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HomeMy WebLinkAboutCity of Tamarac Resolution R-2003-138Temp. Reso. #10142 May 28, 2003 Revision 1: June 9, 2003 Revision 2: June 18, 2003 Page 1 CITY OF TAMARAC, FLORIDA RESOLUTION NO. R-2003- j 3 K A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF TAMARAC, FLORIDA, ADOPTING A FUND BALANCE POLICY; PROVIDING FOR CONFLICTS; PROVIDING FOR SEVERABILITY; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City of Tamarac desires to develop and follow sound financial policies, and WHEREAS, rating agencies consider fund balance a critical factor in determining financial strength; and WHEREAS, the National Advisory Council on State and Local Budgeting recommends maintaining a prudent level of financial reserves to protect against reducing service levels or raising taxes and fees because of temporary revenue shortfalls or unexpected one-time expenditures; and WHEREAS, the Government Finance Officers Association recommends municipalities adopt a formal fund balance policy; and WHEREAS, the City has established prudent ranges to maintain in funds containing operating expenses, after reviewing predictability of revenues, volatility of expenditures, availability of resources in other funds, liquidity, designations and legal and regulatory restrictions; and Temp. Reso. #10142 May 28, 2003 Revision 1: June 9, 2003 Revision 2: June 18, 2003 Page 2 WHEREAS, the City Manager and Director of Finance recommend the adoption of the proposed Fund Balance Policy; and WHEREAS, the City Commission of the City of Tamarac deems it to be in the best interest of the citizens and residents of the City of Tamarac to adopt the proposed Fund Balance Policy. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF TAMARAC, FLORIDA: SECTION 1: The foregoing "WHEREAS" clauses are hereby ratified and confirmed as being true and correct and are hereby made a specific part of this Resolution. SECTION 2: The Fund Balance Policy hereto attached as Exhibit 1 is hereby adopted. SECTION 3: All resolutions or parts of resolutions in conflict herewith are hereby repealed to the extent of such conflict. SECTION 4: If any clause, section, other part or application of this Resolution is held by any court of competent jurisdiction to be unconstitutional or invalid, in part or application, it shall not affect the validity of the remaining portions or applications of this Resolution. 1 1 1 1 Temp. Reso. #10142 May 28, 2003 Revision 1: June 9, 2003 Revision 2: June 18, 2003 Page 3 SECTION 5: This Resolution shall become effective immediately upon its passage and adoption. PASSED, ADOPTED AND APPROVED this 25t" day of June, 2003. ATTEST: MARION SWENSON, CMC CITY CLERK I HEREBY CERTIFY that I have approved this RESOLUTION as to form. 1 MITCHELL S. KRAF CITY ATTORNEY JOE SCHREIBER, MAYOR RECORD OF COMMISSION VOTE: MAYOR SCHREIBER DIST 1: COMM. PORTNER DIST 2: COMM. FLANSBAUM-TALABISCO DIST 3: COMM. SULTANOF 1 DIST 4: V/M ROBERTS l FUND BALANCE POLICY Purpose: Temp Reso #10142 EXHIBIT 1 For increased financial stability, the City of Tamarac desires to manage its financial resources by establishing fund balance ranges for selected funds. This will ensure the City maintains a prudent level of financial resources to protect against reducing service levels or raising taxes and fees because of temporary revenue shortfalls or unexpected one-time expenditures. Definitions: Fund Balance: Fund balance means the difference between fund assets and fund liabilities. Fund balance is also referred to as net assets.. Reserved Fund Balance: Reserved fund balance is the portion of fund balance that is legally restricted and is not available for appropriation or expenditure. Unreserved Fund Balance: Unreserved fund balance represents expendable available financial resources. Designated Fund Balance: Designated fund balance is that portion of unreserved fund balance that reflects the City's self-imposed limitations on the use of otherwise available expendable financial resources. Undesignated Fund Balance: Undesignated fund balance represents available financial resources which have not been obligated to a specific purpose. Net Assets: Net assets is another term for fund balance. Restricted Net Assets: Restricted net assets is equivalent to reserved fund balance. Unrestricted Net Assets: Unrestricted net assets in proprietary funds is roughly equivalent to unreserved fund balance in governmental funds; however, in the case of proprietary funds unrestricted net assets does not necessarily represent funds available for appropriation. This is due to the fact that some of the unrestricted net assets offset capital assets such as buildings and equipment. Fund Balance Range: Fund balance range is the range of amounts this policy has set within which the City means to maintain the undesignated fund balance. Surplus: Surplus is the amount by which undesignated fund balance exceeds the upper limit of the fund balance range. City of Tamarac Prepared by D. Newman Temp Reso #10142 EXHIBIT 1 Shortfall: Shortfall is the amount by which the lower limit of the fund balance range exceeds undesignated fund balance. Expenditures: Expenditures are all uses of financial resources, budgeted for any purpose, and include operating and capital expenses, debt service, and transfers to other funds. Operating Expenditures: Operating expenditures are uses of financial resources for personnel, supplies, services and materials, and exclude capital expenses, debt service, and transfers to other funds. Fund Balance Range: Fund balance ranges are established for each City fund which contains operating expenses, as well as, the Utilities Re. -e- al and Replacement Fund. The . amounts set for each fund are based on the predictability of revenues, volatility of expenditures, and liquidity requirements of each fund and may need to be reviewed periodically. In calculating the ratio of undesignated fund balance to proposed expenditures, the latest audited Comprehensive Annual Financial Report (CAFR) shall be compared with the budget in effect when the CAFR is released. In essence this will mean the current year budgeted expenditures will be compared with the prior year's undesignated fund balance. Designations Proprietary Funds: Unrestricted net assets in proprietary funds does not necessarily represent resources available for appropriation. This is due to the fact that capital assets are included in proprietary funds and are offset in unrestricted net assets. Since it is not likely the organization will sell the capital asset in order to fund operations, it's value is not available for appropriation. In order to take this into account when calculating the ratio related to the fund balance range, staff will identify the portion of unrestricted assets that does not represent resources available for appropriation and consider the amount "designated". General Fund: The fund balance range for the General Fund shall be not less than 7.5% and not more than 10% of the total budgeted expenditures of the General Fund budget. City of Tamarac Prepared by D. Newman Temp Reso #10142 EXHIBIT 1 Fire Rescue Fund: The fund balance range for the Fire Rescue Fund shall be not less than 5% and not more than 7.5% of the total budgeted expenditures of the Fire Rescue Fund budget. Stormwater Fund: The fund balance range for the Stormwater Fund shall be not less than 5% and not more than 7.5% of the total budgeted expenditures of the Stormwater Fund budget. Utilities Operating Fund: The fund balance range for the Utilities Operating Fund shall be not less than 90 days and not more than 120 days of the total budgeted operating expenses of the Utilities Operating Fund. Utilities Renewal and Replacement Fund: The fund balance range for the Utilities Renewal and Replacement (R & R) Fund shall be not less than 5% and not more than 7.5% of the operating expenditures budgeted in the Utilities Operating Fund. Insurance Fund: The fund balance for the Insurance Fund shall be set at an amount determined by an annual actuarial report at a range with the lower limit at 75% confidence level and an upper limit of 90% confidence level. Surplus: If it is determined there is a surplus (an amount in excess of the upper limit of the fund balance range for any fund), the funds are to be designated or appropriated at the next quarterly budget amendment for the following purposes in order of priority: 1. Eliminate shortfalls in related funds. Any General Fund surplus shall be transferred to cover shortfalls within Fire Rescue Fund, Stormwater Fund, Insurance Fund, or any other fund initiated by the City to provide City services. Any Utilities Operating Fund surplus shall be transferred to the R & R Fund to cover shortfalls and/or a proportionate share amount to the Insurance Fund if needed. 2. Reduction or avoidance of debt. If there is short-term debt within the fund the surplus may be applied to reduce or eliminate the debt if financial City of Tamarac Prepared by D. Newman Temp Reso #10142 EXHIBIT 1 analysis proves this to be advantageous for the City. If a borrowing is scheduled, the surplus may be used to reduce the principal amount the City needs to obtain if financial analysis proves this to be advantageous for the City. 3. Applied to a replacement program. Surplus funds may be used to supplement or enhance a capital replacement program such as vehicle, personal computer, or heavy equipment replacement, or any other capital replacement program initiated by the City. 4. One-time capital needs. Since a surplus does not represent a recurring source of revenue it should not be used to fund a recurring expense; however, if a one-time capital expenditure has been identified, but not already funded through an appropriation, the surplus may be appropriated for this use. 5. Tax, fee, or rate stabilization. Surplus funds may be designated for stabilization in order to avoid raising taxes, fees, or rates related to the fund in subsequent years. Shortfall: If it is determined there is a shortfall (an amount below the lower limit of the fund balance range for any fund), the fund balance is to be rebuilt through the following mechanisms in order of priority: Distribution of surplus from other related funds as delineated under "Surplus" category. 2. An appropriation during the next annual budget process of at least 20% of the lower limit of the fund balance range until the lower limit has been reached. If this is financially infeasible, a written plan shall be forwarded by the City Manager to the Commission for approval in order to restore the fund balance to an amount within the range within a reasonable time frame. This plan may require reduction of services, increases in taxes, fees, or rates, or some combination thereof. City of Tamarac Prepared by ll. Newman