HomeMy WebLinkAbout1987-142-10/06/1987-1988 ANNUAL BUDGET RESOLUTION 87- 142
OF THE COUNCIL OF THE CITY OF FORT COLLINS
ADOPTING THE FINANCIAL AND MANAGEMENT
POLICIES RELATING TO THE 1988 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 1988 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, 1988 and ending December 31 , 1988.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT
COLLINS, that the 1988 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 1988 Annual
Budget for the City of Fort Collins.
Passed and adopted at the regular meeting of the City Council held
this 6th day of October, A.D. 1987.
Asss♦an Mayor
ATTEST:
City Clerk
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
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;
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.
(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 Community Meetings held at
various locations throughout the City.
The budget for the upcoming year is adopted in October per Charter
requirements, and a final adopted budget document is then printed.
(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.
(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.
1.3. CATEGORIZATION OF CITY SERVICES
For 1988, 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 & Sewer
Maintenance of Effort Services
Cemeteries
Engineering
Facilities
General Administrative Services
Internal Service Activities
Library
Natural Resources
Park Maintenance
Planning
Street Lighting
Transfort
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:
1 fee policies applicable to each fund or activity;
1 the related cost of the service provided;
1 the impact of inflation in the provision of
services;
1 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
In 1988, the City's Sales & Use Tax will total 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.
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
General Fund 80%
Fixed Dollar Amounts
Debt Service Fund
Ft. Collins/Loveland Airport Authority
Sales & Use Tax Reserves
Capital Projects Fund
Sales & Use Tax receipts dedicated to General
City Essential Capital are determined after
coverage of General Fund and Fixed Dollar
Amounts
20%
TOTAL 100%
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%
Sales & Use Tax Distribution was altered in 1987 to reflect a
concern that the General Fund be sheltered from fluctuations in the
local and regional economy. The Sales & Use Tax is the largest
revenue source in the General Fund. By allocating 80% of all Sales
& Use Tax revenues to the General Fund, the City will be better
able to predict revenues and expenditures in the General Fund. The
remaining 20% of Sales & Use Tax receipts are divided among the
Capital Projects Fund and several debt obligations.
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 authorized
projects have been completed. Upon completion of the designated
projects, excess revenue will be transferred to the General Fund to
reduce Property Taxes.
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. Upon
retirement of the BANS, excess revenue will be transferred to the
General Fund for operation of the facility, although at this time
our five year projections do not indicate that the $0.25 cent tax
will produce any excess revenue.
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.
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 on-going
basis. The Federal Revenue Sharing program was discontinued in
1986. In 1987, and again in 1988, the City has been able to
utilize 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.
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:
1 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.
NOTE: This policy has been applied to all funds in 1988, with the
exception of those funds subsidized by the General Fund. In 1988,
the City has applied Administrative Charges to four new funds.
These include the three Capital Projects funds (Capital Projects,
Conservation Trust , and Parkland) and the Transportation Fund.
By applying Administrative Charges over a wider array of City
funds, there is a more equitable distribution of those costs. The
modifications made in 1988 represent the first step in a longer
term process which will ultimately result in more accurate
accounting of administrative costs.
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
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.
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 , for the Water, Sewer,
and Light and Power Utilities is 5% of operating revenues per year
for each utility. The 5% PILOT rate accomplishes the following
objectives:
Establishes a rate approximately one and one-half
(1.5) times the rate that would be charged if the
utilities were privately owned, and;
Provides a more consistent rate for all utilities.
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 consists of the following provisions:
I 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 1988 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 E 84,000 -0- $ 84,000
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.
(b) The City revised its Property Tax mill levy in 1987 and,
accordingly, the 1988 Budget includes an allocation of Property Tax
to the PFA, maintaining the relative proportion of Property Tax
mills as allocated to the PFA in Resolution 83-7. In accordance
with Resolution 87-148 the City currently contributes 4. 186 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 1988 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. Since the Revenue
Allocation Formula represents the City's contribution to the PFA
for its operation and maintenance costs only, the City's 1988-1992
Capital Improvement Program provides for additional contributions
to the PFA for capital expenditures, in the Capital Projects Fund.
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.
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 55% 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, Sewer, 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. In many of these funds, a subsidy
from the General Fund has been necessary to cover operating
expenses. 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
1991.
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 1988
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. "
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:
To pay the full cost of operation and maintain
the electric utility in good repair and working
order;
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 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;
To pay into the General Fund of the City of Fort
Collins in lieu of taxes and franchise permits a
percentage of revenue from the sale of electric
energy equivalent to 5% of operating revenues.
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.
(b) Water & Sewer 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 Sewer Utilities shall be at
least equal to the annual cost of the following:
Principal reductions of outstanding bonds;
Loan requirements to Federal or State agencies, and;
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:
0 Operating Reserve - at least equal to 2% of the
projected annual operating revenue.
Plant Investment Fee Reserve - equal to the
annual fees less annual cost allocated to System
Expansions.
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.
Debt Reserve - equal to the amount required by
individual bond ordinance.
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 structured on a base rate of $.0003917 per square foot
per month and on a rate factor based on the category of
development.
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 project 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.
3. Capital Cost Financing
The financing of capital improvements will be accomplished
through the following:
1 a one-time basin fee that is collected with new
development;
1 monthly capital fee collected from property
owners;
1 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:
1 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;
1 Operating Revenue Reserve - equal to 2% of the
projected annual operating revenue;
1 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.
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.
(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. Total direct revenue from all Recreation programs shall not
fall below a 100% recovery of total direct costs.
3. 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".
4. Revenue generated from rentals, concessions, and other
miscellaneous sources shall be considered an equal priority
with class registrations when establishing fees and charges.
5. 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.
6. The Recreation Division shall charge rental for rooms, pool
time, gym, ball field, and special equipment, as specified in
written policies.
7. 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.
8. 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.
In 1988, a new policy on user fees will be 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.
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:
1 The City will develop a multi-year plan for capital
improvements and update it annually;
1 The City will make all capital improvements in
accordance with the adopted Capital Improvement
Program and the Capital Project Management Control
System;
The City will identify estimated costs and funding
sources for each capital project requested before it
is submitted to City Council ;
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.
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:
Essential
Necessary
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)
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 Proiects Fund
General City Capital improvements (General Services, Parks &
Recreation, Streets & Traffic, Police, and Poudre Fire Authority)
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 accordance
with the 2.25 cent Sales Tax Distribution formula, adopted by City
Council , a portion of Sales & Use Tax revenues is committed to the
Capital Projects Fund for General City Essential Capital Projects.
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 (Sewer, 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.
(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 operating budget.
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 Revenue Reserve - 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.
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.
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.
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.
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:
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.
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;
0 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;
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 utilized 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.