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HomeMy WebLinkAbout2015-055-05/19/2015-ADOPTING AMENDMENTS TO THE FINANCIAL MANAGEMENT POLICIES BY COMBINING AND REVISING GENERAL POLICIES, RESOLUTION 2015-055 OF THE COUNCIL OF THE CITY OF FORT COLLINS ADOPTING AMENDMENTS TO THE FINANCIAL MANAGEMENT POLICIES BY COMBINING AND REVISING GENERAL POLICIES, FUND POLICIES, AND CAPITAL IMPROVEMENT FUND POLICIES WHEREAS, City Council has adopted Financial Management Policies for the City pursuant to Resolution 1994-174 (the "Financial Policies"); and WHEREAS, Resolution 1994-174 provides that City Council may adopt amendments to the Financial Policies, which the Council has done several times over the years; and WHEREAS, the City's Chief Financial Officer and City Manager have recommended new amendments to the Financial Policies related to the current sections of the Financial Policies titled "General Policies", "Fund Policies" and "Capital Improvement Fund Policies," by revising these sections and combining them into a single section titled "General Policies'; and WHEREAS, the City is committed to sound and efficient financial planning and management consistent with the best practices as established by the Government Financial Officers Association ("GFOA"); and WHEREAS, the new "General Policies" are attached hereto and incorporated by reference as Exhibit "A" (`General Policies"); and WHEREAS, the Council Finance Committee has reviewed the General Policies and voted to recommend that the Council approve them; and WHEREAS, the City Council wishes to amend the Financial Polices, as most recently updated in July 2014 with the adoption of Resolution 2014-058, by adopting these General Policies in pursuit of its objective of sound and efficient financial planning and management consistent with GFOA's best practices. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS, as follows: Section 1. That the City Council hereby approves and adopts the General Policies. Section 2. That the General Policies shall be included as a new section to the Financial Policies, and the Financial Policies, as previously amended and as amended herein, shall hereafter remain in effect until the same are amended or repealed by subsequent action of the City Council. - 1 - Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 19th day of May, A.D. 2015. Q pOR7C Mayor / ATTEST: Z SEAL : LORPnO,. City Clerk - 2 - EXHIBIT A Financial Management Policy 3 PROPOSED CLEAN VERSION Issue Date : January 17, General Financial Policies 2006 Version : 2 Issued by: City Council Objective : To outline the method and principles for allocation Administrative Charges, establishing the parameters for the Medical and Retirement Program,, Fund Organization; Cost Recovery and Fee Setting; and Capital Improvement Program. Applicability: This policy applies to all City funds. It does not apply to URA, DDA, PFA and Library. Authorized by: City Council Resolution 2006- 006. 3 . 1 Administrative Charges Certain General Fund departments render services to departments in other funds and shall be equitably apportioned to those other funds. General Fund departments that do not have a direct billing mechanism shall have their costs allocated using the formula outlined in this section to other funds, and provide offsetting revenue in the General Fund. A. General Fund Departmental Costs to be Allocated Certain General Fund departmental costs to be allocated include City Council, City Manager, City Clerk, City Attorney, Human Resources, and Finance . Any services in these departments which are funded by user fees or dedicated revenues are excluded from the allocation. The amount of costs to be allocated is the current adopted budget for each of the departments listed above less user fees and dedicated revenue. With a multi-year budget, the charge to each fund is increased by a determined percentage for the second future year and then adjusted to the actual calculation with the next multi-year budget. B. How Costs Are Allocated Financial Policy 3 - General Financial Policies PROPOSED CLEAN VERSION 1 The Human Resources costs are allocated on a prorated basis to funds based on the total number of budgeted full-time- equivalent positions in each fund. All other General Fund administrative costs are allocated on a prorated basis to the funds based upon adjusted expenditure budgets for the current year. Adjustments are made to recognize the lower amount of administrative services required for Capital, Debt Service, and Purchased Power payments . Capital project budgets are reduced by two -thirds and averaged over three years . Debt Service budgets are reduced by three - fourths and the entire Purchased Power budget is deducted from the Light & Power budget. C . All Funds Receive Allocations but Not All Funds Are 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 Governmental 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. D . Review During each budget process, the Administrative Charge calculation will be reviewed the Budget Office . Minor refinements in the allocation formulas are made as needed . Significant changes will be brought to the City Council for approval to assure that the equitable apportionment meets requirements of the Code/Charter. 3 . 2 Medical Insurance and Retirement Plan A. Medical Insurance In 1981, the City of Fort Collins set up a partially self- funded medical insurance program . The objective of a self- funding program is to reduce the cost of medical insurance by assuming the risk for certain plan expenses . Assuming a portion of the risk lowers the amount of charges compared to a conventional full insurance plan. For most of the last 33 years, the City has found this funding method to be a cost- effective means of providing a very desirable employee benefit. Financial Policy 3 - General Financial Policies PROPOSED CLEAN VERSION To administer the self-funded and insured portions of the medical insurance plans, the City conducts a competitive proposal process every five years or more often if required. The insurance contracts are reviewed annually for both performance and cost. The types of services contracted for include plan administrative services, stop -loss protection against larger claims, life and accidental death and dismemberment insurance, and long-term disability coverage. B. Retirement Programs The City of Fort Collins contributes to two types of retirement plans : a Defined Benefit Plan and Defined Contribution Plans . 1 . Defined Benefit Plan - the General Employees Retirement Plan (Plan) . The pension plan is closed to new participants as of 1 / 1 / 1999 . The Plan document approved by the City Council outlines the details of the program. A Board meets monthly to oversee the program. Board members, in consultation with annual actuary report and other information, make recommendations to City Council for any plan changes that may be needed from time to time. The Plan currently calls for the employer (City or PFA) to contribute 10 . 5 %. Because the plan is underfunded, a Supplemental Contribution is made at a fixed dollar amount each year. The Supplemental amount is reevaluated every 2 years in conjunction with the budget cycle and based on the latest actuarial valuation report. 2 . 401 (a) and 457 Money Purchase Plans. Also known as Defined Contribution Plans, the contribution rates are as follows : 401 a 457 Employee Group Employer Employee Waiting Employer Employee Waiting Classified Employees 6.5 % 3 .0% 6 months 0 .0% optional no wait Classified Employees hired on 7.5 % 3 .0% 6 months 0 .0% optional no wait or before 3/31/07 Unclassified Management 6 . 5 % 6.0% 6 months 0 .0% optional no wait Unclassified Management 7 . 5 % 6.0% 6 months 0 .0% optional no wait hired on or before 3/31/07 Direct Reports of City Council 10 .0 % 0 .0 % no wait match up to optional no wait 3 % Service Area Directors 10.0 % 0 .0 % no wait match up to optional no wait 3 % Police & Dispatch (per union 8.0 % 8.0% no wait match up to optional 6 agreement) * 3 % months Community Service Officer 7.5 % 3 .0% 6 months 0 .0% optional no wait Financial Policy 3 - General Financial Policies PROPOSED CLEAN VERSION 3 * All employee groups vest immediately, except Police and Dispatch who follow schedule in union agreement. Employee contributions to the 457 plan are limited to the amounts published by the IRS. The City will contract with a third party administrator to provide the Defined Contribution Plans. City Staff comprised of both Finance and HR will oversee the program and performance of the third party administrator. 3 . 3 Fund Organization Funds for accounting and financial reporting purposes have their own balance sheet and income statement. The organization of the City's Funds is designed to enhance accountability and transparency, comply with Generally Accepted Accounting Principles, meet grant requirements, comply with City Code/Charter and comply with Colorado statutes. In City Article V, Part III, Section 25 the Financial Officer is empowered to create funds as appropriate. The number of funds established should be the minimum needed for legal and operating requirements . Unnecessary funds can result in inflexibility, undue complexity and inefficient financial administration. The City's funds are organized at two levels of groupings; Fund Groups and Fund Types . Fund Groups Governmental Funds Used to account for activities primarily supported by taxes, grants and similar revenue sources. Proprietary Funds Used to account for activities that receive significant support from fees and charges. Fiduciary Funds Used to account for resources that a City holds as a trustee or agent on behalf of an outside party that cannot be used to support the City's own programs. Within each Fund Group are Fund Types . Governmental Fund Types General Fund Main operating fund used to account for and report all financial resources not accounted for and reported in another fund. Special Revenue Used to account for and report the proceeds of specific revenue sources that are Funds restricted, committed or assigned to expenditure for specific purposes, other than debt service or capital projects. Debt Service Funds Used to account for and report resources that are restricted, committed or assigned to expenditure for principal and interest. Financial Policy 3 - General Financial Policies PROPOSED CLEAN VERSION Capital Project Funds Used to account for and report resources that are restricted, committed or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities or other capital assets. Proprietary Fund Types Enterprise Funds Used to account and report any activity for which a fee is charged to external users of goods and services Internal Service Used to account and report any activity for which a fee is charged to other funds, Funds departments, or agencies of the City and its component units on a cost reimbursement basis. Fiduciary Fund Types Pension Trust Fund Used to account and report resources that are required to be held in trust for the members and beneficiaries of defined benefit plans. Agency Funds Used to report resources held by the City in a purely custodial capacity. The following is a list of all funds of the City, including legally separate entities but from a financial reporting perspective are treated as a component unit of the City. Group and Type Legal Ref. Name Governmental General Fund city 100 General Fund Special Revenue Fund City 250 Capital Expansion Fund Special Revenue Fund City 251 Sales & Use Tax Fund Special Revenue Fund Separate 252 General Improvement District # 1 Special Revenue Fund City 254 Keep Fort Collins Great Fund Special Revenue Fund City 272 Natural Areas Fund Special Revenue Fund City 273 Cultural Services & Facilities Special Revenue Fund City 274 Recreation Fund Special Revenue Fund City 275 Cemeteries Fund Special Revenue Fund City 276 Perpetual Care Fund Special Revenue Fund City 277 Museum Fund Special Revenue Fund City 280 Community Development Block Special Revenue Fund City 281 Home Investment Partnership Special Revenue Fund City 290 Transit Services Fund Special Revenue Fund City 291 Street Oversizing Fund Special Revenue Fund City 292 Transportation Services Fund Special Revenue Fund Separate 293 GID # 15 - Skyview Special Revenue Fund City 294 Parking Fund Special Revenue Fund City 300 Timberline/Prospect SID #94 Debt Service city 303 Debt Service Fund Debt Service city 304 Ca itaI Leasing Corporation Capital Projects Fund City 400 Capital Projects Fund Capital Projects Fund City 270 Neighborhood Parkland Fund Capital Projects Fund City 271 Conservation Trust Fund Proprietary Financial Policy 3 — General Financial Policies PROPOSED CLEAN VERSION Enterprise Fund city 500 Golf Fund Enterprise Fund City 501 Light & Power Fund Enterprise Fund city 502 Water Fund Enterprise Fund City 503 Wastewater Fund Enterprise Fund city 504 Storm Drainage Fund Internal Service Fund City 601 Equipment Fund Internal Service Fund City 602 Self-Insurance Fund Internal Service Fund City 603 Data And Communications Fund Internal Service Fund City 604 Benefits Fund Internal Service Fund City 605 Utility Customer Service & Admin Fiduciary Pension Trust Fund city 700 Employees ' Retirement Fund Governmental Special Revenue Fund Separate 800 URA - N . College District Special Revenue Fund Separate 801 URA - Prospect South TIF District Special Revenue Fund Separate 803 URA - Mall Fund Special Revenue Fund Separate 820 DDA Operating Fund Special Revenue Fund Separate 822 DDA Debt Service Fund 3 . 4 Cost Recovery and Fee Setting A. Enterprise Funds shall rely on charges and user fees to recover their costs, rather than taxes . Utility 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 in each of the utility funds after paying the full cost of operating and maintaining the utilities and keeping them in good repair and working order. Such rates shall also be sufficient to enable each utility, where applicable, to meet rate requirements of City or utility enterprise bond ordinances. B . The Internal Service Funds shall operate under the following guidelines . 1 . Internal service fund charges are limited to the recovery of the cost of the service, including depreciation, rather than making a profit. Each fund' s prior year financial statements and estimates of future costs form the basis for the calculation of charges. 2 . Charges should be set at a level to avoid significant adverse financial impacts on their customers . Fund customers and independent experts should be allowed to review and make recommendations about the level of charges. The Finance Department should approve the Financial Policy 3 - General Financial Policies PROPOSED CLEAN VERSION 6 analysis and conclusions used to set rates . 3 . Internal service funds should compete with similar services offered by the private sector. The City staff will compare rates every five years . If not competitive with the private sector, the Finance Department will analyze whether the private sector should provide the service . 4. Internal service funds may build up reserves . Customer- approved master plans and independent third- party actuarial reviews (for the Benefit and Self- Insurance funds) guide the level of reserves . Fund managers may spend reserves only for their approved purpose . S . The City may buy equipment and facilities for the internal service funds through lease- purchase financing. Management' s decision to recommend lease- purchase financing depends on : ( 1) cash flow needs; (2 ) budget constraints ; (3 ) benefit to cost analysis; and (4) level of reserves . 6 . Except for the Utilities Customer Service and Administration Fund, Internal service funds operate under the same guidelines and constraints as the General Fund and other governmental funds of the City. The Utilities Customer Service and Administration Fund shall operate under the guidelines of the Utilities Services Funds . C . Cultural Services & Facilities Fund Fee 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 . 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. Financial Policy 3 - General Financial Policies PROPOSED CLEAN VERSION D . Recreation Fund Fee Policy The following fee policy for the Recreation Fund was adopted by Resolution 1990 - 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. Costs associated with the Recreation Fund shall be defined as either Program Costs or Community Good Costs . 1 . Program costs are directly associated with the activities and facilities used by the citizens, and include the following: (a) Activity Costs ( 1) part time staff (2 ) materials (3 ) equipment (4) participant transportation (5) other costs directly associated with conducting activities (b) Facility Operation and Maintenance Costs ( 1) minor repairs (2 ) custodial equipment and supplies (3 ) building utilities (4) specialized items (5 ) other operations and maintenance costs directly associated with operating facilities Fees should cover the cost of the direct program experience and facilities used. However, fees may be established in accordance with the market value of the recreational services provided . The fees charged will not exceed the cost of providing direct services to program users . 2 . Community Good costs are those costs that are necessary to provide a program but are not directly experienced by the user. Such costs include the following: (a) full time recreation staff (b) office operation costs such as telephone and computer charges (c) training costs (d) dues and subscriptions (e) insurance (f) office supplies and equipment (g) other costs not directly experienced by the users Financial Policy 3 — General Financial Policies PROPOSED CLEAN VERSION 8 The General Fund shall cover " Community Good" costs . General Fund will also cover deficits in programs that cannot recover all their costs through fees. Generally, these include programs designed for special populations where it is not feasible to cover the total cost of participation, or programs, like youth sports where Council policy requires a fee discount. Because costs that are defined as " Community Good " costs are supported by the General Fund, they are subject to the same operational guidelines as established for other General Fund budgets. 3 . 5 Capital Improvement Program 1 . Each Service Area or Department shall develop multi-year Master Plans for capital improvements. On a city-wide basis, staff shall compile a 10 year Capital Improvement Plan and update it every two years . Estimates of operating and maintenance costs should be included; 2 . Appropriation requests must include not only the cost of construction or acquisition and the funding sources, but an estimate of operating and maintenance costs; 3 . Capital improvements projects will be administered in accordance with the Capital Projects Procedures Manual; 4. Appropriations for capital improvements will be constructed and expenditures incurred only for the purpose as approved by City Council; 5 . Staff should seek out grants and partnerships whenever appropriate . ; Financial Policy 3 - General Financial Policies PROPOSED CLEAN VERSION 9 Definitions Example : Financial Policy 3 - General Financial Policies PROPOSED CLEAN VERSION 10 Getting Help Please contact the Controller with any questions at 970.221 . 6772. Financial Policy 3 - General Financial Policies PROPOSED CLEAN VERSION 11