ice Rink
Facility. Since the revenues generated by these increases are
dedicated for the specific purposes intended, the budget includes
an allocation of 0.303 of one cent of the City's 2.25 cent Sales &
Use Tax applicable to all taxable sales and uses to the PFA, in
accordance with Resolution 83-7. The Revenue Allocation Formula
represents the City's contribution to the PFA for its operation
and maintenance costs as well as for capital expenditures.
3.10. REBATE PROGRAMS
The City recognizes that certain segments of its population,
specifically the handicapped 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
These programs provide financial assistance to handicapped
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
The City recognized the regressiveness of the Sales Tax on food
and specifically excluded the sale of grocery food when enacting a
voter-approved $0.25 cent Sales and Use Tax increase for Capital
Projects, on July 1, 1984 and another $0.25 cent January 1, 1985,
for a Pool/Ice Rink Facility.
In addition to these measures, the City implemented a Sales Tax
Rebate on Food Program, with the 1985 Budget. This program
provides for an annual rebate to members of qualifying households
on the basis of residency and income guidelines.
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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 a specific use. The major source of revenue to the General
Fund is the Sales & Use Tax, which accounts for approximately 53%
of the fund revenue. Local Property Tax and the Lodging Tax are
also included in the General Fund as are revenues derived from
fees for services and materials, licenses, permits, and fines.
4.2. ENTERPRISE FUNDS
The City currently has six Enterprise Funds. These include
Cemeteries, 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 only if they
were financed more than 50% by user charges. In the 1988 Budget,
all Enterprise Funds, with the exception of Cemeteries, will
recover 100% of their costs through the five year projection.
The long term goal of all enterprise accounts is self-sufficiency.
Toward this end, those funds which are not presently recovering at
least 75% of their 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 timeframe may be accounted for as subsidized
operations and not as 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 has been prepared in compliance with the following:
1 . Fundamental Purpose
"To efficiently manage the City of Fort Collins' energy
systems and services with sensitivity to the environment, the
community, and conservation of resources. To enhance the
quality of life for the consumers and the community through
provision of sufficient electrical energy, reliably and
economically. "
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2. Electric Rates
Electric rates will be based upon the cost of service approach
to reflect full distribution of costs to appropriate rate
classes in order to effect equitable sharing of costs. Rates
shall be established and maintained at a level sufficient:
1 To pay the full cost of operation and maintain
the electric utility in good repair and working
order;
1 To provide an operating reserve equal to 8% of
budgeted operating expenditures, excluding the
cost of purchased power;
1 To provide a future capital improvements
reserve in an amount which shall , as nearly as
possible, be 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 provided, however, that the
amount in such reserve shall be permitted to
vary from year to year if approved by the
Council during the annual budget process for
the purposes of achieving stability and
predictability in rates and to minimize changes
adverse to electric consumers;
3. Excess Retained Earnings
After retained earnings are reserved as specified above, any
excess retained earnings shall be added to the future capital
improvements reserve.
4. Operating Records
The Light & Power Utility will maintain a standard system of
accounting which shall , at all times, correctly reflect all
financial operations of the system and keep other such records
and data as are generally used by the electric utility
industry.
The accounts of the Light & Power Utility shall be kept
separate and distinct from all other accounts of the City and
shall contain proportionate charges for all services performed
by other departments as well as proportionate credits for all
services rendered to other departments.
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(b) Water & Wastewater Utilities
Formally adopted financial policies are an important factor in
planning the financial operations of the Water and Sewer
utilities. Policy statements have been developed and incorporated
into the five year financial plan as follows:
1 . Net Income
The net income of the Water and Wastewater Utilities shall be
at least equal to the annual cost of the following:
1 Principal reductions of outstanding bonds;
1 Loan requirements to Federal or State agencies, and;
1 Annual operating reserve increases.
2. Rate Requirements
Utility rates shall be set at a level to provide for the net
income requirement in each fiscal year. Levelized rate
increases are preferred and, when possible, should be achieved
through levelized expenditures.
3. Reserves
The following reserves shall be established and maintained in
the applicable utility:
1 Operating Reserve - at least equal to 2% of the
projected annual operating revenue.
1 Plant Investment Fee Reserve - equal to the
annual fees less annual cost allocated to
System Expansions.
1 Capital Reserve - equal to the amount of bond
proceeds available at the end of one fiscal
year to be expended in the next fiscal year.
1 Debt Reserve - equal to the amount required by
individual bond ordinance.
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4. Capital Cost Financing
Annual capital cost shall be identified as one of three types,
and financed as noted:
1 Normal replacement of the existing system.
Financed on a Pay-As-You-Go basis from a
reserve for depreciation funded from current
rates.
1 System improvements that benefit the existing
and future population. Debt financed over the
life of the improvement and the annual debt
service shall be funded from current rates.
1 System expansions that benefit future
populations. Debt financed over the life of
the expansion, and annual debt service shall be
funded from a combination of Plant Investment
Fees and Contributions in Aid of Construction.
Federal and/or State grants may be utilized to fund portions
of, or all , capital costs.
(c) Storm Drainage Fund
The primary purpose of the Storm Drainage Fund is to meet the
public need for effective stormwater management, including flood
control , capital improvements and the operation and maintenance of
drainage facilities.
1. Operation and Maintenance Requirements
Utility rates will be set at a level to provide for the
operation and maintenance requirement for each fiscal year.
The rate is based on the category of land usage and a per
square foot per month rate.
2. Capital Project Needs
A master plan has been developed for each basin to identify
drainage needs, set fees, and determine capital improvement
requirements. In the effort to balance storm drainage risk and
liability, a 20-year storm drainage capital program has been
developed that relates to the system requirements of each
basin where a positive cost/benefit ratio exists.
To finance this capital program, a one-time basin fee is
collected with new development and a monthly capital fee from
property owners.
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3. Capital Cost Financing
The financing of capital improvements will be accomplished
through the following:
a one-time basin fee that is collected with new
development;
monthly capital fee collected from property
owners;
bond issues that will be financed over the life
of the improvement.
The annual debt service will be provided from the existing
monthly capital fees.
4. Reserves
The following reserves have been established:
Capital Reserve - equal to the amount of bond
proceeds, monthly capital fees, and one-time
new development fees available at the end of
one fiscal year to be expended in the next
fiscal year;
Operating Revenue Reserve - equal to 2% of the
projected annual operating revenue;
Debt Reserve - equal to the amount required by
the individual bond ordinance.
4.3. INTERNAL SERVICE FUNDS
Internal Service Funds are used for the operation of agencies
which provide goods and/or services to other agencies within the
City on a cost-reimbursement basis . These funds cover
expenditures through the imposition of user charges.
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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. Special Revenue
Funds include Cultural Services & Facilities, Recreation,
Transportation, and the City's various Pension funds.
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 & Maintenance and Performing &
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 & Visual Arts Programming.
A transfer from the General Fund will make up the difference
between total revenue and expenditures.
2. The Cultural Services & Facilities Administration and Museum
budgets provide minimal financial support. These programs are
funded primarily by a transfer from the General Fund.
3. Major capital improvements and renovations will be financed
through sources other than Cultural Services and Facilities
Fund.
4. Solicitation of funds through donations, fund-raising events,
and non-traditional sources shall be encouraged by the City
staff, Lincoln Center League, the Cultural Resources Board and
the City Council .
Funding collected for any special purpose shall be earmarked for
that purpose and those funds will be processed through the Fort
Collins Foundation.
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(b) Recreation Fund Fee Policy
The following fee policy for the Recreation Fund continues in
effect.
1 . The Recreation Division shall recover a minimum of 50% of its
total costs in revenue generated through fees and charges.
2. Categories have been created for the Recreation Programs in
order to evaluate which programs must cover total or partial
expenditures. These categories are:
A. Total Support
1. Sports
2. Dance and Fitness
B. Partial Support
1 . Aquatics
2. Outdoor Recreation
3. Arts and Crafts
4. Special Interests
C. Minimal Support
1 . Senior Citizens
2. Special Events
3. Therapeutics
4. Youth Centers
5. Northside Recreation
Total revenue from fees and charges shall cover a minimum of
80% of "Total " and "Partial " support program costs. A
transfer from the General Fund will comprise the difference
between actual revenues and expenditures in these programs as
well as programs requiring "Minimal " support.
3. Revenue generated from rentals, concessions, and other
miscellaneous sources shall be considered an equal priority
with class registrations when establishing fees and charges.
4. The Recreation Division shall provide designated programs for
senior citizens and developmentally disabled persons at 1/2
the established fee, and to low-income citizens at 1/3 the
established fee.
5. The Recreation Division shall charge rental for rooms, pool
time, gym, ball field, and special equipment, as specified in
written policies.
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6. An admission fee shall be charged at the Northside Community
Center for use of the weight room, locker room, and gym,
during drop-in hours.
7. Solicitation of funds through donations, fund raising events,
non-traditional sources, and various other needs shall be
encouraged by the Parks and Recreation Advisory Board and City
Council .
Funding collected for any special purpose shall be earmarked
for that purpose, and the utilization of foundations for the
furtherance of this goal shall likewise be encouraged.
NOTE: In 1987, City staff began a comprehensive evaluation of the User
Fee policies established by the Cultural Services and Facilities
and Recreation funds. This evaluation was done as part of an
on-going review of the City's costs associated with providing these
programs. A new policy on user fees is being developed which takes
into consideration both the direct and indirect costs of providing
Cultural Services and Recreation programming. The new policy will
also highlight the recommended levels of General Fund support for
each program. This effort has been undertaken as part of an
overall effort to ensure that the costs of City services are being
equitably distributed over all user groups.
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CAPITAL IMPROVEMENT FUNDS
5.1. CITIZEN PARTICIPATION
The development of the Capital Improvement Program was
significantly modified by Resolution 83-86. By this Resolution,
Council stated its intention "to develop and implement a program
for soliciting citizen involvement and participation in
formulating a Capital Improvements Program and the funding
thereof. " This was accomplished with the adoption of Resolution
83-94, creating a Citizens' Advisory Committee on Project RECAP
(REevaluation of CApital Projects) . Council directed the
Citizens ' Advisory Committee on Project RECAP to make
recommendations on the capital improvement needs of the community.
The Project RECAP Committee was instrumental in the determination
of the General City Capital projects to be accomplished in the
1985-1989 Capital Improvement Program.
In addition, at the City's May 1, 1984 election, the residents of
Fort Collins approved the imposition of a $0.25 cent increase in
the Sales & Use Tax rate (excluding grocery food) , effective for a
five year period commencing July 1, 1984, to finance "necessary"
General City Capital projects, as well as a $0.25 cent increase in
the Sales and Use Tax rate (excluding grocery food) , effective for
a five year period commencing January 1, 1985, to finance the
construction of a Pool/Ice Rink Facility in the City.
5.2. CAPITAL IMPROVEMENT POLICY
With the above-mentioned modifications to the process of
identifying the City's capital needs, the City will continue to
operate under its existing Capital Improvement Policy:
The City will develop a multi-year plan for capital
improvements and update it annually;
The City will make all capital improvements in
accordance with the adopted Capital Improvement
Program and the Capital Project Management Control
System;
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I The City will identify estimated costs and funding
sources for each capital project requested before
it is submitted to City Council ;
1 The City will use intergovernmental assistance to
finance only those capital improvements that are
consistent with the Capital Improvement Plan and
City priorities and whose operating and maintenance
costs have been included in the operating budget
forecasts.
5.3. CATEGORIZATION OF CAPITAL PROJECTS
Capital improvements generally fall into several different
categories. Project categories, along with their funding sources,
include:
(a) Replacement - capital expenditures relating to normal replacement
of worn or obsolete capital equipment or facilities.
In general , capital expenditures relating to replacement of
equipment or facilities will be financed on a pay-as-you-go basis,
with debt financing considered only when appropriate.
(b) Expansion - capital expenditures relating to the construction of
new or expanded facilities necessitated by growth.
Capital expenditures relating to expansion will be financed
primarily on a pay-as-you-go basis, but when the City's share of
new improvements can be determined to benefit the overall
population in the future, debt financing may be appropriate.
(c) Unusual - capital expenditures for improvements that enhance the
quality of life in Fort Collins and are consistent with the City's
goals, but cannot be categorized as essential for the provision of
basic or maintenance of effort services.
The policy relating to unusual capital expenditures directs the
City to look to the ultimate beneficiary of each capital
improvement in order to determine the source of funding.
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5.4. PRIORITIZATION OF GENERAL CITY CAPITAL PROJECTS
With the incorporation of the recommendations of the Citizens'
Advisory Committee on Project RECAP, a new mechanism for
categorizing General City Capital projects has been developed in
order to determine priorities for the allocation of available
funds to projects.
General City Capital needs are first identified as relating to one
of the Council -adopted "categories of service", as detailed in
Policy 1 .3;
I . Basic (or Core)
II. Maintenance of Effort
III. Quality of Life
Within each category, projects are then ranked as:
1 Essential
1 Necessary
1 Desirable
The following matrix demonstrates the resulting order of priority
in terms of access to available funds:
MAINTENANCE QUALITY
BASIC SERVICES OF EFFORT OF LIFE
-------------- ----------- ---------
Essential (1) Essential (2) Essential (3)
Necessary (4) Necessary (5) Necessary (6)
Desirable (7) Desirable (8) Desirable (9)
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5.5. FUNDS INCLUDED IN CAPITAL IMPROVEMENT PROGRAM
The City's Capital Improvement Program includes the Capital
Projects Fund, the Conservation Trust Fund, and the Parkland Fund.
(a) Capital Projects Fund
General City Capital improvements (Facilities, Parks & Recreation,
and Streets & Traffic are financed by transfers from the
appropriate financing fund. These funds include; Sales & Use Tax,
General , and Transportation. They can also be financed through
bond proceeds, and/or grant funds deposited directly in the
Capital Projects Fund. In addition, the proceeds of the two $0.25
cent Sales & Use Taxes are specifically dedicated to General City
Necessary Capital Projects and a Pool/Ice Rink facility.
Utilities (Wastewater, Storm Drainage, and Water) capital projects
are financed by transfers from the respective financing fund.
Sources of funding in the financing funds are bond proceeds and
specific fees. Light & Power Utility capital projects are
included in the Light & Power fund and, thus, do not appear in the
Capital Projects Fund.
(b) Conservation Trust Fund
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.
(c) Parkland Fund
The 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 Parkland Fund includes funds for
neighborhood park capital improvements, with associated operation
and maintenance costs included in the General Fund operating
budget.
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RESERVE POLICIES
6.1. 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.
6.2. TYPES OF RESERVES
The City of Fort Collins maintains the following reserves in its
governmental and proprietary funds:
General Fund Designated for Revenue Shortfall -
this reserve is held in the General Fund and is
designed to be available for temporary financing of
unforeseen needs of an emergency nature, and to
permit orderly adjustment to revenue losses. The
amount of money to be held in the general
contingency reserve will not be less than 6% of the
approved General Fund budget.
I General Fund Designated for Buildings AImprovements
- --this reserve provides for deferred maintenance
needs, major renovations and repairs to maintain
the City's facilities. An appropriate amount is
determined based on the dollar value of City
buildings and improvements.
General Fund Designated for Equipment Replacement -
this reserve provides for the timely replacement of
operating equipment (vehicles or machinery) and the
purchase of additional equipment due to increased
need. An appropriate reserve amount is determined
based on the total dollar value of City equipment.
Operating Reserves - operating reserves are held
in Enterprise, Internal Service, and some Special
Revenue Funds. There are two types of Operating
Reserves:
1 . An appropriated contingency which provides for
unexpected or unanticipated expenditures during
the years. 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.
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2. 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.
0 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.
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.
Debt financed capital improvements are , by
definition, financed by proceeds of bond issues and
do not require capital reserves.
Debt Reserves - Debt reserves are established to
protect bond holders from payment defaults.
Adequate debt reserves are essential in maintaining
good bond ratings and the marketability of bonds.
The amount of debt reserves are established by bond
ordinance in association with each bond issuance.
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INVESTMENT PROGRAM
7. 1. OBJECTIVES
The City's Investment Program has several objectives. Among those
are:
to maximize the amount of cash available, both to
meet the City's daily cash need and to increase the
amount available for investment;
earn the maximum return on investment;
minimize risk to the investment principal .
7.2. TYPES OF INVESTMENTS
The City of Fort Collins maintains several types of investments.
Included among these are:
0 Interest bearing accounts or time certificates of
deposit in State and/or national banks doing
business in Colorado;
Obligations of the United States government
including Treasury Bills, Treasury Notes, and
Treasury Bonds;
Bonds or other interest bearing obligations of
which the principal and interest are
unconditionally guaranteed by the United States
government. These include such issues as GNMA and
FNMA bonds;
Debentures or similar obligations issued by a
federal intermediate credit bank or by a bank for
cooperatives;
Notes or bonds secured by mortgage or trust deed
insured pursuant to Title II of the National
Housing Act.
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7.3. ADMINISTRATION OF INVESTMENT PROGRAM
In accordance with Resolution 82-70, the Director of Finance is
authorized and empowered to manage City monies including the
purchase and sale of investments.
The responsibilities of the Director of Finance in this area
include the following:
to prepare a cash budget to determine cash needs
and the availability of cash to invest;
to pool cash from various City funds to enhance
investment capabilities, thereby maximizing
investment income;
to analyze market conditions of the various
investment securities on a daily basis to determine
the maximum yield obtainable;
to prepare investment assumptions as to market
conditions, cash availability, and starting mix of
investment securities,
to prepare investment strategies or actions to be
taken based upon assumptions and actions to be
taken in the event of an unexpected drop in cash
flow or unexpected revenues;
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DEBT POLICY
8.1. CONDITIONS FOR USING DEBT
The City of Fort Collins will use debt financing only when it is
considered appropriate. The issuance of debt will be considered
appropriate when the following conditions exist:
When non-continuous capital improvements are
desired, and;
When it can be determined that future citizens will
receive a benefit from the improvement.
8.2. SOUND FINANCING OF DEBT
When the City of Fort Collins utilizes long-term 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 improvement;
Determining that the cost/benefit of the
improvement, including interest cost, is positive.
8.3. FINANCING METHODS
The City maintains the following policies in relation to the
methods of financing used to issue debt:
Total general obligation debt will not exceed 10%
of assessed valuation, in accordance with the City
Charter;
Where possible, the City uses special assessment,
revenue, or other self-supporting bonds instead of
general obligation bonds;
Fort Collins maintains good communications with
bond rating agencies about its financial condition.
Annual budgets include debt service payments and reserve
requirements for all debt currently outstanding for all proposed
debt issues.
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