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HomeMy WebLinkAboutReg 2005-09-06 Item 6B - Resolution - Financial Policies and Financial Planning Model COUNCIL AGENDA SYNOPSIS vqs,, ITEMIVO. I .y nttals 10 Meeting Date 1 Prepared by Mayor's review Council review <I i o 09/06/05 I KAF erti 1908_ 1 1 1 ITEM INFORMATION CAS NUMBER. 05-118 I ORIGINAL AGENDA DATE: SEPTEMBER 6, 2005 AGENDA I l'EM TITLE Adoption of Financial Policies CATEGORY Discussion Motion Resolution Ordinance Bid Award Public Heanng Other Mtg Date Mtg Date Mtg Date 09/06/05 Mtg Date Mtg Date Mtg Date Mlltg Data SPONSOR Council Mayor Adni Svcs DCD Finance Firs Legal P &R Police PD' SPONSOR'S Attached for review are the revised draft financial policies related to debt, the Financial SUMMARY Planning Model, and policies of a general financial nature. In addition, a resolution has been constructed to formally adopt the policies. REVIEWED BY COW Mtg. CA &P Cmte F &S Cmte Transportation Cmte Utilities Cmte Arts Comm. Parks Comm. Planning Comm. DATE: August 22, 2005 (COW) RECOMMENDATIONS: SPONSOR /ADMIN. Forward to the City Council for final review and adoption. COly IL rEE Same. COS T IMPACT /FUND SOURCE EXPENDITURE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED S0 So $0 Fund Source: N/A Comments: None MTG. DATE, I RECORD OF ACTION 08/22/05 1 COW recommendation to forward to the City Council for final review and adoption MTG. DATE I ATTACHMENTS 09/06/05 Cover Memo from Finance Director Revised Draft Financial Policies Committee of the Whole meeting minutes from August 22, 2005 Proposed Resolution to adopt the policies To: City Council From: ,1() .~ Kevin A. Fuhrer, Finance Director ~ Date: August 31, 2005 Subj ect: Financial Policies As a follow up to the August 22, 2005 Committee of the Whole meeting, I have incorporated the proposed change to the financial policies. More specifically, Policy DP-5 has been changed to read, "Assessment Debt (LID) shall be considered as an alternative to General Debt." For the sake of providing quick reference, the change to this policy statement is denoted through underline and strikeout. I look forward to reviewing the policies with you on Tuesday, September 6. CITY OF TUKWILA Debt Policies The Debt Policies can be segregated into three areas: Legal Debt lilTIlts, PractIcal or Fiscal limits and General Debt policies. A. Legal Debt Limit - The Revised Code of Washington (RCW 39.36) establishes the legal debt limits for cities. Specifically, this RCW provIdes that debt cannot be incurred in excess of the following percentages of the value of the taxable property of the City: 1.5% without a vote ofthe people; 2.5% with a vote ofthe people; 5.0% with a vote ofthe people, provided the indebtedness in excess of 2.5% is for utIlities; and 7.5% with a vote of the people, provided the indebtedness in excess of 5.0% is for parks or open space development. A sample schedule for the current 12 year penod IS attached to demonstrate the impact certain projections would have on debt capacity lImitatIOns. Policy DP-1 - Prior to issuing any long-term bonds, the Administration must provIde an impact analysis over the life of the new bonds. Bond issues must be approved by the City Council. B. Practical or Fiscal Limitations - More important than the legal limitations is the practical or fiscal limitations, i.e. ability to repay borrowed funds. Policy DP-2 - Long-term debt cannot be issued pnor to reviewing the impact on the Six Year Planning Model and its polIcy guidelines. The impact of other potential bond issues shall be considered. Policy DP-3 - Fiscal Policy for large developments. To be determined. C. General Debt Policies Policy DP-4 - The City will be cognizant of the criteria used by rating agencies to maintarn the highest possible bond rating. Policy DP-5 - Assessment Debt (LID) shall be considered as an alternativeis preferred _to General debtDebt. Policy DP-6 - Debt issuance will conform to IRS regulations and aVOId arbitrage consequences. CITY OF TUKWILA Financial Planning Model Policies The Six-Year Financial Planning Model and Capital Improvement Program is the primary financial policy document. It represents the culminatIOn of all financIal policies. Revenues Policy FP-1 - Revenues will be estimated on a conservative baSIS. Increases greater than inflation in Attachment A, Total Revenues and Expenditures, will require additional documentation. Policy FP-2 -Major revenue sources will require explanation in Attachment A-I, Notes to Revenues. Operations & Maintenance Expenditures Policy FP-3 - ExpendItures for the General Fund operatIOns (Attachment B, General Fund Operations & Maintenance Expenditures) will only mclude basic inflationary increases at the beginning of the budget preparation process. Proposed increases in programs or personnel will require an Issues and options paper and Council approval before being added to the operations & maintenance expenditures estimate. Capital Expenditures Policy FP-4 - Project capital grants with local matching requirements can only be applied for with express approval by the CIty Council. Grant applicatIOns shall be made only for projects listed in the six-year Capital Improvement Program. Policy FP-5 - If the proposed grants or mitigation are eIther not funded or are reduced, the respective project will be re-evaluated on the basis of its value and priority level placement in the Capital Improvement Program. Policy FP-6 - The financing of limited benefit capital improvements (i.e. private development) should be borne by the primary beneficiaries of the improvement. The principle underlying limited benefit IS that the property IS peculiarly benefited and therefore the owners do not in fact pay anything in excess of what they receive by reason of such improvement. Fund Balances Policy FP-7 - The General Fund will mamtain a designated $1,100,000 "Rainy Day Fund" balance that is not included in Attachment A, Total Revenues & Expenditures, of the Six -Year Plannmg Model. Furthennore, III order to assure a mmimum cash flow scenano the Accumulated Totals wIthin the Six-Year Plannmg Model may not recede below $3,000,000 m Attachment A, Total Revenues & Expenditures. PolIcy FP-8 - If compliance with Policy FP-7 is at risk; the Administration will provide a list of revenue options, service level/program reductions or capItal project deferrals for City Council consideration. Enterprise Funds Policy FP-9 - Each Enterprise Fund will be reviewed annually and it must have a rate structure adequate to meet its operations & maintenance and long-term capital requirements. Policy FP-l 0 - Rate increases should be small, applied rrequently, and staggered to avoid an overly burdensome increase and undue impact in any given year. PolIcy FP-ll - Rate increases of external agencies (i.e. King County secondary wastewater treatment fees) will be passed through to the users of the utility. CITY OF TUKWILA Other General Financial Policies Policy GF-l- The City's various user charges and fees will be reviewed at least every three years for proposed adjustments based on services provIded and comparisons with other jurisdictions. Policv GF-2 - The Finance Director will provide a fmancial status update at least quarterly. PolIcy GF-3 - Budget amendments during the year will be approved by budget motion until the end ofthe budget year, when a formal comprehensive budget amendment is submitted. Policy GF-4 - Interfund loans will be permissible if practical. Interest rates will be computed based on the annual average of the State Investment Pool earnmgs rate. Policy GF 5 - The CIty shall, whenever practIcal and advantageous, take advantage of grants, loans, or other external financmg sources. With the exception ofcapltal improvement program grants requirIng a local match, staff shall report to and seek the approval of the appropriate council committee before finalizing the grant. Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CITY OF TUKWILA Projected Debt Capacity 2003-2015 AV Non-Voted Debt x 1.5% $50,760 51,780 52,810 53,865 57,945 60,270 62,670 65,175 67,785 70,485 73,320 76,305 79,305 Net Remaining Capacity $24,401 26,615 28,906 31,274 36,729 30,486 34,788 39,295 44,007 49,057 54,242 59,477 64,927 *Growth rate up to 3.591 at 2%. AddItional $.200 in 2007 then 4% growth rate thru 2015 ** An additional $10,000,000 is borrowed for Tukwila Terrific Gateway. (Billion Actual) $3.384 3.452 3.521 3.591 3.863* 4.018 4.178 4.345 4.519 4.699 4.888 5.087 5.287 Debt Outstanding $26,359 25,165 23,904 22,591 21,216 29,784** 27,882 25,880 23,778 21,428 19,078 16,828 14,378 EXCERPTED MINUTES TUKWILA CITY COUNCIL August 22, 2005 TUKWILA CITY HALL - COUNCIL CHAMBERS COMMTITEE OF WHOLE MEffiNG SPECIAL ISSUES: c. Proposed Financial Policies Council member Dennis Robertson reported review of the draft proposed financial policies on more than one occasion by the Finance and Safety Committee meeting At their August 15, 2005 meeting, the Committee agreed the policies are in "good shape" and should be forwarded to this meeting for review by the full Council As Chair of the Finance and Safety Committee, Mr Robertson is hopeful the policies are adopted/approved by the end of 2005 (while he is still Chair) Kevin Fuhrer, Finance Director, reported the proposed polices are, for the most part, "things the City currently does or practices," which should be put in writing Although not required by the Washington State Auditor, the proposed policies were called a "good, internal control feature" As each proposed policy was reviewed, Councilmembers voiced opinion and/or offered proposed edits. Mr Fuhrer stood ready to respond to Council inquiries as well Of particular interest to the Council were the following ~ Changing verbiage in a policy related to Local Improvement Districts (preferred vs shall be considered), ~ Maintaining $1 1 million in "rainy day" funds, and $3 million surplus dollars in the general budget each year; in the event it is impossible, administration must provide revenue options, including service level/program reductions, capital project deferrals and/or staff reductions. It should be noted the $1 1 million is NOT included in the "Attachment A" prepared each year in conjunction with the budget; ~ Reporting a financial status update (by the Finance Director to Council) each quarter; ~ Recording of the adopted financial policies in the CIP, the annual budget, and within a resolution Mr. Fuhrer noted proposed changes where necessary and will present the final draft financial policies to the Council (at their request) at the September 6, 2005 Regular meeting. I, Robert H Baker, Deputy City Clerk, for the City of Tukwila, hereby certify the above to be a true and correct excerpt of the City Council Committee of Whole meeting minutes from Monday, August 22, 2005 DATED this :2/\ 0U day of ALLer- ,2005 'P:fdJ.t' I- r( i}(' k 6 ' tJ. j/L.-~.I b, f Ll ) J,-- -d Robert H Baker, CivlC Deputy City Cierk CITY OF TUKWILA Office of the City Clerk 6200 Southcenter Boulevard Tukwila, WA 98188 (206) 433-1800 City of Tukwila Washington Resolution No. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, ADOPTING POLICIES RELATED TO DEBT, THE FINANCIAL PLANNING MODEL, AND POLICIES OF A 9ENERAL FINANCIAL NATURE. WHEREAS, the City Council and Mayor are committed to high standards of financial management; and WHEREAS, adopting and periodically updating and revising financial policies are important steps towards assuring consistent and rational financial management; and WHEREAS, policies related to debt, the Financial Planning Model, and policies of a general financial nature are essential components of an overall financial management policy; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, HEREBY RESOL YES AS FOLLOWS: Section 1. The financial policies related to debt, the Financial Planning Model, and policies of a general financial nature, as evidenced in Attachment A, are adopted. PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at a Regular Meeting thereof this day of , 2005 Pamela Linder, Council President A TrEST/AUTHENTICATED' Jane E. Cantu, CMC, City Clerk APPROVED AS TO FORM. By: Office of the City Attorney Filed with the City Clerk: Passed by the City Council. Resolution Number Financial policies KF:bjs 8/31/05