HomeMy WebLinkAbout1993-091-07/06/1993-ADOPTING THE FINANCIAL AND MANAGEMENT POLICIES RELATING TO THE 1994 ANNUAL BUDGET AND ADOPTING A REV RESOLUTION 93-91
OF THE COUNCIL OF THE CITY OF FORT COLLINS
ADOPTING THE FINANCIAL AND MANAGEMENT POLICIES
RELATING TO THE 1994 ANNUAL BUDGET AND ADOPTING A
REVENUE ALLOCATION FORMULA TO DEFINE THE CITY'S
CONTRIBUTION TO THE POUDRE FIRE AUTHORITY
FOR THE YEAR 1994
WHEREAS, the City Manager and City Council have reviewed various financial
and management policies in preparation for the annual budget process and in
conjunction with the City's five-year financial plan; and
WHEREAS, the City of Fort Collins ("the City") is committed to sound
financial planning; and
WHEREAS, these Financial and Management Policies establish guidelines for
the various decisions affecting the 1994 Annual Budget and long-range financial
plans; and
WHEREAS, the City Council wishes to formally adopt these Financial and
Management Policies to facilitate the preparation of the budget for the fiscal
year beginning January 1, 1994, and ending December 31, 1994; and
WHEREAS, the City entered into an Intergovernmental Agreement dated
December 22, 1981, with the Poudre Valley Fire Protection District ("the
District") , creating the Poudre Fire Authority ("the Authority")
) as an entity;
and
WHEREAS, the Authority provides fire protection services to all properties
within the City limits, and the City has a continuing commitment to provide
funding to the Authority to accomplish the provision of these public safety
services; and
WHEREAS, as a part of the Intergovernmental Agreement, the City has agreed
to contribute funding for maintenance and operation costs to the Authority based
on a "Revenue Allocation Formula" which is to be set annually, based upon a
percentage of sales and use tax revenues (excluding sales and use tax revenue
which must be spent on specific projects) and a portion of the operating mill
levy of the City's property taxes.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS
as follows:
Section 1. That the Council hereby adopts the 1994 Financial and
Management Policies attached hereto as Exhibit "A", and incorporated herein by
this reference, which policies are to be used as the basis for the 1994 Annual
Budget for the City of Fort Collins.
Section 2. That the Revenue Allocation formula set forth in Section 3.7
of Exhibit "A" is hereby adopted as the formula for determining the City
contribution to the Poudre Fire Authority for the year 1994.
Passed and adopted at a regular meeting of the City Council held this 6th
day of July, A.D. 1993.
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ATTEST: or
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City Clerk
GENERAL
1.1. OVERVIEW
The Budget represents the process by which financial policy is made,
implemented and controlled. For the City of Fort Collins, direction for the annual
Budget emanates from many distinct sources. The State Constitution and the
City Charter provide the basic legal requirements and time lines for the process.
Council goals, ordinances and resolutions provide additional direction and
respond to the needs of the community. Specific financial policies are also
found in capital improvement plans, in grant applications, and in administrative
documents.
The Financial and Management Policies are a compendium of all City policies
that shape the annual Budget. They are intended to assist the Council and the
City Manager in preparing the annual Budget and help communicate to
residents and customers how the community goals are being addressed.
1.2. REVENUE AND EXPENDITURE LIMITATION
In 1992, voters approved an amendment to the Colorado Constitution that
places limits on revenue and expenditures of the State and all local
governments. Growth in revenue and expenditures is limited to the increase in
the Denver-Boulder Consumer Price Index plus local growth (new construction
and annexation).This percentage increase is added to the preceding year's base
budget, giving the dollar limit allowed for revenue and expenditures in the
current year. Any revenue collected over the dollar limit must be refunded to
the citizens, unless it is offset by a voter-approved revenue change. Under the
amendment, Federal grants or gifts to the City are not included when
calculating the City's spending base. City "enterprises" (the Light and Power,
Water, Wastewater, and Storm Drainage Utilities) are exempt from the imposed
limits.
1.3. 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.
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The budget estimates are open to the public for inspection and copying. 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 November 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 within growth limit guidelines. To this
end, the City utilizes conservative growth and 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 and State Constitution;
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.
1.4. BUDGET PROCESS AND PHILOSOPHY
(a) Charter Requirements
The City Charter requires a budget to be adopted for the ensuing fiscal year
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"before the last day of November of each year." A single appropriation
ordinance is presented to Council 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.
(c) Budget Preparation
While the Charter establishes time limits and the essential content of the City
Manager's proposed budget, the budget preparation process is not prescribed.
The preparation process is developed by the City Manager with input from the
City Council.
The City's Financial Policies and issues are consistently addressed during the
budget preparation process with input coming from a variety of sources. A
Budget Issues Team composed of the City Manager, Deputy City Manager,
Administrative Services Director, Finance Officer, and the Budget Director
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develops the guidelines to be used for budget preparation. A Budget Review
Committee with representatives from three service areas is used to develop
options and recommendations on issues that are outside normal budget
guidelines. In addition, the budget process is reviewed with user groups made
up of representatives from every department/division within the City. The
Executive Lead Team reviews the budget recommendations at various points
during the preparation process.
The constitutional growth limits, as well as available resources, limit budget
appropriations. In March, departments develop five year revenue projections of
their revenue sources and submit them to the Budget and Research Office. The
Budget Office also coordinates collection of information about the costs of
providing services from the departments.
Based upon revenue and growth limit projections, the costs of providing
services, and direction provided by Council about major revenue sources, the
Budget Office staff prepares target budgets for each fund and program. All of
this information is compiled into the Budget Manual which provides the basis
for the development of each program budget. Departments begin developing
budgets in April.
In May and June, prior to receipt of budget proposals from departments,
Council work sessions are held. At these sessions, policy issues are discussed
and Council has the opportunity to provide direction for development of
departmental budgets.
In June, budgets are due into the Budget Office. All funds are expected to stay
within their corresponding targets. Departments may shift resources between
programs. Budget issues are reviewed and the City Manager's proposed
budget is submitted to Council in late August. It is made available to the public
at the same time. In September and October, two Public Hearings on the
budget are held at the regular Council meetings. The City Manager solicits
additional discussion and policy direction from Council at two work sessions
held in September and October. If necessary, the Council may schedule
additional work sessions and may also direct that community budget meetings
be held.
The budget for the ensuing year is adopted in November. Following the
passage of the Budget Ordinance, the Final Adopted Budget document is
printed.
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(d) Changes to the Adoated 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.
• Carryover Encumbrances - If a department has open purchase
orders at year end, related appropriations are encumbered and
carried over to the next year to cover the actual expense when it
occurs.
• Unanticipated Revenue- If a fund receives revenue during the year
from a source that was not anticipated or projected in the Budget,
such as a grant or a bond issue, such revenue may be
appropriated by Council for expenditure in the year received
provided the appropriation does not exceed the growth limit.
• Prior Year Reserves - In cases where a fund's reserves are greater
than required by policies or where prior productivity savings exist
in the General Fund, Supplemental Requests may be funded, with
Council appropriating amounts from reserves to fund items which
were not included in the adopted budget. Council may also
appropriate reserves in case of an emergency or unusual
circumstances, if it determines that such appropriations are in the
best interests of the City.
2. Budget Decreases
Annual budgets may also be decreased below adopted appropriations
during the year. Changes in service demand, economic conditions,
projected growth limits, and Council goals and direction may cause such
budget reductions. Each service area is responsible for developing a plan
to reduce appropriations. Each plan must be in place and ready for
implementation should the need arise. If the City Manager directs budget
reductions, Council will be informed immediately and the appropriations
will be set aside through administrative action. While this administrative
action does not lower the appropriations within a fund, expenditures are
prevented. If the - circumstances leading to the implementation of
reductions change, the appropriations may be made available for
expenditure.
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(e) Level of Control and Budget Transfers
Control of expenditures is exercised at the fund level. Fund managers are
responsible for all expenditures made against appropriations within their fund,
and can allocate available resources as they deem appropriate. There are two
general types of budget transfers:
1 . Within Fund - This is a transfer between line items and/or departments
within a fund, and requires approval of the fund manager.
2. Between Funds - This type of transfer requires the Recommendation of
the City Manager and formal action by the City Council.
In order to provide City Council with information and control over capital
improvements taking place within the City, Council approval is also
required to transfer appropriations between Capital Projects. This is
normally done in cases where a project is completed under budget and
Council wishes to use the unused appropriations to enlarge the scope of
another project.
(f) Lapsing of Appropriations
Per the City Charter, any appropriations which are unspent at the end of the
year lapse into fund balance, where they cannot be spent unless appropriated
by Council with the following exceptions:
• Capital Projects - Appropriations for Capital Projects do not lapse until
the project is completed and closed out.
• Grant Funds - Appropriations funded by federal or state grants do not
lapse until the grant expires, or the project for which the gr?nt was
received is completed and closed out.
REVENUE POLICIES v
2.1. REVENUE LIMITATION
Revenue growth is limited by the State Constitution to the combined increase
in the Denver-Boulder Consumer Price Index plus local growth (new
construction and annexation). The limit applies to all City funds with the
exception of Light and Power, Water, Wastewater, and Storm Drainage funds.
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2.2. 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. To shelter the City from short-term decreases in any one
revenue source by maintaining a diversified and stable revenue system is a
primary goal of the City of Fort Collins. 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.
2.3. FEE POLICY
As a home rule municipality, the City of Fort Collins has the ability to determine
the extent to which fees should be used to fund City services. This Policy
identifies the kinds of services for which fees could be imposed by the City and
establishes a uniform method for determining the appropriate percentage of
costs to be recovered through such fees.
Cost of Service
The amount of a fee should not exceed the overall cost of providing the service
for which the fee is imposed. In calculating the cost of a service, direct and
indirect costs are included. That is:
• costs which are directly related to the provision of the service;
and,
• support costs which are more general in nature but provide
support for the provision of the service.
Percentage of Cost Recovery
The extent to which the total cost of service should be recovered through fees
depends upon the following factors:
• The nature of the services. When a service is proprietary in
nature, rather than governmental, a higher level of cost recovery
is warranted. Governmental services are those which are provided
by the City .for the public good such as regulating land use,
maintaining streets, and providing police and fire services.
Proprietary services are those which are provided for the benefit
and enjoyment of the residents such as parks and recreation
services.
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• The nature and extent of the benefit to the fee payers. When a
particular service results in substantial, immediate and direct
benefit to fee payers, a higher percentage of the cost of providing
the service should be recovered by the fee. When a particular
service benefits not only the fee payer but also a substantial
segment of the community, lower cost recovery is warranted.
• The level of demand for a particular service. Because the pricing
of services can significantly affect demand, full cost recovery is
more appropriate when the market for the services is strong and
will support a high level of cost recovery.
• Ease of collection. Although it may be determined that a high level
of cost recovery is otherwise appropriate for a particular service,
it may be impractical, too costly from an administrative point of
view or too burdensome for users of the service to establish such
a cost recovery system.
Establishment and Modification of Fees and Charges
The City Council will determine by ordinance:
• the services for which fees should be charged;
• the level of cost that should be recovered through fees according
to the criteria established in this Policy;
• an appropriate method for apportioning the cost of providing each
service among the users of the service; and,
• a procedure for periodically reviewing and modifying the amount
of fees in order to maintain appropriate cost recovery levels.
Fee amounts will be established on an annual basis and submitted to the City
Council for approval by resolution.
Waivers, Rebates. Deferrals and Other Exce tions
If the amount of a particular fee is considered to be too high to accommodate
the needs of particular segments of the community and the public interest
would be served by adjusting the amount or manner of payment of such fees
in particular instances, the City Council may establish, by ordinance, programs.
for waiving, rebating, or deferring payment of the fees.
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2.4. SALES AND USE TAX DISTRIBUTION
The City's Sales and Use Tax totals 3.00 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*
1993 - Natural Areas .25*
3.00
*Excluding sales of grocery food.
Revenue generated by the Sales and Use Tax will be distributed, based
on adopted budgets, in the following manner:
TAX ON ALL SALES & USES: 2.25 cents
(1) Fixed Dollar Amounts
Annual Debt Service
Fort Collins/Loveland Airport Authority
Sales & Use Tax Debt Service 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 (92% to Capital Projects and 8% to the Transportation
Fund).
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 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.
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Actual Sales and Use Tax revenue generated by the 0.25 cent tax
for the Natural Areas Capital Program will be transferred to, and
retained in, the Capital Projects Fund for the acquisition,
construction, enhancement and maintenance of trail systems,
wildlife habitat, and other natural areas to benefit the citizens of
the City of Fort Collins.
2.5. PRIVATE CONTRIBUTIONS
The City encourages the solicitation of private contributions. These services
and programs represent an "extra" that the City has been able to provide to
residents. In times of revenue constraints the City may not be able to provide
the same level of service without additional support. Therefore, efforts should
be made to secure private contributions in support of these programs and
services, as these contributions are an integral part of their successful
operation. With respect to Article X Section 20 of the State Constitution, the
City will make a determination as to whether a contribution is a gift and is
therefore excluded from constitutional limits.
FINANCIAL ADMINISTRATION
3.1. ADMINISTRATIVE CHARGES
The Charter states that expenses for departments rendering services to other
departments shall be equitably apportioned. For Enterprise, Internal, and Special
Revenue Funds, direct charges are made to the funds receiving services when
they are rendered. Certain departments within the General Fund provide
services to all funds and do not have a direct billing mechanism. For these
General Fund departments, a cost allocation formula has been developed to
apportion costs to other funds and provide offsetting revenue to the General
Fund.
GENERAL FUND DEPARTMENTAL COSTS TO BE ALLOCATED
Departmental costs to be allocated are based on the current year's budget and
on projected employment levels. The current year is the one immediately
preceding the year being budgeted.
The amount to be allocated includes the budget expenditures for City Council,
City Manager, City Clerk, and City Attorney. The full amount of budgets for the
Employee Development department is included.The Finance department budget
is reduced by the amounts reimbursed by the Utility departments, an amount
linked to Special Improvement District administration, and Rebate Program
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administration. The Information & Communication Systems (ICS) department
budget is adjusted for amounts corresponding to support for the departments
listed above.
HOW COSTS ARE ALLOCATED
The Employee Development costs are allocated in proportion to the total
number of budgeted full time equivalent positions within a fund.
Except for ICS, all other General Fund administrative costs are allocated to the
funds based upon corresponding revised budgets for the current year with some
additional adjustments. These adjustments recognize the lower amount of
administrative service required by Capital, Debt Service, and Purchased Power
payments. Capital project costs are reduced by two-thirds of their budgeted
amount and Debt Service payments are reduced by three-fourths. Purchased
Power is also deducted from the Light & Power budget.
The administrative costs for ICS are allocated through a two-stage formula.
First, ICS determines what their charges will be for each particular service
performed for departments, then ICS determines the charges to each
department based on which services are provided.
ALL FUNDS RECEIVE ALLOCATIONS BUT NOT ALL FUNDS CHARGED
While Administrative Charges are allocated among all City funds, only specified
funds are charged. Charges are not made to a fund if it is not self-supporting,
it is an Internal Service fund, or if the funds role is merely to facilitate proper
accounting procedures. For example, the Sales and Use Tax fund and Debt
Service fund receive amounts which are then transferred to other funds.
Charging these funds would lead to double charging many transactions and
would not correspond to the level of service provided by the departments in the
General Fund.
ANNUAL REVIEW
During each annual budget process, the Administrative Charge calculation will
be reviewed. Further refinements in the allocation formulas will be made as
needed-to assure that the equitable apportionment requirement of the Charter
is met.
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3.2. PAYMENT IN LIEU OF TAXES (PILOT)
In accordance with the City Charter regarding municipality rates and finances,
the water, wastewater, and electric utilities "pay into the General Fund in lieu
of taxes on account of the city-owned utilities such amount as may be
established by the Council by ordinance".
The 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 established PILOT rate is
approximately one and one-half (1 .5) times the franchise and property tax
amounts that a utility would pay if privately owned.
3.3. LEASE-PURCHASE
The City of Fort Collins uses lease-purchase financing for the provision of new
and replacement equipment, vehicles and rolling stock in order to ensure the
timely replacement of equipment and vehicles. This method may also be used
to acquire real property. Members of management staff have developed an
equipment needs schedule for rolling stock which encompasses the demands
of operating departments. This schedule is used to project equipment needs for
each budget year.
The type of lease that the City uses is termed a conditional sales lease, in
effect a purchase rather than a rental of property. The City pays for the asset
in installments according to a fixed payment schedule. Each installment
includes principal and interest and the City builds equity and assumes risk in the
asset over the term of the lease. The annual installments are appropriated by
the Council each year.
Advantages of lease-purchase financing over the traditional cash method of
financing are:
• Decreasing the impact of inflation on the
replacement equipment. purchase of new and
• Resolving the problem of a capital replacement needs backlog.
• Conserving operating reserves.
• Reducing the initial impact of the cost to user department by enabling
acquisition costs to be spread over the useful life of the equipment.
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• Safeguarding the opportunity to use cash assets to earn higher interest
than the interest cost of lease-purchasing.
It should be noted that the City is able to discontinue the equipment leases at
its discretion so that future City Councils will have the option to continue or
discontinue the policy of lease-purchasing City equipment.
According to State of Colorado House Bill 90-1164, local governments are
required to identify as part of their budgets: 1) the total expenditures during the
ensuing fiscal year for all lease purchase agreements involving real and personal
property; 2) the total maximum payment liability under all lease purchase
agreements over the entire terms of the agreements, including all optional
renewal terms.
We recognize that the State does not include lease purchase in the legal
definition of debt, however rating agencies include lease purchase financing in
calculating the City's debt burden.
3.5. MEDICAL INSURANCE AND RETIREMENT PLAN
A. Medical Insurance
The City of Fort Collins entered into a partially self-funded medical
insurance program in October 1981. This program allowed the City to
cut out profit paid to a private carrier, invest available money (at higher
rates), and maintain better cash flow. The initial savings were as high as
expected and the program continues to provide a cost effective and very
desirable employee fringe benefit.
The partially self-funded insurance program is enhanced by a consortium
of cities to collectively bid administrative services, stop-loss insurance
for unexpected emergencies, and life and accidental death and
dismemberment insurance, resulting in lower rates.
B. Retirement Programs
The City of Fort Collins contributes to six types of pension plans,
including:
1. Social Security
2. Police Money Purchase
3. Fire Money Purchase
4. General Employee Retirement Defined Benefit
5. Old Hire Fire Defined Benefit
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6. Management Money Purchase
The Fire and General Employee Retirement Plans are administered by the City
of Fort Collins. The rate of contribution for the City administered plans is based
upon an annual actuarial analysis for the normal cost and unfunded liability of
the number of employees participating in each pension plan. The General
Employees Retirement Committee has identified inequities among the City-
administered plans. The Committee's recommendations will be presented to
Council in the next year and adjustments to the policies will be made at a later
date.
The City's current pension plans consist of the following provisions:
• The City will maintain contribution rates at a level sufficient to meet all
current normal costs of each pension plan;
• Any unfunded liability incurred by individual pension funds will be
amortized over a period not to exceed twenty years;
• A thrift plan for City employees is an adjunct to the general employee
retirement plan, to maintain comparability with benefits provided by
other Front Range communities. Employees participation in this plan is
optional.
• A money purchase plan is offered to City Police and Poudre Fire
Authority employees who do not belong to Social Security.
• Money purchase plans are offered to management level employees who
are also covered by Social Security.
The Budget incorporates the following rate requirements to continue this policy:
SOCIAL EMPLOYEE POLICE & FIRE MGMT.
SECURITY GENERAL THRIFT MONEY PURCHASE MONEY
NORMAL COSTS CONTRI. EMPLOYEE PLAN PLAN PURCHASE
PLAN
City Contri. 7.65% 3.553% 3% 8%
%-10%
Employee Contri. 7.65% -- 3% 8% 3 3
TOTAL 15.3% 3.553% 6% 16% 3%-10%
_ MAINTENANCE COSTS
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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
These categories and priorities are used as the basis for funding recommendations in the
annual budget process.
3.7. POUDRE FIRE AUTHORITY - REVENUE ALLOCATION FORMULA
In December of 1981, the City and the Poudre Valley Fire Protection District created the
Poudre Fire Authority (PFA) through an intergovernmental agreement. The PFA provides
fire protection services to Fort Collins and the surrounding area. The agreement specifies
a Revenue Allocation Formula (RAF) for defining the City's contribution to the PFA for
operations and maintenance. For PFA's operating costs, the City shares property tax and
sales and use tax collections. In addition to operating costs, the agreement further
provides authorization for the PFA to request funds for capital costs pursuant to the
procedures set by the City and District. PFA's capital needs include land acquisition,
construction of additional stations, and acquisition of major fire fighting apparatus.
The RAF has served as the Poudre Fire Authority's funding mechanism from 1981
through the 1993 budget. Passage of Amendment No. 1 (on November 3, 1992), a
revenue and spending limitation to the state constitution, requires review and revision of
the Revenue Allocation Formula. In its original form, the Revenue Allocation Formula
allowed the PFA to realize the full extent of growth in sales and use tax and property tax
collections. Article X, Section 20 of the State Constitution now limits the rate of growth
to a combination of the Denver-Boulder Consumer Price Index and additions to the local
property tax base primarily due to construction and annexation. Accordingly,the Revenue
Allocation Formula for the City's contribution to the PFA has been restructured to fit
within the constraints of Article X, Section 20.
The City will continue its current policy of funding PFA capital needs by dedicating one
mill of the City's total mill levy. The revenue from the dedicated mill will be managed
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according to the property tax mill levy and revenue limitation provisions of Article X,
Section 20. The City's contribution to PFA for operation and maintenance will be
calculated by the Revenue Allocation Formula. The Revenue Allocation Formula allocates
to PFA 67.09% of the property tax mills available for operations and 0.303 of one cent
of the City's 2.25 cent sales and use tax applicable to all taxable sales and uses. The
resulting contribution for operations and maintenance will then be compared to the
constitutional growth limits. The City's operation and maintenance contribution to PFA
will be the lesser of the contribution as determined by the Revenue Allocation Formula
or the allowable contribution in accordance with the limits imposed by Article X, Section
20 of the State Constitution.
3.8. REBATE PROGRAMS
The City recognizes that certain segments of its population, specifically the disabled and
senior citizens on fixed incomes, may be unable to keep pace with increasing taxes and
utility costs. In an effort to partially offset the cost of property taxes, utility billings and
sales taxes on these segments of its population, the City has established several rebate
programs, as follows:
Property Tax and Utility Charge Rebate Program
These programs provide financial assistance to disabled residents and senior citizens, in
the form of an annual rebate on property tax and utility charges, who qualify under
residency and income guidelines.
Sales Tax Rebate on Food Program
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 a 0.25 cent tax
for the Choices 95 Capital Improvement Program effective January 1, 1990. The sale of
grocery food was also excluded from the voter-approved 0.25 cent Sales and Use Tax
for natural areas effective January 1, 1993.
In addition to these measures, the City has a Sales Tax Rebate on Food Program. This
program provides for an annual rebate to members of qualifying households on the basis
of residency and income guidelines.
GOVERNMENTAL AND PROPRIETARY FUNDS
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4.1. GENERAL FUND
The General Fund is the largest and most diverse of the City's operating funds. It includes
all resources not legally restricted to specific uses. The major source of revenue to the
General Fund is sales & use tax, which accounts for approximately 56% of the revenue.
Local property tax and Lodging Tax are also included, as are revenues derived from fees
for services and materials, licenses, permits, and fines.
Service Productivity Incentive Policy
This Policy provides incentives for General Fund managers to improve planning and
delivery of services. General Fund managers need a means by which to save unspent
annual appropriations that result from increases in productivity. Without an incentive
policy, managers tend to spend savings on short term needs rather than long-range
service improvement. This policy creates incentives to more closely examine spending
decisions and to consider program related savings before requesting additional General
Fund resources.
Prudent cost-effective service delivery requires long range planning of both costs and
resources necessary to provide the service. This Policy provides a framework within
which managers can develop strategic plans rather than short term, line item cost
approaches. Allowing managers to save and use resources from increased productivity
emphasizes responsibility and accountability for efficient service delivery. It further allows
more flexibility for General Fund managers, similar to the management conditions of
enterprise funds.
Policy Structure
1 . This Policy defines savings as unspent department or division level appropriations
which managers have not committed for future years. Committed appropriations
include encumbrances, unspent lease purchase, and any planned reap propriations.
The Policy further requires that the savings result from increased productivity in
service delivery.
• Finance Department staff will adjust department or division savings within
a service area for any over spending by another department or division
within the service area.
0 Finance Department staff will determine the department and division annual
savings after completing the annual financial report.
2. The following criteria guide the use of carry-over savings and appropriations.
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• The City Manager must review and approve requests for use of savings.
• Increased productivity should generate the savings, rather than decreases
in services.
• Departments and divisions should use savings for the improvement of future
service delivery.
• City Council must approve, through an appropriation ordinance, the request
for use of savings.
• Annual General Fund revenue collections must be equal to or greater than
the projected budget revenue.
3. The eligible productivity savings shall be separately accounted for in a General
Fund designated reserve account. Requests for the use of accumulated savings
from prior year(s) held in this reserve can be made by the department or divisions
at any time during the year.
4.2. ENTERPRISE FUNDS
The City has five Enterprise Funds. These are Golf, Light & Power, Wastewater, Storm
Drainage, and Water. The Enterprise Fund classification has been used to account for
various services for which there exists a significant potential for financing through user
charges. Historically, services were accounted for in an Enterprise Fund if financed more
than 50% by user charges ( of the five Enterprise Funds, all but the Golf Fund are also
treated as "enterprises" within the meaning of Article X, Section 20 of the State
Constitution). In the 1993 Budget, all Enterprise Funds will recover 100% of their costs
through the five year projection.
The goal of all enterprise accounts is self-sufficiency. Toward this end, funds which are
not recovering at least 75% of costs shall incrementally adjust their rate structures to
achieve a positive income position. Those operations which cannot achieve a positive
income position within a five year time frame may be accounted for as subsidized
operations and not as Enterprise Funds.
(a) 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. Mission Statement
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MISSION: "Fort Collins Light and Power is a community owned Electric Utility.
We work with our customers to:
• Provide safe, reliable economical systems and services;
• Meet their needs as economic, environmental and technological changes
occur;
• Conserve resources; and
• Improve the quality of systems and services."
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 maintain positive net income after paying the full cost of operating and
maintaining 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 up to approximately 25% of the
annual revenue from the sale of electrical energy. This reserve shall be used
to partially off-set, defer, or mitigate the impact of purchase power cost
increases due to factors such as federal power issues or the competitive
marketing of post 1994 surplus Rawhide power. Significant changes to the
25% level shall be reported to the 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 the 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.
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.
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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 were developed and
incorporated into the five-year financial plan as follows:
1 . Net Income
The Water and Wastewater utilities shall not have a significant net loss after
paying the full cost of operating and maintaining the utility plant. Water and
Wastewater utility rates shall be set at a level to provide for the net income
requirement.
2. Working Capital Reserves
The following reservations of working capital shall be established and maintained
in each utility in the following order of priority:
1 . Debt Service Reserve--equal to the amounts restricted for debt service by
bond ordinance.
2. A-B Capital Reserve--equal to the amount of bond proceeds available and
restricted for projects relating to the Anheuser-Busch brewery.
3. Operating Reserve--at least equal to 2% of the actual or projected operating
revenue for the year.
4. Capital Reserve--equal to the amount of working capital available after the
above three reserves have been satisfied.
3. Capital Cost Financing
Capital cost will be identified as either:
(1) Minor capital--relatively small capital acquisitions such as vehicles, lab
equipment, or leasehold improvements; or
(2) Capital Projects--major additions, improvements, or expansions to utility
plant.
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Financing for minor capital is through utility charges. Financing for capital projects
is provided through a combination of utility charges, long-term debt financing
(bonds, loans, etc.), and utility plant investment fees. In addition, all or a portion
of capital costs may be funded from federal or state grants and other forms of
contributed capital.
In addition, the Council has adopted a policy to comply with the water metering
act of the State of Colorado. In recognition of the fact that the installation of water
meters will generally reduce the demand for treated water, thereby postponing the
need for additional capital improvements to meet the demands of new customers,
the Council decided that the cost of installing water meters for non-metered
customers shall be considered a "growth related capital expansion cost" which
may be funded with the proceeds of the water plant investment fee.
(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.
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.
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4. Reserves
The following reserves have been established:
• Capital Reserve - equal to the amount of bond proceeds, monthly capital
fees, and one-time new development fees available at the end of one fiscal
year to be expended in the next fiscal year;
• Operating Revenue Reserve - equal to 2% of the projected annual operating
revenue;
• Debt Reserve - equal to the amount required by the individual bond
ordinance.
4.3. INTERNAL SERVICE FUNDS
Internal Service Funds are used for the operation of agencies which provide goods and/or
services to other agencies within the City on a cost-reimbursement basis. These funds
cover expenditures through the imposition of user charges. City Internal Service Funds
are the Benefits Fund, Communications Fund, Equipment Fund, and the Self Insurance
Fund.
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 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 and Maintenance and Performing and Visual Arts Programming
Budgets. This includes revenues generated at the Lincoln Center from rentals,
equipment, concessions and other miscellaneous sources and all total direct
revenues from the Performing
and Visual Arts Programming. A transfer from the General Fund will make up the
difference between total revenue and expenditures.
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2. The Cultural Services and Facilities Administration and Museum budgets provide
minimal financial support. These programs are funded primarily by a transfer from
the General Fund.
3. Major capital improvements and renovations will be financed through sources other
than Cultural Services and Facilities Fund.
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 was adopted by Resolution 90-132 on
September 4, 1990. The goal of the policy is to provide for a more equitable distribution
of the costs of recreational programs between program users and General Fund tax
dollars.
Fund Structure
Costs associated with the Recreation Fund shall be defined as either: 1) Program Costs;
or 2) Community Good Costs.
1 . Program costs are directly associated with the activities and facilities used by the
citizens, and. include the following:
Activity Costs
• part time staff
• materials
• equipment
• participant transportation
• other costs directly associated with conducting activities
Facility Operation and Maintenance Costs
• minor repairs
• custodial equipment and supplies
• building utilities
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• specialized items
• other operations and maintenance costs directly associated with operating
facilities
Fees and charges shall cover the cost of the direct program experience and facilities used.
The fees charged will not exceed the cost of the specific activity in which a person is
participating.
2. Community Good costs are those costs that are necessary to provide a program
but are not directly experienced by the user. Such costs include the following:
• full time recreation staff
• office operation costs such as telephone and computer charges
• training costs
• dues and subscriptions
• insurance
• office supplies and equipment
• other costs not directly experienced by the users
The General Fund shall cover "Community Good" costs. General Fund will also cover
deficits in programs that cannot recover all their costs through fees. Generally, these are
programs designed for special populations where it is not feasible to cover the cost of
participation. Because costs that are defined as "Community Good" costs are supported
by the General Fund, they are subject to the same operational guidelines as established
for other General Fund budgets.
Reserves
1 . Scholarship Reserve - established to pay fees for participants who are unable to
afford full fees for programs; targeted at 3% of the program cost portion of the
fund; supported by the General Fund each year. .
2. Operating Reserve - to be maintained at 7% of the program costs portion of the
fund, excluding one time capital items and lease purchase payments
3. Any excess fund balance will be distributed within the following priorities: 1)
maintaining operating reserves; 2) equipment and repair needs; 3) capital needs;
4) new program needs.
RESERVE POLICIES
5.1. POLICY STATEMENT
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The accumulation of reserves protects the City from uncontrollable increases in
expenditures or unforeseen reductions in revenues, or a combination of the two. It
also allows for the prudent financing of capital construction and replacement projects.
5.2. TYPES OF RESERVES
The City of Fort Collins maintains reserves that are required by law or contract and
that serve a specific purpose. These types of reserves are considered restricted and
are not available for other uses. Within specific funds, additional reserves may be
maintained according to adopted policies. All expenditures of reserves must be
approved by Council. This may occur during the budget process or throughout the
budget year.
GENERAL FUND
The top priority goal of the Council is to improve the fiscal health of the City. Annual
revenue projections are conservative and authorized expenditures are closely
monitored. In stable economic times, the combination of these two strategies leads
to revenue collections higher than actual expenditures. The net resources are then
available to first fund the Restricted Reserve for Emergencies required under Article
X, Section 20 of the State Constitution and then the designated reserves. Year-end
balances in the designated reserves may be used as a funding source in the next
budget year. The General Fund reserves are funded from net revenues each year as
part of the budget process to maintain them at appropriate levels.
The combined total of the following four reserves should not exceed 20% of the
approved General Fund operating expenditures. (Note: this recommendation is the high
end of a range for year-end reserves from the State of Colorado financial handbook
for local governments.) The target is 15%.
• Restricted for Emergencies-this reserve is required under Article X, Section
20 of the State Constitution. Therefore the use of this reserve is restricted
to the purpose for which it was established. This reserve can be used for
declared emergencies only. In 1993, one percent or more of the City's fiscal
year spending, less bonded debt service, must be reserved, with two
percent required in 1994, and three percent for all later years.
All City Funds, excluding the Utilities, are required to maintain a Restricted
Reserve for Emergencies. For ease in accounting for these reserves, each
fund will contribute the required percentage into the General Fund to be held
in the General Fund Reserve for Emergencies. The General Fund required
percentage will be funded from the existing Designated Reserve for Financial
Uncertainty.
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• Designated for Financial Uncertainty - this reserve is maintained in the
General Fund and is designed to provide orderly adjustment to unforeseen
reductions in revenues in the current year if budgeted revenues are less than
actual revenues and expenditures, including encumbrances,are greater than
actual revenues-The minimum amount of money to be held in this reserve
should be approximately 3.5% of approved General Fund operating
expenditures.
If revenue shortfalls are measurable during the current budget year, the
Charter allows use of monies from this reserve to cover authorized
expenditures. Similarly, Charter authorized adjustments may be made as
part of the year-end closeout if additional monies are needed to cover
authorized expenditures.The City Manager will notify the City Council when
draws are made from this reserve.
• Designated for Facilities Maintenance - this reserve provides for deferred
maintenance needs, major renovations, and repairs to maintain the City's
facilities as defined in the 1992 fixed asset report. The level of the reserve
is determined based on the value of buildings and improvements as recorded
in the Comprehensive Annual Financial Report (CAFR) divided by an average
asset life of 35 years.
The Facilities Maintenance Reserve is used during the current budget year
by a supplemental appropriation of prior year reserves. Monies maintained
in this reserve are also authorized for expenditure in the annual budget.
• Designated for Equipment Replacement Loans - this reserve provides a
revolving loan pool for the timely replacement of operating equipment
(vehicles, machinery, and computer equipment). Operating managers may
borrow from this loan pool to "bridge" the period of time when the
equipment is needed and the next available lease/purchase package.
Typically, lease/purchase packages are assembled and presented to Council
twice a year. At that time, the principal amount of any loan from this
reserve will be repaid, plus interest at the prevailing rate.
• Designated for Productivity Savings - this reserve provides General Fund
managers the flexibility of long-range service planning through the use of
accumulated savings from increased productivity in service delivery. The
eligible productivity savings held in this reserve are separately accounted for
by the department or division that generated the savings.
Requests for the use of accumulated prior year(s) savings can be made to
the City Manager at any time during the year. City Council must approve,
through an appropriation ordinance, the use of the savings.
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• Designated for Contingencies - this reserve provides for the temporary
financing of unforeseen opportunities or needs of an emergency nature
including increases in service delivery costs. Monies held in this reserve
may be appropriated during the current budget year and may also be used
for the ensuing budget years as a revenue source if projected expenditures
needed to maintain appropriate levels of service exceed projected revenues.
Of all General Fund reserves, this is the most flexible. The amount of money
to be held in this reserve should not exceed 10% of the approved General
Fund operating expenditures.
OTHER FUNDS
• 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 year. It is typically budgeted at
an amount equal to 2% of the annual operating budget by fund, but
may be a fixed amount depending upon available funds.
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. Debt financed capital
improvements are, by definition, financed by proceeds of bond issues and
do not require capital reserves. The amount of the reserve is determined by
averaging the dollar value of capital needs as shown in the Capital
Improvement Program.
A second type of capital reserve is appropriated capital contingency,
typically 5% of-the amount annually appropriated for capital construction,
which provides for the conceptual study and preliminary design of
unanticipated capital improvements.
• Debt Reserves - Debt reserves are established to protect bond holders from
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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.
The City Council may establish, upon recommendation of the Financial
Officer, supplemental Debt Service reserves in addition to those expressly
required by Bond Ordinance. Such reserves shall not be deemed to confer
any rights upon Bondholders over and above those set forth in the Bond
Ordinance for each bond issue.
CAPITAL IMPROVEMENT FUNDS
6.1. CITIZEN PARTICIPATION
With Resolution 87-130, Council solicited citizen involvement and participation in
formulating a Capital Improvements Program known as Choices 95. By this Resolution,
a citizen committee was created 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 recommendation. The
Choices 95 citizen committee was instrumental in the determination of projects and
funding mechanism to be accomplished in the 1991-1997 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.
On November 3, 1992, the residents of Fort Collins approved a citizen initiated
ordinance creating a 0.25 cent Sales and Use Tax rate (excluding grocery food) to
finance the acquisition, construction, enhancement and maintenance of trail systems,
wildlife habitat and other natural areas to benefit the citizens of the City of Fort
Collins. This tax is effective for a five year period beginning January 1, 1993 and
ending December 31, 1997.
6.2. CAPITAL IMPROVEMENT POLICY
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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.
6.3. CAPITAL IMPROVEMENT PROGRAM
The City's Capital Improvement Program includes the Capital Projects Fund, the
Conservation Trust Fund, and the Parkland Fund.
Capital Projects Fund
Projects within the Capital Projects Fund are classified as follows:
• General City Capital Projects
- General Capital Projects
- Choices 95 Capital Projects
- Street Capital Maintenance
- Natural Areas
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
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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.
Street Capital Maintenance consists of the Street Overlay and Sealcoat Program. This
program provides for repair and maintenance of existing streets using cracksealing,
patchings, sealcoats, overlays or reconstruction. 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. (92% of the revenues are allocated for
street rehabilitation and 8% for minor street maintenance).
Natural Areas includes the acquisition, construction, enhancement and maintenance
of trail systems, wildlife habitat and other natural areas to benefit the citizens of the
City of Fort Collins. Revenues may also be used to purchase water rights as needed
or desired to maintain or enhance the natural characteristics of areas acquired. The
proceeds of the 0.25 cent Sales and Use Tax is specifically dedicated to finance
natural areas as defined herein.
UTILITY CAPITAL PROJECTS:
Utility Capital Projects, specifically Storm Drainage, Wastewater and Water, were in
prior years also part of the Capital Projects Fund. Utility capital projects are budgeted
within the appropriate enterprise fund. Sources of funding for utility capital projects
are bond proceeds and specific fees and charges.
CONSERVATION TRUST FUND PROJECTS:
The Conservation Trust Fund provides for the receipt and expenditure of revenue
received from the Colorado State Lottery. The Lottery revenue finances capital
projects which relate to the acquisition and development of open space and trails
including associated administrative costs and charges. Consistent with Colorado
statutes, the operation and maintenance of existing open space and trails may also be
financed by these funds.
PARKLAND FUND PROJECTS:
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
the acquisition, development and administration of neighborhood parks. The
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associated operation and maintenance costs are included in the General Fund
operating budget.
DEBT POLICIES
7.1. POLICY STATEMENT
The City of Fort Collins recognizes the primary purpose of capital facilities is to
support provision of services to its residents. Using debt financing to meet the capital
needs of the community must be evaluated according to two tests - efficiency and
equity. The test of efficiency equates to the highest rate of return for a given
investment of resources. The test of equity requires a determination of who should
pay for the cost of capital improvements. In meeting the demand for additional capital
facilities, the City will strive to balance the load between debt financing and "pay as
you go" methods. The City realizes failure to meet the demands of growth may inhibit
its continued economic viability, but also realizes too much debt may have detrimental
effects. Through the rigorous testing of the need for additional debt financed facilities
and the means by which the debt will be repaid, the City will strike an appropriate
balance between service demands and the amount of debt.
The City of Fort Collins uses lease purchase financing for the provision of new and
replacement equipment, vehicles and rolling stock to ensure the timely replacement
of equipment and vehicles and to decrease the impact of the cost to the user
department by spreading the costs over several years. This method may also be used
to acquire real property. The type of lease that the City uses is termed a conditional
sales lease, in effect a purchase rather than a rental of property. The annual
installments for all leases are appropriated by the Council each year. For purposes of
securing credit ratings and monitoring annual debt service as a percentage of operating
expenditures; lease purchase financing is considered a long-term liability of the City
and therefore will be issued under the same conditions as long-term debt.
7.2. AUTHORIZATION FOR MUNICIPAL BORROWING
The Charter authorizes the borrowing of money and the issuance of the following
securities to evidence indebtedness:
- short-term notes,
- general obligation securities,
- revenue securities,
- refunding securities,
- special assessment securities,
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tax increment securities, and
any other securities not in contravention of the Charter.
The Charter and Article X, Section 20 of the State Constitution determines which
securities may be issued only after a vote of the electors of the City and approved by
a majority of those voting on the issue.
7.3. CONDITIONS FOR USING DEBT
Debt financing of capital improvements and equipment will be done only when the
following conditions exist:
When non-continuous projects (those not requiring continuous annual
appropriations) are desired;
When it can be determined that future users will receive a benefit
from the improvement;
When it is necessary to provide basic services to residents and
taxpayers (for example, purchase of water rights);
- When the rights of bond buyers and subsequent investors are
protected through full disclosure; and
When total debt, including that issued by overlapping governmental
entities, does not constitute an unreasonable burden to the residents
and taxpayers.
7.4. DEBT INDICATORS AND TARGET LEVELS OF DEBT
While no absolute measures of debt burden exist, the City recognizes that municipal
bond rating agencies and financial analysts have established key debt indicators by
which they evaluate the credit strength of issuers. Since debt issued by entities
sharing the same geographic area, for example, Poudre R-1 School District, cannot be
controlled by the City, the indicator that will be used will be calculated using only
direct debt issued by the City itself. The indicator does not include debt issued by the
City or by the City Council as the Board of Directors for the City's utilities, as the
revenue collected for services are the source of repayment. The City Council has
chosen to use direct debt service as a percent of General Fund and debt service
expenditures to monitor its debt.
This indicator measures how the City's debt burden compares to financial operations.
As debt service requirements increase,the flexibility to make decisions regarding other
expenditures is reduced. .Excessive debt may be indicated if the percentage is
maintained at very high levels. A debt service to operating budget expenses ratio of
10 to 15 percent is considered fair; over 15 percent is generally considered poor.
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THE TARGET INDICATOR IS:
Direct debt service as a percent of operating expense: 10 to 12 percent for
the 1994-1998 period.
By establishing the target indicator defined above and managing debt accordingly,
the City will reduce its debt burden over the next five years-By 1998, projections
show that the annual debt service as a percent of operating expense will be within the
target range.
Annual Debt Service as a
Percentage of Operating Expenses
30 Full Loading of
All Direct Debt
25 Direct Debt Less
20 Target Zone
Some Self—Supporting
% 15
10 — — .-
5 Direct Debt Less
All Self—Supporting
0
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97
Year
Since the City's sustained growth causes demand for capital improvements and
resulting debt financing, the City target is established at a level above the median for
cities of comparable size. The City target is also adjusted because certain portions of
its debt burden are self-supporting. Specifically, Anheuser-Busch has pledged to cover
a large share of the Sales Tax revenue debt. Property taxes from the Downtown
Development Authority District are pledged to cover its debt service. Finally, Special
Improvement District debt was issued on the premise that it would be self-supporting.
Therefore, the indicator will be tracked using three different debt loadings. The first
is a full loading of direct debt, similar to the calculation method used by Moody's
Investor Service. The second subtracts out from the Moody's calculation the full
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Anheuser-Busch debt portion, fifty percent of Special Improvement Districts debt, and
twenty percent of the Downtown Development Authority Debt. The final loading
deducts all Anheuser-Busch, Special Improvement Districts, and Downtown
Development Authority debt. By 1998, the debt indicators will be approximately 11 %
full loading, 6% for the second, and 4% for the final.
7.5. SOUND FINANCING OF DEBT
When the City utilizes debt financing, it will ensure that the debt is soundly financed
by:
- Conservatively projecting the revenue sources that will be used to
pay the debt;
- Financing the improvement over a period not greater than the useful
life of the improvements;
- Determining that the benefits of the improvement exceed the costs
including interest costs;
- Maintaining a debt service coverage ratio which ensures that
combined debt service requirements will not exceed revenues pledged
for the payment of debt; and
- Evaluating proposed debt against the target debt indicators.
7.6. FINANCING METHODS
The City maintains the following policies in relation to methods of financing used to
issue debt:
- Total General Obligation (payable from Property Tax levies) debt will
not exceed 10% of assessed valuation per the City Charter;
- Where possible, the City will use revenue or other self-supporting
bonds instead of General Obligation Bonds;
- When appropriate, the City will issue non-obligation debt, for
example, Industrial Development Revenue Bonds, to promote
community stability and economic growth;
- Staff will maintain open communications with bond rating agencies
about its financial condition and whenever possible, issue rated
securities; and
- Staff will exchange information with Larimer County, Poudre R-1
School District, the Poudre Valley Hospital District and other entities
whose debt would contribute to the overlapping debt indicators for
the purpose of monitoring such debt burdens.
Annual budgets include appropriations for debt service payments and reserve
requirements for all outstanding debt and for debt anticipated to be issued within the
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ensuing budget year.
CASH MANAGEMENT AND INVESTMENT POLICY
(Summarizing Resolution No. 90-44)
8.1. POLICY STATEMENT
This policy was adopted by the Council of the City of Fort Collins as Resolution 90-44.
It is intended to supplement and expand upon Ordinance No. 109, 1988, Providing
for the investment and deposit of public funds and moneys of the City of Fort Collins."
8.2. SCOPE
This policy shall apply to the investment of all general and special funds of the City
of Fort Collins (hereinafter referred to as the "City") over which it exercises financial
control, including the City of Fort Collins Firefighters Pension and General Employees
Retirement Funds.
8.3. OBJECTIVES
The City's principal cash management and investment objectives are:
• Preservation of capital through the protection of investment principal.
• To maximize the cash available for investment.
• Maintenance of sufficient liquidity to meet the City's cash needs.
• Diversification of investments to avoid incurring unreasonable risk regarding
a specific security, maturity periods, or institution.
• To maximize the rate of return for prevailing market conditions for eligible
securities.
• Conformance with all federal, state and other legal requirements.
8.4. DELEGATION OF AUTHORITY
Responsibility for the collection and investment of all City funds is assigned to the
Financial Officer by the Charter, subject to direction of Council by resolution. The
Financial Officer may appoint other members of the Finance Department to. assist in
the cash management and investment function.
The City Manager shall appoint an investment committee consisting of the Financial
Officer and at least two (2) other employees of the City knowledgeable in the area of
governmental investments. The purpose of the committee shall be to provide advice
to the Financial Officer regarding the operation of the Cash Management and
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Investment Program. The committee shall also review the actual rate of return on the
portfolio as compared to the target rate of return.
The Financial Officer shall have the discretion to appoint one or more investment
advisors registered with the Securities and Exchange Commission. All investments
made through such investment advisors shall be within the guidelines of this Cash
Management and Investment Policy.
8.5. PRUDENCE
The standard of prudence to be used for managing the City's assets is the "prudent
investor" rule, which states, "Investments shall be made with judgment and care,
under circumstances then prevailing, which persons of prudence, discretion and
intelligence exercise in the management of their own affairs, not for speculation, but
for investment considering the probable safety of their capital as well as the probable
income to be derived."
8.6. ELIGIBLE INVESTMENTS
All investments will be made in accordance with Ordinance 109, 1988 and the Cash
Management and Investment Policy adopted by the Council of the City of Fort Collins
by Resolution 90-44. The following is a summary of the authorized investments:
• Any securities now or hereafter designated as legal investment for
municipalities in any applicable statute of the State of Colorado.
• Interest-bearing accounts or time certificates of deposit at state or federally-
chartered savings and loan associations or national banks in Colorado which
are designated as depositories for public moneys.
• Obligations of the United States Government and obligations issued by an
agency, instrumentality or public corporation of the United States.
• Obligations issued by or on behalf of the City.
• Obligations issued by or on behalf of any state, political subdivision, agency,
instrumentality or public corporation having an investment grade rating from
Moody's Investors Service or Standard & Poor's Corporation.
• Prime-rated bankers acceptances and prime-rated commercial paper.
• Guaranteed investment contracts of domestically-regulated insurance
companies having a claims-paying ability rating of "AA" or better from
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Standard & Poor's or A+ from Best Rating Services.
• Repurchase and reverse repurchase agreements of any marketable security
described in Ordinance No. 109, 1988 which afford the City a perfected
security interest in such security.
• Local government investment pools authorized by the State of Colorado.
• Shares in any money market fund or account, unit investment trust or open-
or close-end investment company, all of the net assets of which are
invested in securities described in this section, to the extent not prohibited
by Colorado Constitution or State Statutes.
Pension funds may also be invested in equipment trust certificates, real property and
loans secured by first mortgages or deeds of trust on real property, tax certificates
issued on real property in Colorado, and common or preferred stock or debt obligations
of U.S. Corporations.
8.7. REPORTING AND REVIEW
An investment report shall be prepared on a quarterly basis and submitted to the City
Manager. An annual summary shall be published in a newspaper of local circulation.
The Financial Officer and designated investment staff shall meet at least quarterly to
review the portfolio's adherence to appropriate risk levels and to compare the
portfolio's total return to the established investment objectives and goals.
8.8. ETHICS AND CONFLICTS OF INTEREST
City officers and employees involved in the investment process shall adhere to the
rules of conduct concerning conflicts of interest as stated in Art. IV, Section 9 (B) of
the Charter of the City of Fort Collins, Colorado.
8.9. POLICY REVISIONS
This Cash Management and Investment Policy will be reviewed periodically by the City
Manager and the Financial Officer and may be amended by City Council as conditions
warrant.
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