HomeMy WebLinkAboutCOW 2012-09-24 Item 4D - Policy - Financial Reserve PolicyCOUNCIL AGENDA SYNOPSIS
Initials ITEM NO.
Meeting Date Prepared by Mayor's review I �;ouncil review
09/24/12 I PMc I Q Q, 4.D.
10/01/12 PMc
ITEM INFORMATION
STAFF SPONSOR: PEGGY MCCARTHY ORIGINAL AGENDA DATE: 9/24/12
AGENDA ITEM TITLE Financial Reserve Policy
CATEGORY Discussion Motion Resolution Ordinance Bid Award Public Hearing Other
Mt g Date 9/24/12 Mtg Date Mtg Date 10/1/12 Mtg Date 10/1/12 Mt Date Mig Date Mtg Date
SPONSOR Council Mayor HR DCD Finance Fire IT P &R Police PW
SPONSOR'S Approve revisions to the City's Reserve Policy that simplify policy administration while
SUMMARY sustaining fiscal safeguards.
The Council is being asked to approve:
1. A resolution adopting a financial reserve policy.
2. An ordinance repealing Ordinance #2266, relating to the City's cash reserve policy.
REVIEWED BY COW Mtg. CA &P Cmte F &S Cmte Transportation Cmte
Utilities Cmte Arts Comm. Parks Comm. Planning Comm.
DATE: 5/22,7/17&9/5/12 COMMITTEE CHAIR: QUINN
RECOMMENDATIONS:
SPONsoR /ADMIN. FINANCE DEPARTMENT
COMMITTEE Forward to Committee of the Whole for discussion
COST IMPACT FUND SOURCE
EXPENDIIURI- REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED
Fund Source:
Comments:
MTG. DATE I RECORD OF COUNCIL ACTION
9/24/12
MTG.DATEI ATTACHMENTS
9/24/12 Informational Memorandum dated 9/18/12
Resolution adopting the reserve policy
Ordinance repealing Ordinance #2266
Mintues from the Finance and Safety (FS) Meeting of 9/5/12
Minutes from the FS Meeting of 7/17/12, with draft policy for that meeting (per request)
Minutes from the FS Meeting of 5/22/12, with draft policy for that meeting (per request)
Reserve Policy effective 12/11/09
13b
I
City of Tukwila
Jim Haggerton, Mayor
TO:
FROM:
DATE:
SUBJECT:
Mayor Haggerton
City Council
Peggy McCarthy, Finance Director
Kimberly Matej, Government Relations
September 18, 2012
City Fiscal Reserve Policy
ISSUE
Consider for approval, draft revisions to the City's Fiscal Reserve Policy.
BACKGROUND
The Council adopted the Reserve Policy by reference in 2009, through Ordinance 2266 and as
codified in Tukwila Municipal Code 3.34.010. Per the TMC, changes to the reserve policy require
approval by the Finance Safety Committee. The draft revised Policy was presented to the Finance
Safety Committee for consideration on May 22, 2012. At the time, the Committee made
recommendations for incorporation, and an updated draft policy was presented and discussed at the
July 17, 2012 Finance Safety Committee meeting. The Policy requirements as revised under this
proposal were compared with certain neighboring jurisdictions' reserve policy requirements as shown
on their websites and with the Government Finance Officer Association (GFOA) recommendation.
The current draft Policy as presented in this memo, via draft resolution, meets or exceeds the
requirements of the neighboring jurisdictions and the GFOA.
Per request at the July 17 Finance Safety Committee meeting, an informal poll was taken of certain
south King County cities regarding minimum fund balance and reserve requirements. The results are
shown below:
Fund Balance Survey Results
Area Cities
Additionally, after the July 17 meeting, the draft Policy was reformatted, per Committee direction, to
condense and simplify its structure. It also came to our attention that certain large, one -time revenue
sources such as transfers in from other funds or property sales could skew and temporarily increase
the requirements under the proposed policy. In response, the draft policy was further revised to
exclude from the minimum balance calculations non operating, non recurring revenues, such as
transfers in from other funds as a consequence of overfunding, real property sales, or bond issuance.
137
Governmental
2011/2012
Contingency
City
Fund Policy
Actual FB
Funds
Comment
New Castle
10%
29%
N
Sea Tac
25%
33%
N
Renton
8%
10%
N
Federal Way
17%
9%
N
Covington
10%
46%
N
Auburn
8%
22%
y
No policy 10% currently
Tukwila
10%
10%
y 10
10% by policy
Maple Valley
10%
30%
N
10% end of 6 year plan
Additionally, after the July 17 meeting, the draft Policy was reformatted, per Committee direction, to
condense and simplify its structure. It also came to our attention that certain large, one -time revenue
sources such as transfers in from other funds or property sales could skew and temporarily increase
the requirements under the proposed policy. In response, the draft policy was further revised to
exclude from the minimum balance calculations non operating, non recurring revenues, such as
transfers in from other funds as a consequence of overfunding, real property sales, or bond issuance.
137
INFORMATIONAL MEMO: Reserve Policy
Page 2
The attached draft Reserve Policy reflects the structural change in presentation and also the
exclusion from the minimum balance calculations of significant non operating, non recurring revenue.
DISCUSSION
The proposed revisions to the Reserve Policy add simplicity and ease in administration while
maintaining fiscal safeguards. The revisions exceed the Government Finance Officer Association
(GFOA) recommendation of maintaining a fund balance of at least 16.7% of fund balance. The
revisions are in -line with the policies of neighboring jurisdictions.
At the July 17 Finance Safety Committee meeting, Committee Members determined that the
Reserve Policy should be reviewed and approved by the full Council rather than leaving policy
approval to the Committee as outlined in TMC 3.34.010. Since the TMC currently requires the
Committee to provide approval of said Reserve Policy changes, the current ordinance must be
repealed, and in turn, a resolution created to reflect Council direction and approval of the Reserve
Policy. A resolution is an appropriate mechanism to adopt Council policy. The draft Reserve Policy is
included as an attachment to this memo in resolution format.
RECOMMENDATION
The Council is being asked to consider two items for action:
1. Approve the draft Reserve Policy as provided or with changes, via attached resolution
2. Repeal Ordinance No. 2266
ATTACHMENTS
Attachment 1
Resolution adopting the reserve policy
Attachment 2
Ordinance repealing Ordinance 2266
Attachment 3
Minutes from 9/5/12 Finance Safety Committee meeting
Attachment 4
Minutes from 7/17/12 Finance Safety Committee meeting including draft policy from that meeting
(as requested)
Attachment 5
Minutes from 05/22/12 Finance Safety Committee meeting including draft policy from that meeting
(as requested)
Attachment 6
Reserve Policy effective of 12/11/09
1
ATTACHMENT 1
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TUKWILA, WASHINGTON, ADOPTING A FINANCIAL RESERVE
POLICY TO MAINTAIN AN ADEQUATE FUND BALANCE,
ALLOWING MITIGATION OF RISKS TO REVENUES.
WHEREAS, for the well -being and sustainability of the community, its residents,
and businesses, it is important that the City of Tukwila be prepared to respond to any and
all situations that could result in a risk and /or crisis to the City's finances, including but not
limited to revenue shortfalls and unanticipated expenditures; and
WHEREAS, it is the responsibility of the City Council of the City of Tukwila to provide
policy direction for the City's biennial budget through the passage of motions and
ordinances, adoption of resolutions, and final approval of said budget; and
WHEREAS, a financial reserve policy establishes, attains, and restores minimum
fund balances, including self- insured health care reserve funds, and specifies review and
reporting of such,
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, HEREBY RESOLVES AS FOLLOWS:
Section 1. At the close of each fiscal year, the General Fund balance and the
Reserve Fund balance shall each equal or exceed 10% of the previous year General
Fund revenue, exclusive of significant non operating, non recurring revenues such as
real estate sales or transfers in from other funds. In regard to the Enterprise Funds, at
the close of each fiscal year the unrestricted fund balance shall equal or exceed 20%
of the previous year revenue, exclusive of significant non operating, non recurring
revenues such as real estate sales, transfers in from other funds or debt proceeds.
Section 2. All expenditures from the Reserve Fund shall be authorized by the City
Council.
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139
Section 3. The prescribed minimum fund balances outlined in Section 1 shall be
attained no later than the end of the 2014 fiscal year. Should a fund balance decline
below the prescribed minimum balance after 2014, City Administration shall establish
a plan, no later than the end of the fiscal year following the year of decline, to restore
the fund balance to the prescribed minimum level. The plan shall be presented to and
approved by the City Council.
Section 3. In regard to the self- insured health care funds, the City shall maintain a
reserve balance in each of its self- insured health care funds in an amount equal to 2.5
times, or 250 of the actuarially determined IBNR (incurred but not reported)
reserve. The contingency reserve balance will be combined with the IBNR reserve
balance and recorded as one liability in each of the self- insured health care plan
funds.
Section 4. A report showing compliance with the Financial Reserve Policy shall
be provided to the City Council on an annual basis, no later than July 1 of each year.
PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON,
at a Regular Meeting thereof this day of 2012.
ATTEST /AUTHENTICATED:
Christy O'Flaherty, MMC, City Clerk Verna Seal, Council President
APPROVED AS TO FORM BY:
Filed with the City Clerk:
Passed by the City Council:
Resolution Number:
Shelley M. Kerslake, City Attorney
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ATTACHMENT 2
Al
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF TUKWILA, WASHINGTON, REPEALING ORDINANCE
NO. 2266 RELATING TO THE CITY'S CASH RESERVE
POLICY, AS CODIFIED AT TUKWILA MUNICIPAL CODE
CHAPTER 3.34; PROVIDING FOR SEVERABILITY; AND
ESTABLISHING AN EFFECTIVE DATE.
WHEREAS, Ordinance No. 2266 sets forth the process for adopting and
incorporating a fiscal reserve policy for the City; and
WHEREAS, Ordinance No. 2266 requires that amendments to the policy be
approved by the Finance Safety Committee; and
WHEREAS, this amendment process is in conflict with the regular and usual
practice of the City Council to set fiscal policies as the entire Council, rather than as
any individual three member Council Committee; and
WHEREAS, in order to conform with its usual practice for amendment of fiscal
policies, the City Council desires to repeal Ordinance No. 2266 and continue to set
policy as a whole Council via resolution or other designated means;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, HEREBY ORDAINS AS FOLLOWS:
Section 1. Repealer. Ordinance No. 2266 is hereby repealed in its entirety.
Section 2. Corrections by City Clerk or Code Reviser. Upon approval of the
City Attorney, the City Clerk and the code reviser are authorized to make necessary
corrections to this ordinance, including the correction of clerical errors; references to
other local, state or federal laws, codes, rules, or regulations; or ordinance numbering
and section /subsection numbering.
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141
Section 3. 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 4. 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 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 1 2012.
ATTEST /AUTHENTICATED:
Christy O'Flaherty, MMC, City Clerk
APPROVED AS TO FORM BY:
Shelley M. Kerslake, City Attorney
Jim Haggerton, Mayor
Filed with the City Clerk:
Passed by the City Council:
Published:
Effective Date:
Ordinance Number:
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Page 2 of 2
142
ATTACHMENT 3
City of Tukwila
Finance and Safety Committee
FINANCE AND SAFETY COMMITTEE
Meeting Minutes
September 5, 2012 5:15p.m.; Conference Room #3 *Wednesday meeting due to holiday
PRESENT
Councilmembers: De'Sean Quinn, Chair; Dennis Robertson and Kate Kruller
Staff: David Cline, Peggy McCarthy, Nick Olivas and Kimberly Matej
CALL TO ORDER: Committee Chair Quinn called the meeting to order at 5:15 p.m.
I. PRESENTATIONS
No presentations.
II. BUSINESS AGENDA
A. Grant Acceptance: Washington State Militarv/Homeland Securitv
Staff is seeking Council approval to accept funding from the Emergency Management Performance Grant
in the amount of $82,388 from the Washington State Military Department and the U.S. Department of
Homeland Security to support and enhance the City's emergency management program. This grant cycle
runs from October 2012 to June 2013.
This grant requires a 50/50 match (every $1 of grant funding needs to be matched by a $1 from the City).
This match can be met through current salaries, which means there is no additional unbudgeted cost to the
City. This is an ongoing grant that the City can apply for annually. Funds can be used for a number of
emergency management program needs.
Committee Chair Quinn requested that staff submit a documented list of expenditures that last year's grant
funded. Since this item will move forward to the Consent Agenda, the list can be included in the packet
that goes to full Council. UNANIMOUS APPROVAL. FORWARD TO SEPTEMBER 17 CONSENT
AGENDA.
III. MISCELLANEOUS
Staff requested clarity on an issue surrounding the Reserve Policy and Committee direction given at the July
17, 2012, Committee meeting. Per Tukwila Municipal Code (TMC) 3.34.010, the City's Reserve Policy is
adopted and incorporated into the TMC by reference, and changes to the policy require approval by the
Finance Safety Committee.
The Committee's desire to have the full Council review and legislative approval the Reserve Policy (as
outlined in the Finance Safety Committee minutes dated July 17, 2012) is inconsistent with the direction
set forth by the TMC. Therefore, staff inquired as to how the Committee would like to proceed. The
Committee agreed that there are two items requiring action/direction relative to the Reserve Policy:
1. Council approval of a DRAFT Reserve Policy
2. Council repeal of Ordinance No. 2266 and subsequent replacement clarifying, that changes
to the Reserve Policy require approval by the City Council rather than Finance Safety
Committee approval.
The Committee believes it is imperative to set policy, especially relating to finances, as a full Council. Due
to this item requiring additional time for staff preparation based on tonight's Committee direction, this item
will be pulled from the September 10 COW and moved to the September 24 COW for discussion.
Additionally, Committee Chair Quinn requested a brief overview of this DRAFT Reserve Policy at the
September 19 Council Budget Work Session. The Committee was clear that this delay should not impede the
143
Finance Safety Committee Minutes
September 5. 2012 Paae 2
Finance staff from proceeding with reserve policy, direction, and implementation that was previously given
at the July 17 Committee meeting.
Meeting adjourned at 6:00 p.m.
Next meeting: Tuesday, September 18, 2012 5:15 p.m. Conference Room #3
Committee Chair Approval
M, es by KAM.
144
FINANCE AND SAFETY COMMITTEE Meeting Minutes
July 17, 2012 5:15p. in.; Conference Room #3
ATTACHMENT 4
City Of Tukwila
Finance and Safety Committee
PRESENT
Councilmembers: De'Sean Quinn, Chair; Dennis Robertson and Verna Seal (filling in for Kate Kruller)
Staff: Peggy McCarthy, David Cline, Dennis McOmber, Gail Labanara and Kimberly Matej
CALL TO ORDER: Chair Quinn called the meeting to order at 5:20 p.m.
I. PRESENTATIONS
No presentations.
II. BUSINESS AGENDA
A. Reserve Policv Revisions
This item is returning from the May 22, 2012, Finance Safety Committee meeting for continued
discussion.
Staff is seeking Committee approval of draft revisions to the City's Reserve Policy 300 -15. Since the last
Committee discussion, staff has, as requested by the Committee, researched and provided information
from comparable cities. Staff has found that the City is proposing a contingency fund and general fund
minimum balance that is within the parameters of surrounding communities, and in line with the
Government Finance Officers Association (GFOA) recommendation. The Committee reviewed the draft
policy in detail for additions and/or changes. Staff noted some wording changes which will be made to the
document.
In order to ensure that policy and relative decisions are well documented, and the full Council is aware
and accepting of such policies, the Committee recommends this policy be discussed and approved, as
appropriate, by the Council. This process will also allow for documented Council discussions and policy
setting. COMMITTEE APPROVAL WITH CHANGES. FORWARD TO AUGUST 13 COW FOR
DISCUSSION.
B. National Night Out Finance Safety Committee Meeting
After a brief discussion, the Committee agreed that National Night Out may not be the best opportunity to
hold a Finance Safety Committee meeting in the community due to logistics and simultaneous
organized events at locations throughout the City. However, the Committee would like to hold an off -site
meeting that takes place within the community, perhaps at the new Neighborhood Resource Center.
Committee Chair Quinn requested an off -site meeting take place prior to November. DISCUSSION
ONLY.
III. MISCELLANEOUS
Meeting adjourned at 6:12 p.m.
Next meeting: Tuesday, August 7, 2012 5:15 p.m. Conference Room #3
40. Committee Chair Approval
Minutes by KAM.
145
146
Index: 300 -15
CITY OF TUKWILA
ADMINISTRATIVE MANUAL
Page I 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.
P
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 th 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
I�
Index: 300 -15
TITLE: RESERVE POLICY
Page 2 of 2
P
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 1 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
CITY OF TUKWILA
FINANCE SAFETY COMMITTEE MEETING
July 17, 2012
I RESERVE POLICY COMPARISON
RESERVE POLICY
Reserve Type EXISTING RESERVE POLICY �t� PROPOSED RESERVE POLICY
I'm Inft'MAW,}'f.�,. v` t'^- E-?-Tb P .:3z �S,ars; Pwsn.'' 'f ULVZ YUivatmM 'i,;S,�?maw*aarws,l4l�4tsa u, anstra✓�skc'��a.wxa m.::z.: :;am. awn..a. ,.a�a. �..s�wum n....,, .zm w
General Fund N/A Not applicable
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
$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
�n
General Fund Balance $5,911,616
FUNDING DEFICIENCIES
Funding deficiency $8,300,548
14" $2,658,306
Under the existing policy the General Fund resources are available for additional funding of the Contingency Fund.
10% General Fund Revenue $5,013,825
n
$4,011,060
i
5;
$600.574
4
10% General Fund Revenue $5,013,825
ill
$347,750
$4,011,060
f
$501,382
N/A Not applicable
$286,450
TOTAL RESERVE REQUIREMENT based on 2011
financial results
$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
�n
General Fund Balance $5,911,616
FUNDING DEFICIENCIES
Funding deficiency $8,300,548
14" $2,658,306
Under the existing policy the General Fund resources are available for additional funding of the Contingency Fund.
I
ATTACHMENT 5
City of Tukwila
Finance and Safety Committee
FINANCE AND SAFETY COMMITTEE Meeting Minutes
May 22, 2012 5: ISp.m.; Conference Room #3
PRESENT
Councilmembers: De'Sean Quinn, Chair; Dennis Robertson and Kate Kruller
Staff: Peggy McCarthy, Derek Speck, David Cline, Mary Miotke, Gail Labanara, Kim 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: Familv 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 City has selected a different vendor, Western Display Fireworks Ltd., and will 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 the
contract and event (i.e.: overtime), and other event specifics, which are most appropriately answered by
Parks Recreation staff. Since this item is addressing the permit only portion, the Committee would 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 an update on the new
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: Manae-ed Print Services
Staff is seeking Council approval to enter into a contract with the Xerox Company for managed print
services which will provide printer and copier supplies, repairs, maintenance, replacements as needed.
This five -year contract will cost a minimum $3,420 quarterly for a pre- estimated number of copies, but
will 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 services to the City. 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 within 90 days. UNANIMOUS
APPROVAL. FORWARD TO JUNE 4 CONSENT AGENDA.
C. Reserve Policv Revisions
Staff is seeking Committee approval of draft revisions to City's Reserve Policy 300 -15. The current
reserve policy was adopted in December 2009, and was revised this past April to include Self- Insured
Healthcare plan contingency reserve levels.
151
Finance Safety Committee Minutes
Mav 22.2012 Pape 2
The current suggested revisions simplify administration of reserves, address and clarify funding
processes, and provide improved Tukwila Municipal Code interpretation.
There was lengthy discussion surrounding the suggested changes, and although the Committee was
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 Emergency Management and consider projected funding that could
be needed under the most severe and probably 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 secretary/civil service examiner. The administrative secretary /civil service examiner
position has been vacant for over a year, and the position's administrative and civil service
responsibilities 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 Mayor's Office requested Human Resources conducted a review
and analysis of workload and functions. This was done to assist in determining the best use and
identification of the positions that would meet the needs of Administration, while increasing better
utilization of current resources and personnel.
Staff would like to reinstate the management analyst classification position in place of the currently
vacant administrative secretary/civil service examiner position. The salary difference between the top
steps of these two positions is approximately $23,000. For 2012, the cost difference will be covered
through salary savings in the Mayor's Office. In subsequent years, the difference will be addressed
through the regular budget process. Council approval of this change is needed due to the nature of
replacing one title classification with another. It is anticipated that the management analyst position will
provide a higher level of support to the Mayor's Office through cross department communications,
leading projects, and implementation of organizational development and improvement (i.e.: strategic
plan).
The Committee had a significant amount of discussion regarding the specific title of this position, which
is being referred to as a project analyst. Committee Chair Quinn reminded everyone, that it is Council
responsibility to consider job classifications which are based on the skill levels of and decisions made by
a particular position. As far as actual working job titles, the operational responsibility of determining
those should be left to the highest level supervisor, which in this case is the Mayor. UNANIMOUS
APPROVAL. FORWARD TO MAY 29 COW FOR DISCUSSION.
III. MISCELLANEOUS
Meeting adjourned at 6:35 p.m.
Next meeting: Tuesday, June 5, 2012 5:15 p.m. Conference Room #3
Committee Chair Approval
Minutes by KAM.
152
Index: 300 -15
CITY OF TUKWILA
ADMINISTRATIVE MANUAL
Page 1 of 2
TITLE RESERVE POLICY
1. PURPOSE:
1.1. To ensure the City has sufficient funds to continue o
event occur that disrupts or negatively impacts the fin
Self- Insured Healthcare Funds.
1.2. To ensure idle or excess funds are reallocated o 0
and objectives of the City.
1.3. To provide an interpretation of Tukwila Mu i N al Code
allocating additional sales tax revenue reced by the
2. ORGANIZATION AFFECTED:
All City funds.
3. REFERENCES:
4. GENERAL FUND MINIMUM FUND BALANCE,
4.1. At the close of
of the previoug
4.2. Deviation from
4.3. Should^. a—,dev
year of d
prescribed
Mwear 2014
5. CONTINGENCY FUND
should an unforeseen
bility of the City or the
to meet the goals
(TMC) 3.16.
�'Jtv.
of
r, the Ge eral Fund balance shall equal or exceed 10%
eral Fund nnual revenues.
icy all be permittecly as approved by Council.
c:r a plan to reestablish the minimum fund
by Coun` o later than the end of the fiscal year following
funlance shall be attained no later than the close of the
5.1. At the clos I eac'.fiscal year, the Contingency Fund balance shall equal or exceed
10% of the pre s fiscal year General Fund annual revenues.
5.2. Use of Contin ency 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.
153
Index: 300 -15
TITLE RESERVE POLICY
Page 2 of 2
6. ENTERPRISE FUND RESERVE POLICY:
6.1. At the close of each fiscal year, each Enterprise Fund balance shall equal or exceed
25 %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
the year of deviation. A�:
All
6.4. The prescribed minimum fund balance shall be attaineXter fftan the close of the
2014 fiscal year.
7. SELF INSURED HEALTHCARE PLAN CONTINGEN
7.1. The City shall maintain a contingency reser0
healthcare funds in an amount equal to 5
determined IBNR (incurred but not reporteds(
7.2. The contingency reserve balance will I com ,w.nl
recorded as one liability in each of the self -insA
8. REALLOCATION OF EXCESS ORID E
FUNDS.
All governmental and internal sera ce
identify excess or idle funds. Shoul
excess of amounts a ne 3 eed to meet th
may be used fopiarposesoutside of t
if such use 'approved y the Cou
regulations l
9. INTERPRE QION OFr III
PROCEE LMITAT 4.N ON
e code pres E
all be place
I mps .vement fund;
the neral Fund
seroic d capital
10. REVIEW AND OR'
Annually, but n ei
to Council.
Effective Date:
that`1�0 of
muni
shall be�'int(
I d the Hot(
ect funds.
GOVERN
�alance in each' f its self- insured
times, or 250 he actuarially
ve.
'I wi e,IBNR reserv alance and
thcare plan funds.
OR INTERNAL SERVICE
lances sh�'ff' be reviewed annually to
at`a fund contains resources in
Is and a tives of the fund, the resources
fund to m et City -wide goals and objectives,
icl and is not in conflict with State or other
K f CODE 3.16.060 DISTRIBUTION OF TAX
1SE THEREOF
the additional sales tax proceeds received by the City
capital improvement funds. "Municipal capital
rpreted to include any governmental fund other than
I /Motel Fund, such as special revenue funds, debt
ING
than July 1 a Reserve Policy compliance report will be provided
Initiating Department:
Finance Department
Supercedes: Mayor's Office Approval Signature:
5/21/12
4/17/12
154
ATTACHMENT 6
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
155
Index: 300 -15
TITLE: RESERVE POLICY Pa 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 51 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%
W
TITLE: RESERVE POLICY
Page 3 of 5
Index: 300 -15
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
157
Index: 300 -15
TITLE: RESERVE POLICY 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 st 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 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:
158
Index: 300 -15
TITLE: RESERVE POLICY
Page 5 of S
5% by December 31, 2011
10% by December 31, 2012
15% by December 31, 2013
20% by December 31, 2014
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:
RESERVE POLICY
Effective Date:
12/11/09
Initiating Department:
Finance Department
Supercedes: Mayor's Office Approval Signature:
N /A�'"'�
159