HomeMy WebLinkAbout1989-174-10/03/1989-ADOPTING THE FINANCIAL AND MANAGEMENT POLICIES RELATING TO THE 1990 ANNUAL BUDGET RESOLUTION 89- 174
OF THE COUNCIL OF THE CITY OF FORT COLLINS
ADOPTING THE FINANCIAL AND MANAGEMENT POLICIES
RELATING TO THE 1990 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 1990 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, 1990 and ending December 31, 1990.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT
COLLINS, that the 1990 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 1990 Annual
Budget for the City of Fort Collins.
Passed and adopted at the regular meeting of the City Council held
this 3rd day of October, A.D. 1989.
Mayor
TTEST-
City Clerk
TABLE OF CONTENTS
Section 1. General Information
Paae
1.1 . 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. Private Contributions. . . . . . . . . . . . . . . . . . . . 8
Section 3. Financial Administration
3. 1 . Administrative Charges . . . . . . . . . . . . . . . . . . . 9
3.2. Building Maintenance Costs . . . . . . . . . . . . . . . . . 9
3.3. Lease/Purchase . . . . . . . . . . . . . . . . . . . . . . . 10
3.4. Medical Insurance. . . . . . . . . . . . . . . . . . . . . . 10
3.5. Payment in Lieu of Taxes . . . . . . . . . . . . . . . . . . 10
3.6. Pension Funds. . . . . . . . . . . . . . . . . . . . . . 11
3.7. Performance Pay Plan . . . . . . . . . . . . . . . . . . . . 12
3.8. Revenue Allocation Formula . . . . . . . . . . . . . . . . . 12
3.9. Rebate Programs. . . . . . . . . . . . . . . . . . . . . . . 13
3. 10. Car Allowance. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4. Governmental and Proprietary Funds
4.1. General Fund . . . . . . . . . . . . . . . . . . . . . . 14
4.2. Enterprise Funds . . . . . . . . . . . . . . . . . . . 14
4.3. Internal Service Funds . . . . . . . . . . . 18
4.4. Special Revenue and Debt Service Funds . . . . . . . . . . . 19
Section 5. Capital Improvement Funds
5.1. Citizen Participation. . . . . . . . . . . . . . . . . . . . 22
5.2. Capital Improvement Program. . . . . . . . . . . . . . . . . 22
5.3. Capital Improvement Policy . . . . . . . . . . . . . . . . . 23
Section 6. Reserve Policies
6. 1. Policy Statement . . . . . . . . . . . . . . . . . . . . . . 24
6.2. Types of Reserves. . . . . . . . . . . . . . . . . . . . . . 24
Section 7. Investment Program
7.1. Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2. Objectives . . . . . . . . . . . . . . . . . . . . . 26
7.3. Delegation of Authority. . . . . . . . . . . . . . . . . . . 27
7.4. Prudence . . . . . . . . . . . . . . . . . . . . . . 27
7.5. Eligible Investments . . . . . . . . . . . . . . . . . . . . 27
7.6. Reporting and Review . . . . . . . . . . . . . . 28
7.7. Ethics and Conflicts of Interest . . . . . . . . . . . . . . 28
Section 8. Debt Policy
8.1 . Authorization for Municipal Borrowing. . . . . . . . . . . . 29
8.2. Conditions for Using Debt. . . . . . . . . . . . . . . . . . 30
8.3. Sound Financing of Debt. . . . . . . . . . . . . . . . . . . 30
8.4. Financing Methods. . . . . . . . . . . . . . . . . . . . . . 31
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 ordinance 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 General Employees' Retirement and Police
Pension Funds are classified as Trust and Agency Funds for
Accounting purposes. The Fire Pension Fund is shown in Other
Governmental with Poudre Fire Authority. 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.
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", and the City Manager will immediately inform the
City Council of this action. While this does not lower the
appropriations in a fund, it prevents them from being spent. If
the 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:
1 Capital Projects - Appropriations for Capital Projects do not
lapse until the project is completed and closed out.
1 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;
the related cost of the service provided;
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
1989 - Street Capital Maintenance .25*
1990 - CHOICES 95 Capital Improvement Program .25*
- 2.75
*Excluding sales of grocery food.
TAX ON ALL SALES & USES-EXCLUDING GROCERY FOOD: 0.50 cents
Capital Projects Fund
CHOICES 95 Capital Improvement Program 507.
Street Capital Maintenance 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
Actual Sales and Use Tax revenue generated by the 2.25 cent tax in
excess of the fixed dollar amounts listed above, will be
transferred to the General Fund.
Actual Sales and Use Tax revenue generated by the 0.25 cent tax
for Street Capital projects will be transferred to, and be
retained in, the Capital Projects Fund for repair and maintenance
of existing streets. Timely effective repair and maintenance helps
to avoid costly reconstruction to streets after deterioration has
become irreversible.
Actual Sales and Use Tax revenue generated by the 0.25 cent tax
for the CHOICES 95 Capital Improvement Program will be transferred
to, and be retained in, the Capital Projects Fund for construction
of projects approved during the CHOICES 95 process. With this
pay-as-you-go program, no debt will be incurred to complete
projects.
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 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:
8 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;
6 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. 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:
Decreasing the impact of inflation on the purchase
of new and replacement equipment.
Reducing the initial impact of the cost to user
departments by enabling acquisition costs to be
spread over the useful life of the equipment.
Safeguarding the opportunity to use cash assets to
earn higher interest than the interest cost of
lease/purchasing.
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.
3.4. 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.
3.5. 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 on account of the city-owned
utilities such amount as may be established by the Council by
ordinance" .
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.
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3.6. PENSION FUNDS
The City of Fort Collins contributes to three pension plans,
including:
Fire
General Employee Retirement
State Pension - Fire
The Fire and General Employee Retirement Plans are administered by
the City of Fort Collins. The rate of contribution for the City
administered plans is based upon an annual actuarial analysis for
the normal cost and unfunded liability of the number of employees
participating in each pension plan.
The 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 .
A money purchase plan is offered to City Police
employees who do not belong to Social Security.
The Budget incorporates the following rate requirements to
continue this policy:
Police
General Employee Money Purchase
Normal Costs Fire Employee Thrift Plan Plan
City Contribution 8Yo 3.553% 3% 8%
Employee Contribution 8'/ -- 3% 8%
TOTAL 16% 3.553% 6% 16%
General
Unfunded liability Fire Employee Total
City Contribution $84,000 $ 0 $84,000
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3.7. 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.
3.8. 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 66.64% of the Property Tax mills to the PFA in
1990. In accordance with Resolution 89-175, the City currently
contributes 5. 108 mills of existing Property Tax to the PFA.
An allocation of 0.303 of one cent of the City's 2.25 cent Sales &
Use Tax is applicable to all taxable sales and uses to the PFA.
The Revenue Allocation Formula represents the City's contribution
to the PFA for its operation and maintenance costs as well as for
capital expenditures.
3.9. 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 extension for street
maintenance on July 1, 1989 and the extension of the 0.25 cent
January 1, 1990, for the CHOICES 95 Capital Improvement Program
In addition to these measures, the City has a Sales Tax Rebate on
Food Program. This program provides for an annual rebate to
members of qualifying households on the basis of residency and
income guidelines.
3.10. CAR ALLOWANCE
The City provides reimbursement to its employees for use of their
personal vehicle on official City business. Payment is considered
a reimbursement for expenses and not a form of compensation. All
payments are based on the actual mileage traveled by the employee
at a mileage reimbursement rate set by the City Manager.
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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 56%
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 1990 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 time frame 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:
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 equal to the average
annual cost (excluding debt financing) of the
approved five-year capital improvement plan,
considering any changes which, from time to
time, may be made in such plan;
To provide a purchase power reserve equal to
approximately 25% of the annual revenue from
the sale of electrical energy. This reserve
shall be used to partially off-set, defer, or
mitigate the impact of purchase power cost
increases due to factors such as federal power
issues or the competitive marketing of post
1994 surplus Rawhide power. Reserves projected
to exceed the 25% level shall be reported to
Council during the annual budget process.
3. Excess Retained Earnings
Priority for the accumulation of reserves and excess retained
earnings shall be as follows: reserves shall first be
accumulated in operating reserve, second in future capital
improvements reserve, third in the purchase power reserve.
After reserves are funded as specified in 2. above, any
excess retained earnings shall be added to the purchase power
reserve.
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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 & Wastewater Utilities
Formally adopted financial policies are an important factor in
planning the financial operations of the Water and Wastewater
utilities. Policy statements have been developed and incorporated
into the five year financial plan as follows:
I . Net Income
The net income of the Water and Wastewater 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.
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4. Capital Cost Financing
Annual capital cost shall be identified as one of three types,
and financed as noted:
Normal replacement of the existing system.
Financed on a Pay-As-You-Go basis from a
reserve for depreciation funded from current
rates.
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.
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:
I vital 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;
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, Transit,
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.
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CAPITAL IMPROVEMENT FUNDS
5.1. CITIZEN PARTICIPATION
With Resolution 87-130, Council solicitated citizen involvement
and participation in formulating a Capital Improvements Program
known as Choices 95. This created a citizen committee to make
recommendations on the capital improvement needs of the community
and the financing of those improvements. The recommended Capital
Improvement Program was presented to Council by the Choices 95
citizen committee along with a pay-as-you-go funding recommenda-
tion. The Choices 95 Capital Improvement Program committee was
instrumental in the determination of projects and funding
mechanism to be accomplished in the 1990-1997 Capital Improvement
Program.
The residents of Fort Collins on March 7, 1989, approved the
extension of a 0.25 cent Sales and Use Tax rate (excluding grocery
food) to finance the Choices 95 Capital Improvement Program. This
extension is effective for a seven year period beginning January
1, 1990. In addition, the residents also approved the extension of
0.25 Sales and Use Tax rate (excluding grocery food) to finance
much needed resurfacing of the City's streets. This extension is
effective July 1, 1989 and expires January 1, 1997.
5.2. 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
The Capital Projects Fund includes two capital project
classifications:
General City Capital Projects
- General Capital Projects
- Choices 95 Capital Projects
- Street Capital Maintenance
Utility Capital Projects.
GENERAL CITY CAPITAL PROJECTS:
General Capital Projects include minor street repair, concrete
program, pedestrian access ramps, major building maintenance and
other minor capital projects. General Capital Projects are
financed by transfers from the appropriate financing fund and can
be financed through bond proceeds and/or grant funds deposited
directly in the Capital Projects Fund.
Choices 95 Capital Projects were recommended by the Choices 95
citizen committee and approved by the voters of Fort Collins. The
proceeds of the 0.25 cent Sales and Use Tax is specifically
dedicated to finance these projects.
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Street Capital Maintenance includes street resurfacing and
maintenance projects. Council recognized the importance of
maintaining existing City streets, and the voters approved using
0.25 cent Sales and Use Tax revenue to finance the projects.
UTILITY CAPITAL PROJECTS:
Includes Wastewater, Storm Drainage, and Water Funds and are
financed by transfers from the respective financing fund. Sources
of funding are bond proceeds and specific fees and charges. Light
& Power Utility Capital Projects are included in the Light & Power
Fund and therefore 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.
5.3 CAPITAL IMPROVEMENT POLICY
With the exception of the Choices 95 Capital Programs, 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;
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.
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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.
General Fund Designated for Buildings &Improvements
- 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.
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
This Investment Policy is intended to supplement and expand upon
Ordinance No. 8, 1988 of the Council of the City of Fort Collins,
Providing for the Investment and Deposit of Public Funds and Moneys
of the City of Fort Collins (hereinafter referred to as the
"Ordinance") .
The Financial Officer, City of Fort Collins, Colorado (hereinafter
referred to as the "Officer") , is charged with the responsibility
of prudently and properly managing any and all funds of the City.
Because these funds may be called upon for expenditure at any time,
absolute maturity horizons must be identifiable for the purpose of
liquidity. Morever, these funds must be fully collateralized to
minimize risk of principal . The following Investment Policy
addresses the methods, procedures and practices which must be
exercised to ensure effective and sound cash management.
7.1 SCOPE
This policy shall apply to the investment of all financial assets
and all funds of the City of Fort Collins (hereinafter referred to
as the "City") over which it exercises financial control , including
funds held in a trust capacity. In order to maximize use of the
City's cash resources, all City moneys shall be pooled into one
investment account with earnings credited separately. The
investment income derived from this account shall be distributed to
the various City funds in accordance with City Charter, Code and
applicable state statutes.
7.2 OBJECTIVES
The City's principal investment objectives are:
• Preservation of capital and the protection of investment
principal .
1 Maintenance of sufficient liquidity to meet anticipated
disbursements and cash flows.
Diversification to avoid incurring unreasonable risks
regarding securities owned.
Maximizing security by selecting only proven dealers,
brokers and financial institutions.
Attainment of a market rate of return equal to or higher
than the performance measure established by the Director
of Finance.
Conformance with all Federal , State and other legal
requirements.
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7.3 DELEGATION OF AUTHORITY
The ultimate responsibility and authority for investment
transactions involving the City resides with the Officer who has
been designated by the Charter of the City as responsible for City
investments. The Officer may appoint other members of the City
staff to assist him (her) in the cash management and investment
function. The Officer must establish written administrative
procedures for the operation of the City's investment program
consistent with this Investment Policy. The Officer and any
designee acting within these procedures shall not be held
personally liable for specific investment transactions.
The Officer may in his (her) discretion, and consistent with City
procurement procedures, appoint Investment Advisors registered with
the Securities and Exchange Commission under the Investment
Advisors Act of 1940. The advisors may be granted limited
investment discretion regarding the City's assets placed under
their management.
7.4 PRUDENCE
The standard of prudence to be used for managing the City's assets
is the "prudent investor" rule, which states, "Investments shall be
made with judgment and care, under circumstances then prevailing,
which persons of prudence, discretion and intelligence exercise in
the management of their own affairs, not for speculation, but for
investment considering the probable safety of their capital as well
as the probable income to be derived."
7.5 ELIGIBLE INVESTMENTS
All investments will be made in accordance with the Ordinance
adopted by the Council of the City of Fort Collins, a home rule
municipality, and the Colorado Revised Statutes.
The Ordinance states: "The City may invest its public funds and
moneys in any securities now or hereafter designated as legal
investments in any applicable statute of the State of Colorado or
in any of the following securities:
6 Obligations issued by any agency, instrumentality or
public corporation of the United States.
Debentures or similar obligations issued by any federal
intermediate credit bank or any bank for cooperatives.
Obligations issued by or on behalf of the City.
Obligations issued by or on behalf of any state of the
United States or any political subdivision, agency,
instrumentality or public corporation thereof having an
investment grade rating from Moody's Investors Service
or Standard & Poor's Corporation.
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Prime-rated bankers acceptances.
Prime-rated commercial paper.
Guaranteed investment contracts of domesticly-regulated
insurance companies having a claims-paying ability
rating of "AA" or better from Standard & Poor's
Corporation.
Repurchase and reverse repurchase agreements of any
marketable security described in this Ordinance which
afford the City a perfected security interest in such
security.
Shares in any money market fund or account, unit
investment trust or open- or closed-end investment
company, all of the net assets of which are invested in
securities described in this Section 1, to the extent
not prohibited by Colorado Constitution Article XI,
Section 2. "
7.6 REPORTING & REVIEW
An investment report shall be prepared and submitted to the City
Council , at least on a quarterly basis, of all of the investments
held by the City, the current market valuation of the investments,
transaction summaries and performance results. The Officer and his
(her) investment staff shall meet at least quarterly to review the
portfolio's adherence to appropriate risk levels and to compare the
portfolio's total return to the established investment objectives
and goals. The Officer shall periodically establish a benchmark
yield for the City's investments which shall be equal to the
average yield on the U.S. Treasury security which most closely
corresponds to the portfolio's actual weighted average maturity.
When comparing the performance of the City's portfolio, all fees
and expenses involved with managing the portfolio should be
included in the computation of the portfolio's rate of return. The
Investment Policy will be reviewed periodically by the Officer and
may be amended by the City Manager and the City Council as
conditions warrant.
7.7 ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the investment process shall
refrain from personal business activity that could conflict with
proper execution of the investment program, or which could impair
their ability to make impartial investment decisions.
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DEBT POLICY
8.1 AUTHORIZATION FOR MUNICIPAL BORROWING
The Charter of the City of Fort Collins authorizes the borrowing of
money and the issuance of the following securities to evidence such
indebtedness:
1 Short-term notes.
1 General obligation securities.
1 Revenue securities.
1 Refunding securities.
1 Special assessment securities.
1 Tax increment securities.
1 Any other securities not in contravention of the Charter.
The Charter also regulates which securities may be issued only
after a vote of the electors of the City and approved by a majority
of those voting on the issue.
Election Required
Securities payable in whole or part from ad valorem taxes of the
City except tax increment securities. The aggregate sum of these
securities which have not been refunded or defeased shall not
exceed 10% of the assessed valuation of taxable property within the
City.
Election Not Required
Short term notes (12 months or less) issued in anticipation of the
collection of taxes and other revenues.
Securities issued for water purposes.
Securities payable solely from revenues other than ad valorem taxes
of the City.
Refunding securities issued to refund and pay outstanding
securities other than those payable in whole or part from ad
valorem taxes.
Securities for any special or local improvement district.
Tax increment securities payable from ad valorem tax revenues
derived from increased valuation for assessment of taxable property
within a plan of development or other similar area as defined by
applicable state statutes.
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8.2 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;
When it can be determined that future citizens will
receive a benefit from the improvement;
0 When it is necessary to provide basic services to
citizens (e.g. , purchase of water rights) ;
When the rights of bond buyers and subsequent investors
are protected through full disclosure; and
When total debt including that issued by overlapping
governmental jurisdictions does not constitute an
unreasonable burden to the citizenry.
8.3 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 improvements;
Determining that the cost/benefit of the improvement,
including interest cost, is positive;
Maintaining a debt coverage ratio which ensures that
combined debt service requirements will not exceed
revenues;
Restricting the total debt burden to levels recommended
by national rating agencies that are now estimated to
be 10%-15% of the combined operating and debt service
fund expenditures; and
9 Recognizing national ratios established for municipal
debt such as per capita debt, and median debt and
issuing debt that will place the City in the lower,
conservative side of those ratios.
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Y • �
8.4 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 revenue or other
self-supporting bonds instead of general obligation
bonds;
When appropriate, the City will issue non-obligation
debt (e.g, Industrial Development Revenue Bonds) to
promote community stability and economic growth;
Fort Collins maintains good communications with bond
rating agencies about its financial condition and
whenever possible issues securities that have been rated
by Moody's Investors Service or Standard and Poor's
Corporation.
Fort Collins will communicate with Larimer County,
Poudre R-1 School District, the Poudre Valley Hospital
District and any other entity whose debt would
contribute to the overlapping debt ratio for the purpose
of keeping such debt burden at a conservative level .
Annual budgets include debt service payments and reserve
requirements for all debt currently outstanding and for that
anticipated to be issued within the budget year.
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