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Home My WebLink AboutCOW 2005-08-22 Item 5C - Review - Financial Policies and Financial Planning Model COUNCIL AGENDA SYNOPSIS t J ,9 Inetrars ITEM No. I 1 12 I'Ieetini Date 1 Prepared by illayor;r review 1 Connor! review a: +8i i 08/22/05 1 KAF 1 t -t 1 i 1 ''1, 4 ....if 1 I c--- t.„ -1-9-cii 1 3 C. 1 1 1 I ITT M INFORMATION= CAS NUMBER. 05-118 I ORIGINAL AGENDA DAIE. AUGUST 22, 2005 AGENDA ITEM TITLE Review of Draft Financial Policies CATEGORY Dzscusszon Motion Resolution Ordinance ['Bid Award Public Hearing Other Mtg Date 08/22/05 Mtg Date Mtg Date illtg Date Mtg Date IvItg Date Mtg Date SPONSOR Council Mayor Adrn Svcs DCD Finance Fire Legal P&R Police PIY/ SPONSOR'S Attached for review are draft financial policies related to debt, the Financial Planning SUMMARY Model, and policies of a general financial nature. REVIEWED BY COW Mtg CA &P Cmte F &S Cmte 111 Transportation Cmte Utilities Cmte Arts Comm. Parks Comm. Planning Comm. DATE: Multiple dates with latest, y it "1 on August 15, 2005 RECOMMENDATIONS: J SPONSOR /ADMIN Forward to the Committee of the Whole for review. COM II11EE Same, I COST IMPACT FUND SOURCE EXPENDITURE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED Fund Source. Comments MTG. DATE RECORD OF COUNCIL-ACTION =MTG. DATE I ATTACHMENTS 2 Cover Memo from Finance Director I Draft Financial Policies I Finance Safety Committee Meeting Minutes Ai to 2271f5 (Draft) I To: Committee of the Whole From: Kevin A. Fuhrer, Finance Director tIL Date: August 11, 2005 Subject: Draft Financial Policies For the past several months, the Finance and Safety Committee has engaged in the development of policies related to debt, the Financial Planning Model, and other general financial matters. The draft policies represent either a formalization of our past and current standards or the introduction of a reasonable business practice. This representation is outlined in greater detail for the 3 policies areas as follows: Debt Policies: ./ Legal Debt Limit: This formalizes the processes that have been employed in the past as bond issuance was considered ./ Practical or Fiscal Limitations: This section represents a formalization of past practice. ./ General Debt Policies: This section formalizes past practice and introduces a hierarchial preference for the type of debt Issuance. Financial Planning Model Policies: ./ Generally the draft policies were lifted from the 6- Year Financial Planning Model and Capital Improvement Program. ./ In addition, this policy section formalizes past practice. ./ For cash management and long range financial planning prudence, a new policy measure within this band is the introduction of a fund balance "floor" that may not fall below $3 million. ./ Finally, the matter of utility rate increases and the pass through of external agency rates (i.e. King County) are addressed in a formal policy format. Other General Financial Policies: ./ Largely this policy section formalizes past practice and sets specificity with respect to activities and timelines. ./ Furthermore, it introduces new elements and memorializes the existing process related to grant application. I look forward to reviewing the draft policies with you at the August 22, 2005 meeting of the Committee of the Whole. ww&~u CITY OF TUKvVILA Debt Policies The Debt PolIcies can be segregated into three areas: Legal Debt lImIts, 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 of the people; 2.5% with a vote of the people; 5.0% with a vote of the people, provided the mdebtedness in excess of 2.5% is for utIlItIes; and 7.5% with a vote ofthe people, provIded the indebtedness in excess of 5.0% is for parks or open space development. A sample schedule for the current 12 year period is attached to demonstrate the impact certain projections would have on debt capacIty limitations. Policy DP-1 - Prior to issuing any long-tenn bonds, the Administration must provIde an impact analysis over the life ofthe 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-tenn debt cannot be issued pnor to reviewing the impact on the Six Year Planning Model and its policy guidelmes. The impact of other potential bond issues shall be considered. Policy DP-3 - Fiscal Policy for large developments. To be detennined. C. General Debt Policies Policy DP-4 - The City will be cognizant of the critena used by rating agencies to maintain the highest possible bond rating. Policy DP-5 - Assessment Debt (LID) is preferred to General debt. Policy DP-6 - Debt Issuance will confonn to IRS regulatIOns and avoid arbitrage consequences. wroJfA\Rl? W Lid L~ tr u 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 mflation ill 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 include basIc mflationary increases at the beginning ofthe 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 hsted in the six-year Capital Improvement Program. Pohcy FP-5 - If the proposed grants or mitigation are either not funded or are reduced, the respective proj ect 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 ofthe 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 maintain a designated $1,100,000 "Rainy Day Fund" balance that is not included in Attachment A, Total Revenues & Expenditures, of the SIx-Year Planmng Model. Furthennore, in order to assure a minimum cash flow scenario the Accumulated Totals wIthm the SIX -Year Planning Model may not recede below $3,000,000 in 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 & mamtenance and long-tenn capital requirements. Policy FP-l 0 - Rate increases should be small, applIed ftequently, and staggered to avoid an overly burdensome increase and undue impact m 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. f[;l! UJ~' m. ~ c-:Ju I, r- ' II L:J 'J n CITY OF TUKWILA Other General Financial Policies Policy GF-l- The City's vanous user charges and fees will be reviewed at least every three years for proposed adjustments based on servIces provided and comparisons with other jurisdictions. Policy GF-2 - The Fmance Director will provide a financial 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 subIll1tted. 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 earnings rate. Policy GF 5 - The CIty shall, whenever practical and advantageous, take advantage of grants, loans, or other external financing sources. With the exception 0 f capital improvement program grants requiring a local match, staff shall report to and seek the approval of the appropriate council committee before fmalizing 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 m2007 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 Outstandin2 $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 r\D AIPT L~if~& '. r M Fmance & Safety Committee Meetmg of August 15,2005 Attendance: Dennis Robertson, Chair; Pam Carter, Dave Fenton Rhonda Berry, Jim Morrow, Peter Beckwith, Kevin Fuhrer, Danny Lisa - Washmgton State Gambling Commission >r 2. 1. Proposed Ordinance Regarding Cheating In Cardrooms, Mini-Casinos, and Gambling Establishments Summary: Peter briefed the committee on the draft ordinance and the underlying purpoSe associated with the proposed document. Essentially the King County Prosecutor's Office will not prosecute Tukwi1a gambling violations and by adopting the state statutes by reference, prosecution may occur for violations occurring within our jurisdictIOn. In the absence of an ordinance, it makes it difficult for the gambling commission to enforce the law. The City experiences approximately 10 cheating cases a year. Recommendation: Refer proposed ordinance to the Committee of the Whole. Proposed Financial Policies Summary: The committee approved the proposed changes related to policies FP-8 and GF-5. Additional changes were proposed- specifically to policy FP-4 by adding "Project" to the start ofthe first sentence, and to the draft memo dated August 11,2005, Other General Financial Policies, last sentence to read "Furthermore, it introduces new elements and f01111a1izes the existing process related to grant application." With respect to the policies addressing grants, Pam Carter requested that Kevin poll the departments to ascertain what if any impacts may be felt as a consequence ofthe draft policies and to report the findings when the policies are reviewed by the Committee ofthe Whole. On the sample projected debt capacity chart Dennis Robertson suggested that "non-voted, councilmanic" be added to the chart heading for clarity purposes and to change the specific project reference to a hypothetical project. Recommendation: Refer draft policies to the Committee of the Whole with the additional aforementioned changes. Committee Chair Approval Minutes Prepared By Kevin A. Fuhrer for Lucy Lauterbach in absentia D;~ ~[-ff~ 1["3 :r'!iJ IrS