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Home My WebLink AboutFS 2012-07-17 COMPLETE AGENDA PACKETCity of Tukwila Finance and Safety Committee O De'Sean Quinn, Chair O Dennis Robertson O Kate Kruller Distribution: D. Quinn D. Robertson K. Kruller V. Seal Mayor Haggerton D. Cline P. McCarthy C. O'Raherty S. Kerslake K. Matej AGENDA TUESDAY, JULY 17, 2012 CONFERENCE ROOM #3, 5:15 PM Item Recommended Action 1. PRESENTATION(S) 2. BUSINESS AGENDA a. Revisions to the Reserve Policy. Peggy McCarthy, Finance Director b. Discussion regarding the August 7 Finance Safety Committee meeting and National Night Out Against Crime event. Committee Chair Quinn 3. ANNOUNCEMENTS 4. MISCELLANEOUS a. Committee approval b. Discussion. Next Scheduled Meeting: Tuesday, August 7, 2012 Page Pg.1 S The City of Tukwila strives to accommodate individuals with disabilities. Please contact the City Clerk's Office at 206 433 -1800 or TukwilaCityClerk @TukwilaWA.gov) for assistance. x City of Tukwila Jim Haggerton, Mayor TO: Mayor Haggerton Finance and Safety Committee FROM: Peggy McCarthy, Finance Director DATE: July 11, 2012 SUBJECT: Reserve Policy Revision ISSUE Review neighboring jurisdictions' minimum fund balance and reserve policy requirements in relation to the proposed revisions to the City's Reserve Policy, 300 -15. Consider for approval the proposed revised reserve policy. BACKGROUND Revision to the City's reserve policy was discussed at the May 22st Finance and Safety Committee meeting. Committee Chair Quinn requested that additional, comparative information be presented for consideration. Finance staff obtained the following information from the websites of the listed jurisdictions. City of Contingency /Rainy Day Fund I General Fund Minimum Balance Renton $5 million Kent 10% of General Fund expenditures Burien $3.5 million SeaTac $775,000 Federal Way $3.4 million Auburn $5.6 million Additionally, the Government Finance Officers Association (GFOA) recommends that a balance equal to two months, or 16.7 of general fund revenues or expenditures be maintained as a minimum. Tukwila's proposed policy is as follows: Contingency /Rainy Day Fund General Fund Minimum Balance Tukwila $5 million 10% of General Fund revenue DISCUSSION Based on the information obtained from the neighboring jurisdiction websites, the City's proposed revised policy is in line with the reserve criteria of these cities. When the combined minimum fund balances of both the contingency fund and general fund are considered, the City's proposed revised policy is also in line with the GFOA recommendation of a 16.7% minimum fund balance (10% minimum balance for each fund, or 20% combined, exceeds the 16.7% recommended by GFOA). The revision is proposed to reduce the complexity of the existing reserve policy while continuing to meet the reserve policy goals. RECOMMENDATION The Council Committee is being asked to approve the revised reserve policy. The Committee has authority to make policy revisions through TMC 3.34.010, Reserve Policy, as follows: "Changes to the policy require approval by the City Council Finance and Safety Committee ATTACHMENTS Proposed Revised Reserve Policy Reserve Policy Comparison Reserve Policy 300 -15 Finance and Safety Committee May 22 d meeting minute excerpt x Index: 300 -15 Page 1 of 2 TITLE: RESERVE POLICY 1. PURPOSE: 1.1. Maintain adequate levels of fund balance to mitigate current and future risks (e.g., revenue shortfalls and unanticipated expenditures). 2. ORGANIZATION AFFECTED: All City funds. 3. REFERENCES: 4. GENERAL FUND MINIMUM FUND BALANCE 4.1. At the close of each fiscal year, the General Fund balance shall equal or exceed 10% of the previous fiscal year General Fund annual revenues. 4.2. Deviation from this policy shall be permitted only as approved by Council. 4.3. Should a deviation from policy occur, a plan to reestablish the minimum fund balance shall be approved by Council no later than the end of the fiscal year following the year of deviation. 4.4. The prescribed minimum fund balance shall be attained no later than the close of the fiscal year 2014. 5. CONTINGENCY FUND 5.1. At the close of each fiscal year, the Contingency Fund balance shall equal or exceed 10% of the previous fiscal year General Fund annual revenues. 5.2. Use of Contingency Fund resources shall be permitted only upon Council approval. 5.3. Should a deviation from policy occur, a plan to reestablish the minimum fund balance shall be approved by Council no later than the end of the fiscal year following the year of deviation. 5.4. The prescribed minimum fund balance shall be attained no later than the end of the 2014 fiscal year. 6. ENTERPRISE FUND RESERVE POLICY: 6.1. At the close of each fiscal year, each Enterprise Fund balance shall equal or exceed 20% of the previous fiscal year annual revenues. 6.2. Deviation from this policy shall be permitted only as approved by Council. 6.3. Should a deviation from policy occur, a plan to reestablish the minimum fund balance shall be approved by Council no later than the end of the fiscal year following 3 Index: 300 -15 TITLE: RESERVE POLICY Page 2 of 2 the year of deviation. 6.4. The prescribed minimum fund balance shall be attained no later than the close of the 2014 fiscal year. 7. SELF INSURED HEALTHCARE PLAN CONTINGENCY RESERVE POLICY: 7.1. The City shall maintain a contingency reserve balance in each of its self- insured healthcare funds in an amount equal to 2.5 times, or 250 of the actuarially determined IBNR (incurred but not reported) reserve. 7.2. The contingency reserve balance will be combined with the IBNR reserve balance and recorded as one liability in each of the self- insured healthcare plan funds. 8. REVIEW AND REPORTING Annually, but no later than July 1S a Reserve Policy compliance report will be provided to Council. Initiating Department: Finance Department Effective Date: Supercedes: Mayor's Office Approval Signature: 08/06/12 04/17/12 El CITY OF TUKWILA FINANCE SAFETY COMMITTEE MEETING July 17, 2012 RESERVE POLICY COMPARISON RESERVE POLICY Reserve Type E ISTING RESERVE POLICY PROPOSED RESERVE POLICY General Fund N/A Not applicable 10% General Fund Revenue $5,013,825 8% General Fund Revenue Contingency Excess of General Fund expenditure 25% budget over actual expenditures 25% Sales tax receipts from new construction Risk 8% General Fund Revenue Management 1% (General Fund Revenue Revenue Stabilization 25% Sales and property tax revenue in excess of budget TOTAL RESERVE REQUIREMENT based on 2011 financial results $4,011,060 $600,574 10% General Fund Revenue $5,013,825 $347,750 �I $4,011,060 $501,382 N/A Not applicable $286,450 $9,758,276 1, $10,027,650 RESERVE AND GENERAL FUND BALANCES AT DECEMBER 31, 2011 Contingency Fund Balance $1,457,728 $1,457,728 General Fund Balance $5,911,616 FUNDING DEFICIENCIES Funding deficiency $8,300,548 $2,658,306 Under the existing policy the General Fund resources are available for additional funding of the Contingency Fund. R x Index: 300 -15 CITY OF TUKWILA ADMINISTRATIVE MANUAL Page 1 of 5 TITLE: RESERVE POLICY 1.0 PURPOSE: 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. 2.0 ORGANIZATION AFFECTED: All City funds. 3.0 REFERENCES: 4.0 GENERAL FUND RESERVE POLICY: 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: 2% by December 31, 2011 4% by December 31, 2012 6% by December 31, 2013 8% by December 31, 2014 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 Index: 300 -15 TITLE: RESERVE POLICY Page 2 of S 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 8t 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. 52. The Risk Management Reserve Fund shall be set initially at a minimum of 4% Index: 300 -15 TITLE: RESERVE POLICY Page 3 of 5 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 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 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. 7.0 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. 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 less 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: W Index: 300 -15 TITLE: RESERVE POLICY 5% by December 31, 2011 10% by December 31, 2012 15% by December 31, 2013 20% by December 31, 2014 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. 'Title: Initiating Department: RESERVE POLICY Finance Department Effective Date: Supercedes: Mayor's Office Approval Signature: 12/11/09 N /A-`� 11 12 FINANCE AND SAFETY COMMITTEE Meeting Minutes Mx1' 2- C'on ferencc Room City of Tukwila Finance and Safety Committee PRESENT Councilmembers: De'Sean Quinn. Chair; Dennis Robertson and Kate Knrller Staff: Peggy McCarthy, Derek Speck, David Cline, Mary Miotke. Gail Labanara_ Kiwi Gilman, Craig Zellerhoff and Kimberly Matej Guests: Chuck Parrish.. resident CALL TO ORDER: Chair Quinn called the meeting to order at 5:18 p.m I. PRESENTATIONS No presentations. II. BUSINESS AGENDA A. Fireworks Permit: Farnily 4` at the Fort Staff is seeking Council approval of a Fireworks Permit Application submitted by Western Display Fireworks. Ltd. for the fireworks display at the City's annual 4th of July celebration at Fort Dent. This year.. the Citv has selected a different vendor, Western Displav Fireworks Ltd., and �N i11 be relocating the launch site in order to protect and reduce the likelihood of damage to the turf sports fields located at Starfire. Additionally, this relocation is expected to reduce clean -up time due to increased accessibility. Committee Members had several questions regarding the change in vendor, costs associated with die contract and event (Le.: overtime). and other event specifics_ NyInch are most appropriately answered by Parks Recreation staff. Since this item is addressing the permit only portion, the Committee Vtiould like to forward on the permit to the June 4 consent agenda. However, they have requested that Parks Recreation staff return to the next Finance Safety Committee meeting to provide ari update on the ne« vendor and other specifics of the Family 4 at the Fort events. UNANIMOUS APPROVAL. FORWARD TO JUNE 4 CONSENT AGENDA FOR PERMIT. RETURN TO COMMITTEE AS INFORMATION ONLY TO REVIEW VENDOR CONTRACT. B. Contract: Mana--ed Print Services Staff is seeking Council approval to enter into a contract NN th the Xerox Company for managed print services Nyhich Nyill provide printer and copier supplies_ repairs, maintenance, replacements as needed. This five year contract wi11 cost a inininiuni $3,420 quarterly for a pre estimated number of copies. but NN III be evaluated and adjusted based on actual print numbers as appropriate. Based on staff research and a printer fleet analysis performed by several vendors. Xerox was the lowest cost provider and has been identified as the best vendor to provide these sen�ices to the Cut` Since the Xerox Company is an approved State contract there is no requirement to proceed through the RFP process. The anticipated annual savings on the purchase of toners alone is $4,500 and another $8,000 for repairs. Additional savings will also be seen in replacement costs_ staff time and processing. This contract can be cancelled at any time by written notice to end the contract Nyithm 90 days. UNANIMOUS APPROVAL. FORWARD TO JUNE 4 CONSENT AGENDA. C. Reserve Policy Revisions Staff is seeking Committee approval of draft revisions to City's Reserve Policy 300 -1�. The current reserve policy ryas adopted in December 2000. and vvas revised this past April to include Self- Insured Healthcare pl m contingency reserve levels. 13 Finance Safety Committee Minutes Mali 22, 2012 Pace 2 The current suggested revisions simplify administration of rescrycs. address and clarify funding processes_ and provide improved TukN%Ila Municipal Code interpretation. There xyas lengthy discussion surrounding the suggested changes, and although the Committee vgas supportive of the suggestions. they requested more detail be provided. This detail should include benchmarking_ examples from other cities_ and providing practical application to the changes. Committee Members also suggested talking with Emergence Management and consider projected funding that could be needed under the most severe and probabIN emergency conditions. RETURN TO COMMITTEE WITH ADDITIONAL INFORMATION. D. New Position: Mavor's Office Staff is seeking Council approval to reinstate a position in the Mayor's Office which was relinquished during the City's budget reduction process during the 2009 -10 biennium. The specific position being referred to is in the management analyst classification. Currently, two administrative support positions exist in the Mayor's Office, an executive secretary and an administrative seeretar service examiner. The administrative seeretar /civil sery °ice examiner position has been vacant for over a year. and the position's administrative and civil service respansibilitics have been redirected within the Mayor's Office and Human Resources. respectively. With this significant reduction of administrative support lost through budget cuts and attrition. and added projects that are complex in nature. the May_ or's Office requested Human Resources conducted a review and anaksis of workload and functions. This vvas done to assist in determining the best use and identification of the positions that would meet the needs of Administration, Nvhile increasing better utilization of current resources acrd personnel. Staff would like to reinstate the management analyst classification position in place of the currently vacant administrative secretary /civil sen ice examiner position. The salary difference between the top steps of these two positions is approximately $23.000. For 2012_ the cost difference wi11 be covered through salary savings in the Mayor's Office. In subsequent years, the difference vyill be addressed through the regular budget process. Council approval of this change is needed due to the nature of replacing one title classification Nyith another. It is anticipated that the management anak st position 111 provide a higher level of support to the Mayor's Office through cross department communications. leading projects. and implementation of organizational development and imprm ement (i.e.. strategic plan The Conmnittee had a significant amount of discussion regarding the specific title of this position_ hich is being referred to as a project analyst. Committee Chair Quinn reminded c� er that it is Council responsibility to considerjob classifications which are based on the skill levels of and decisions made bN a particular position. As far as actual N.orking job titles, the operational responsibility of determining those should be left to the highest level supervisor, v\hich in this case is the Mayor. UNANIMOUS APPROVAL. FORWARD TO NIAY 29 COW FOR DISCUSSION. III. MISCELLANEOUS Meeting adjourned at 6:3S pan. Next meeting: TucsdaN June S, 2012 �:1 p.m. Conference Room 43 ,Oro Committee Chair Approval Minutes by KAM 1w,