HomeMy WebLinkAboutReg 2009-12-07 Item 6H - Ordinance - City Cash Reserves Regulations COUNCIL AGENDA SYNOPSIS
1LA Initials ITEm No.
4 r' PI -I• I Meeting Date Prepared by Mayor's review Council ceview,
1 az 9 11/23/09 1 SH H
12/07/09 SH 4141' 1-J iyy0
2 90B
ITEM INFORMATION
CAS NUMBER: 09-171 ORIGINAL AGENDA DATE: NOVEMBER 23, 2009
AGENDA ITEM TITLE An ordinance and policy regarding City cash reserves.
CATEGORY Z Discussion 0 Motion 0 Resolution Z Ordinance Bid Award Public Hearing LI Other
Mtg Date 11/23/09 Mtg Date Mtg Date Mtg Date 12/07/09 Mtg Date Mtg Date Mtg Date
SPONSOR El Council 0 Mayor 0 Adm Svcs LI DCD Z Finance 0 Fire Z Legal 0 P&R 0 Police PIV
SPONSOR'S The ordinance adds new regulations, TMC 3.34, providing for adoption by reference
SUMMARY proposed Administrative Policy No. 300-15, Reserve Policy. The policy would provide for
cash reserves to address revenue shortfalls, unplanned expenses and mitigate the risk of
loss of uninsured claims against the City.
The Council is being asked to approve the ordinance adopting Policy 300-15.
REVIEWED BY LI COW Mtg. 111 CA&P Cmte LI F&S Cmte 111 Transportation Cmte
0 Utilities Cmte 0 Arts Comm. 11 Parks Comm. LI Planning Comm.
DA I E:
RECOMMENDATIONS:
SPONSOR/ADMIN. Finance Department
Comm' I LEE Committee Chair consent to take this item directly to COW
COST IMPACT/ FUND SOURCE
EXPENDITURE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED
Fund Source:
Comments:
MTG.' DATE 1 RECORD OF COUNCIL ACTION
11/23/09 Forward to next Regular Meeting
12/07/09
MTG. DATE 1 ATTACHMENTS
11/23/09 1 Informational Memorandum dated 11/19/09
Ordinance in Draft Form
Administrative Policy No. 300-15, Reserve Policy
12/07/09 Ordinance in final form
54
City of Tukwila
Washington
Ordinance No.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, ESTABLISHING NEW REGULATIONS REGARDING CITY
CASH RESERVES, TO BE CODIFIED AT TUKWILA MUNICIPAL CODE
CHAPTER 3.34, "RESERVE POLICY PROVIDING FOR SEVERABILITY;
AND ESTABLISHING AN EFFECTIVE DATE.
WHEREAS, the City Council recognizes that the City of Tukwila is in need of a reserve
policy that provides resources for unplanned expenses, to offset unexpected revenue
declines and to improve the long -term financial condition of the City; and
WHEREAS, the City Council recognizes establishing such a reserve policy has a direct
effect upon the bond rating of the City, which could result in future decreased borrowing
costs; and
WHEREAS, the City Council has determined it is in the best interest of its citizens and
businesses to provide long -term financial stability, reduce reliance upon one -time cost
savings, to address unplanned economic challenges that might face the City in the future;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, HEREBY ORDAINS AS FOLLOWS:
Section 1. Regulations Established. Tukwila Municipal Code Chapter 3.34, "Reserve
Policy," is hereby created to read as follows:
3.34 Reserve Policy
City Administrative Policy No. 300 -15, "Reserve Policy," attached to this ordinance as
"Exhibit A," is hereby adopted and incorporated into this chapter by reference as if fully set
forth herein. The Finance Director is required to maintain the administrative reserve policy.
Changes to the policy require approval by the City Council Finance and Safety Committee.
Section 2. Severability. If any section, subsection, paragraph, sentence, clause or
phrase of this ordinance or its application to any person or situation should be held to be
invalid or unconstitutional for any reason by a court of competent jurisdiction, such
invalidity or unconstitutionality shall not affect the validity or constitutionality of the
remaining portions of this ordinance or its application to any other person or situation.
Section 3. Effective Date. This ordinance or a summary thereof shall be published in
the official newspaper of the City, and shall take effect and be in full force and effect five
days after passage and publication as provided by law.
PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at a
Regular Meeting thereof this day of 2009.
ATTEST /AUTHENTICATED:
Christy O'Flaherty, CMC
APPROVED AS TO FORM BY:
Office of the City Attorney
Attachment Exhibit A Reserve Policy 300 -15
W:\ Word Processing \Ordinances \Cash Reserve Policy.doc
SH:ksn 11/30/2009
Jim Haggerton, Mayor
Filed with the City Clerk:
Passed by the City Council:
Published:
Effective Date:
Ordinance Number:
Page 1 of 1
55
56
1.0 PURPOSE:
CITY OF TUKWILA
ADMINISTRATIVE MANUAL
TITLE: RESERVE POLICY
2.0 ORGANIZATION AFFECTED:
All City funds.
3.0 REFERENCES:
4.0 GENERAL FUND RESERVE POLICY:
2% by December 31, 2011
4% by December 31, 2012
6% by December 31, 2013
8% by December 31, 2014
Index: 300 -15
Page 1 of 5
To establish a Reserve Policy for the City which is capable of addressing the
various types (categories) of the City's operating and restricted use funds. The
objectives of this Policy are to (i) provide a clear understanding of the goals and
objectives of reserve establishment, (ii) offer guidance and limitations regarding the
establishment, use and replenishment of City reserves, and (iii) establish a process
for periodic reporting and review of City reserves.
The General Fund is used to account for all general revenues of the City not
specifically levied or collected for other City funds, and for expenditures related to
providing general services by the City. For the purpose of this policy and as it
applies to the General Fund only, the City will establish a Contingency Reserve
Fund with a minimum balance of 8% of annual General Fund revenues. At no time,
however, shall the balance in the Contingency Reserve Fund fall below 4% unless
specifically waived by the City Council because of an unforeseen emergency.
The Contingency Reserve Fund shall initially be set at a minimum of 4% of annual
General Fund revenues. The City shall reach the targeted minimum of 8% no later
than fiscal year 2014 according to the following schedule:
4.1 If actual expenditures in the General Fund are less than budgeted
expenditures, and the General Fund does not end the year at a deficit, at least
25% of the difference between budgeted and actual expenditures will revert to
the Contingency Reserve Fund and may then be re- appropriated in a
subsequent year at the discretion of the City Council.
4.2 The City will annually direct a minimum of 25% of sales tax receipts from new
construction (NAICS Industry Classification Code 23) to the Contingency
57
58
TITLE: RESERVE POLICY
Index: 300 -15
Page 2 of 5
Reserve Fund.
4.3 Use of Contingency Reserve Fund To the extent that there is an imbalance
in the General Fund between revenues and budgeted expenditures, City
Council and administration will strive to address the imbalance first with
revenue increases, expenditure reductions, or a combination of the two.
Use of the Contingency Reserve Fund is a one -time, non recurring funding
source. If an imbalance in the General Fund occurs that can not be addressed
with additional revenues or expenditure reductions, a multi -year plan shall be
developed to address the imbalance concurrently with the planned reserve
draw down of the Contingency Fund. The implementation of the replenishment
plan will be done in accordance with the guidelines below (see
"Replenishment of Reserves A planned draw down of the fund's reserves
should: a) not exceed 50% of the balance in the Contingency Reserve Fund,
and b) not reduce the reserve below 4% of annual General Fund revenues.
4.4 Replenishment of Reserves The following criteria will be used to restore the
Contingency Reserve Fund based upon the remaining fund balance compared
to the minimum reserve guideline:
1. If the reserves are drawn down by 25 -50% of reserve fund balance,
then a budgetary plan shall be implemented to return the reserve level
to between 75% and 100% of the minimum balance over a 5 to 7 year
period.
2. If the reserves are drawn down by 10 -25% of reserve fund balance,
then the budgetary plan to restore the reserve shall be structured over
a 3 to 5 year period.
3. If the reserves are drawn down by 0 -10% of reserve fund balance, then
a solution to replenish to at least the minimum shall be structured over
a 1 to 3 year period.
4.5 Annual Status Reporting and Periodic Review Annually, after presentation of
the City's Comprehensive Annual Financial Report, the Finance Director will
prepare and present an updated Reserve Level Status report by July 1 of the
following year.
At least every five years, the Mayor, based on advice from the Finance
Director, will ask the City Council to reaffirm or revise this policy, including the
percentages established herein.
5.0 RISK MANAGEMENT RESERVE POLICY:
5.1. The City shall maintain a Risk Management Reserve Fund dedicated to
mitigation of the risk of loss arising from potential claims against the City for
general liability purposes as well as claims resulting from natural disasters
such as flooding and earthquakes.
5.2. The Risk Management Reserve Fund shall be set initially at a minimum of 4%
TITLE: RESERVE POLICY
of annual General Fund revenues. The City shall reach the targeted minimum
of 8% no later than fiscal year 2014 according to the following schedule:
2% by December 31, 2011
4% by December 31, 2012
6% by December 31, 2013
8% by December 31, 2014
Index: 300 -15
Page 3 of 5
5.3. Legal claims expenses incurred below the City's insurance deductable
amounts will be paid for out of the Risk Management Reserve Fund.
Uninsured legal claim expenses will also be deducted from the Risk
Management Reserve Fund.
5.4. Use of the Risk Management Reserve Fund A draw down of the fund's
reserves should: a) not exceed 50% of the balance in the Risk Management
Reserve Fund, and b) not reduce the reserve below 4% of annual General
Fund revenues.
5.5. Replenishment of Reserves The following criteria will be used to restore the
Risk Management Reserve Fund based upon the remaining fund balance
compared to the minimum reserve guideline:
1. If the reserves are drawn down by 25 -50% of reserve fund balance,
then a budgetary plan shall be implemented to return the reserve level
to between 75% and 100% of the minimum balance over a 5 to 7 year
period.
2. If the reserves are drawn down by 10 -25% of reserve fund balance,
then the budgetary plan to restore the reserve shall be structured over
a 3 to 5 year period.
3. If the reserves are drawn down by 0 -10% of reserve fund balance, then
a solution to replenish to at least the minimum shall be structured over
a 1 to 3 year period.
5.6. The City Council may, at their discretion and as necessary, transfer funds
between the Contingency Reserve Fund and the Risk Management Reserve
Fund. Once the two reserve funds are fully funded up to the minimum levels
as established within this policy, at no time will the combined balances of both
funds decline below 8% of annual General Fund revenues.
6.0 REVENUE STABILIZATION FUND POLICY:
6.1. The City shall maintain a Revenue Stabilization Fund dedicated to mitigating
the impact of unanticipated revenue declines.
6.2. The City shall appropriate, on an annual basis, a transfer of 1% of General
Fund revenue to the Revenue Stabilization Fund beginning with the 2011-
2012 biennial budget. The Revenue Stabilization Fund will not be utilized by
59
60
TITLE: RESERVE POLICY
Index: 300 -15
Page 4 of 5
the City unless actual General Fund revenue is 5% or more below budgeted
revenue after six months through any given calendar year. At no point will the
balance in the Revenue Stabilization Fund decline by more than 50 unless
actual General Fund revenue is more than 20% below budgeted revenue.
6.3. In addition to the annual 1% appropriation, the City will transfer a minimum of
25% of the excess of any actual property tax or sales tax collections above the
respective budgeted amounts. Such transfer shall take place by March 31 of
the following fiscal year.
6.4. Replenishment of Reserves The following criteria will be used to restore the
Revenue Stabilization Fund based upon the remaining fund balance
compared to the minimum reserve guideline:
1. If the reserves are drawn down by 25 -50% of reserve fund balance,
then a budgetary plan shall be implemented to return the reserve level
to between 75% and 100% of the minimum balance over a 5 to 7 year
period.
2. If the reserves are drawn down by 10 -25% of reserve fund balance,
then the budgetary plan to restore the reserve shall be structured over
a 3 to 5 year period.
3. If the reserves are drawn down by 0 -10% of reserve fund balance, then
a solution to replenish to at least the minimum shall be structured over
a 1 to 3 year period.
6.5. If the accumulated balance in the Revenue Stabilization Fund exceeds 10% of
annual General Fund revenues, such excess shall be transferred to the
Contingency Reserve Fund.
7.0 ENTERPRISE FUND RESERVE POLICY:
7.1. The City shall maintain an adequate fund balance in each of the City's
enterprise funds to provide funding for capital expenses, unanticipated
revenue declines, and any other unbudgeted expense. The policy applies to
the following funds:
1. Water Fund
2. Sewer Fund
3. Surface Water Fund
4. Foster Golf Course Fund
7.2. The City shall incorporate into its customer rate structure funding for the
establishment and maintenance of a Working Capital Reserve Fund. The
reserve balance shall be no Tess than 20% of the previous year operating and
capital expenses. The City shall reach the targeted minimum of 20% no later
than fiscal year 2014 according to the following schedule:
TITLE: RESERVE POLICY
Title:
RESERVE POLICY
Effective Date:
12/11/09 N/A
5% by December 31, 2011
10% by December 31, 2012
15% by December 31, 2013
20% by December 31, 2014
Supercedes:
Index: 300 -15
Page 5 of 5
7.3. Use of the Working Capital Reserve Fund A draw down of the fund's
reserves should: a) not exceed 50% of the balance in the Working Capital
Reserve Fund, and b) not reduce the reserve below 10% of annual operating
and capital expenditures within each fund.
7.4. Replenishment of Reserves The following criteria will be used to restore the
Working Capital Reserve Fund based upon the remaining fund balance
compared to the minimum reserve guideline:
1. If the reserves are drawn down by 25 -50% of reserve fund balance,
then a budgetary plan shall be implemented to return the reserve level
to between 75% and 100% of the minimum balance over a 5 to 7 year
period.
2. If the reserves are drawn down by 10 -25% of reserve fund balance,
then the budgetary plan to restore the reserve shall be structured over
a 3 to 5 year period.
3. If the reserves are drawn down by 0 -10% of reserve fund balance, then
a solution to replenish to at least the minimum shall be structured over
a 1 to 3 year period.
7.5. The Working Capital Reserve fund shall be maintained within each of the
Enterprise Funds, but shall be separate from the accumulated fund balance
within each fund.
Initiating Department:
Finance Department
Mayor's Office Approval Signature:
61