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HomeMy WebLinkAbout99-051RESOLUTION NO. 99- O S i A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PORT TOWNSEND, WASHINGTON, ADOPTING A SET OF FINANCIAL POLICIES AND A STATEMENT OF BUDGET PERFORMANCE MEASURES AND PRIORITIES FOR THE FISCAL YEAR 2000 FINANCIAL OPERATIONS OF THE CITY WHEREAS, The City of Port Townsend provides municipal services for its citizens, including protection of life and property, public health and welfare, and improved quality of life; and WHEREAS, The Port Townsend City Council deems it a high priority to deliver municipal services in the manner consistent for all citizens, and with maximum efficiency and financial prudence; and WHEREAS, at the scheduled Port Townsend City Council Finance Committee meeting, the attached policies and statements of budget performance measures and priorities were reviewed and recommended for Council adoption, NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Port Townsend as follows: SECTION 1. The attached set of financial policies and a statement of budget performance measures and priorities for the financial operations of the City are hereby adopted for use in future financial planning by the City Manager and staff of the City of Port Townsend, and for the purpose of guiding the City's Fiscal 2000 budget process. regular meeting of the City Council on the~/4'~'day of j<'efx5, , ADOPTED at the 1999. APPROVED AS TO FORM:. Pam Kolacy,'City Clerk Forrest Rambo, Mayor Resolution on Financial Policies, Performance Measures and Priorities Page 1 REVENUE POLICIES: Statements dealing with taxes and the means whereby the city raises revenue to fund operations. Revenue Policy #1: General Fund Balance To maintain the City's credit rating and meet seasonal cash flow shortfalls, the budget shall provide for an anticipated undesignated fund balance between 5% and 8% for general government and enterprise fund types, of estimated annual revenues. The fund balance shall be exclusive of all reserves not anticipated to be readily available for use in emergencies and contingencies. Should the fund balance fall below 5% of revenues a plan for expenditure reductions and/or revenue increases shall be submitted to the City Council via the City Manager. In the event the fund balance is above 8%, the difference may be used to fund the following activities: one-time capital expenditures which do not increase ongoing City costs; and other one-time costs. Generally, the fund balance levels are dictated by: cash flow requirements to support operating expenses; relative rate stability from year to year for enterprise funds; susceptibility to emergency or unanticipated expenditure; credit worthiness and capacity to support debt service requirements; legal or regulatory requirements affecting revenues, disbursements and fund balances; and reliability of outside revenues. If, at the end of a fiscal year, the fund balance fails below 5%, then the City shall rebuild the balance within a period not to exceed three fiscal years. Revenue Policy #2: Contingency All general government and enterprise fund types shall maintain a contingency to help maintain services during short periods of economic decline and meet emergency conditions, in addition to the Fund Balance, the budget shall provide for a contingency equivalent to 2% of estimated annual operating revenues. The contingency is established to provide for non-recurring unanticipated expenditures, or to meet small increases in service delivery costs. Where correction of a fund balance deficit causes the contingency to fall below 2% of operating revenue, a gradual correction of the problem over a three year period. Revenue Policy #3: Council Reserves In addition to the Fund Balance and the Contingency, the budget for the General Fund shall provide for a "Council Reserve" equivalent to 1% of estimated annual operating revenues. Only the General Fund shall maintain a "Council Reserve". Resolution on Financial Policies, Performance Measures and Priorities Page 2 The "Council Reserve" is established to provide for non-recurring community requests. The "Council Reserve" shall be suspended during times of significant economic downturn, especially during years when the General Fund fund balance falls below 5%. Revenue Policy_ 04: Sources of Revenue The City will strive to maintain a diversified and stable revenue system to shelter the government from short-run fluctuations in any one revenue source and ensure its ability to provide ongoing service. Restricted revenue shall only be used for the purposes legally permissible and in a fiscally responsible manner. Programs and services funded by restricted revenue will be clearly designated as such. Intergovernmental assistance shall be used to finance only those capital improvements that are consistent with the capital improvement plan and local government priorities, and whose operation and maintenance costs have been included in operating budget forecasts. A balance will be sought in the revenue structure. New sources of revenue will be sought to achieve the desirable balance. Revenue Policy #5: Revenue Collection The City shall strive to improve its property tax collection rate through legislative initiative at the state level and cooperative effort with the Jefferson County assessor. Revenue Policy #6: Fees - Licenses. Permits & Misc. Item, All fees for licenses, permits, fines, and other miscellaneous charges shall be set to recover the City's expense in providing the attendant service. These fees shall be reviewed annually and shared with the Council. A revenue manual listing all such fees and charges of the City shall be maintained by the City Manager and updated concurrent with the annual budget. A fee shall be charged for any service that benefits limited interests within the community, except for human needs type services to persons with limited ability to pay. When hazardous materials are spilled and the Fire Department's assistance is required to deal with the situation, the City shall require reimbursement for expenses incurred. Revenue Policy #7: Fees-Utilities {Water, Sewer. Stormwater & Solid Waste] Utility user charges fOr each of the City utilities will be cost of service basis (i.e., set to fully support the total direct, indirect, and capital costs) and established so that the operating revenues of each utility are at least equal to its operating expenditures and annual debt service obligations. The user rates of a utility shall be designated so that a portion covers replacement of the utility's facilities. Beginning in fiscal year 1990, the Utility (Water/Sewer/Stormwater) Fund has conducted a comprehensive rate study annually for Council review beginning each July and concluding with the budget process so that any needed rate adjustment may be implemented effective the first day of the following January. Utility rates should be set to Resolution on Financial Policies, Performance Measures and Priorities Page 3 cover operations & maintenance, depreciation, debt and capital improvements. The Solid Waste Utility Fund has conducted a comprehensive rate study on an as needed basis whenever the contract has needed to be reviewed. The rates are then set for the term of the contract. The solid waste utility rates should be set to cover operations & maintenance, depreciation, debt and capital improvements. Revenue Policy 08: Parks and Recreation Department Fcc:-- As a multi-year goal, the Parks and Recreation Department will strive to recover a minimum 100% of recreation programs and 50% of the Department's administrative costs by generating revenues through special programs, special recreation levies, fees, charges, donations and/or designated uSe of City-operated facilities and special equipment. Fees and charges shall be assessed in an equitable manner in accord with the following fee and charge assessment schedule: total fee support (.more than 80%) special instruction classes recreation trips artd outings adult sports leagues major special events partial fee support (33-50%) preschool programs/introduction outdoor recreation · special craft workshops aquatics latchkey type programs minimum fee su_r~port (less than 33%) senior citizen programs youth programming general special events playground programs junior athletics Beginning with fiscal year 2000 the Parks and Recreation Department shall conduct an annual comprehensive review of rates and through the Parks and Recreation Commission recommend to the City Council via the City Manager any alterations or adjustments necessary in specific fees and/or charges to reflect service demand changes, the ability of users to support demand, and concerns for other City operations. Every effort shall be made to index/limit rate increases to but not exceed the rate of inflation. Through an aggressive volunteer recruitment program, the Parks and Recreation Department shall seek to minimize the subsidy required for partial and minimum fee support programs. Solicitation of funds through donations, fund raising events, non-traditional sources, and various other modes shall be encouraged by the Parks and Recreation Commission and other advisory committees. Funds collected for any special purpose shall be earmarked for that purpose. Resolution on Financial Policies, Performance Measures and Priorities Page 4 Revenue Policy 012: Transfers To the maximum extent feasible and appropriate, General Fund transfers to other funds shall be defined as payments intended for the support of specific programs or services. Amounts not needed to support such specific program or service expenses shall revert to the General Fund's fund balance, unless Council direction establishing the transfer for other items is enacted. Transfers should generally occur on the basis of 1/12 of the budgeted amount at the beginning of each month, with a reconciliation of actual expenditures against transferred amounts in the year-end closing process. Where it is necessary to make a one-time advance of General Funds to another operating fund, this action shall occur under the following conditions: the advance is reviewed, prior to the transfer of funds, by the Finance Committee; all excess cash balances in the fund shall be invested for the benefit of the General Fund, not contrary to applicable Federal and State law and regulation, as long as the advance is outstanding; should the fund accumulate an unexpected unencumbered balance, this excess shall be used first to repay the advance; and at the time of closing out the fund, all assets of the fund revert to the General Fund, not contrary to any other applicable Federal, State or local law. For short-term cash deficits in non-General Fund operating funds during the course of the year, short-term loans are preferred to advances, except in cases where the receiving, fund is legally precluded from paying interest on loans, or where loan transactions would be too numerous and costly to be cost effective. Resolution on Financial Policies, Performance Measures and Priorities Page 5 OPERATING BUDGET POLICIES: Statements dealing with the expenditures of the operating budget. Operating Budget Policy #1: Operatin? Budget - Pay-As-You-G,, The City shall attempt to conduct its operations on a pay-as-you-go basis from existing or foreseeable revenue sources. The control of costs will be emphasized. Achieving pay-as- you-go requires the following practices: current operations, maintenance and depreciation costs to be funded with current revenues; direct and indirect costs of services must be fully identified; and sound revenue and expenditure forecasts must be prepared. The Finance Director shall annually prepare a full cost allocation plan to provide accurate, complete estimates of program costs. Notations as to costs attributable to mandates of other governmental agencies shall be clearly shown in the annual budget. Operating Budget Policy 02: Budget Balance By fiscal year 2000, the City budget shall balance operating expenditures with operating revenues. The General Fund shall not be balanced with appropriations from the General Fund balance if to do so would drop the fund balance below 5% of operating revenue. Operatin~ Policy 04: Maintenance. Repair & Replacemenl All equipment replacement and maintenance needs for the next five years will be projected and the projection will be updated each year. A maintenance and replacement schedule based on this projection will be developed and followed. Replacement of capital outlay items shall be timed at fairly stable intervals so as not to spend excessively in one year and restricted in the next. Operating Policy #5: Maintenance of Capital Assete The budget should provide sufficient funds for the regular repair and maintenance of all City of Port Townsend capital assets. The budget should not be balanced by deferring these expenditures. ' Furore maintenance needs for all new capital facilities will be fully costed out. Resolution on Financial Policies, Performance Measures and Priorities Page 6 CAPITAL IMPROVEMENT POLICIES: Policies relating to the five-year capital improvement program and special funds necessary to address particular needs of the community Capital Improvement Policy #1: Capital Improvement Progran A five-year Capital Improvement Plan shall be developed and presented annually by staff in accordance with the City's Comp Plan, and approved by City Council. This plan shall contain all capital improvements from all funds and departments of the City. A high priority shall be placed on replacement of capital improvements when such improvements have deteriorated to the point of becoming hazardous, incur high maintenance costs, are negatively affecting property values, and/or no longer functionally serving their intended purposes. Capital improvements constructed in the City shall be based on construction costs, while assuring that accepted useful life and minimum maintenance costs will result. Capital Improvement Policy #3: Capital Improvement Maintenance. Standards of maintenance to adequately protect the City's capital investments shall be developed and periodically updated. The annual budget will be prepared to meet established maintenance schedules. Future maintenance needs for all new capital facilities will be fully costed. Capital Improvement Policy_ 04: Capital Improvement Finan¢[_n~ Capital Improvement financing should represent 5 - 10% of the annual budgeted expenditures of the City. Within the limitation of existing law, various funding sources may be utilized for capital imProvements. Upon completion of capital projects, the Finance Director shall certify any unspent funds from the project, to the City Manager. Unspent capital project funds shall be reported to the City Council through the Quarterly Performance Report. The City Manager shall include in the annual budget and capital improvement program recommendations to dispose of unspent capital project funds. In no case shall projects incur a funding deficit without the express approval of the City Council Interest earnings from capital improvement financing sources shall be separately accounted for and attributed to each active capital improvement project on a monthly basis. Resolution on Financial Policies, Performance Measures and Priorities Page 7 DEBT POLICIES: Policies relating to the long-term financing of the City's capital improvement program Debt Policy #1: Use of Debt Financinp Annual debt payments should not exceed 5 - 10% of the annual expenditures of the City. The City of Port Townsend shall only use long term debt for capital projects that cannot be financed out of current revenues within the Revenue Policy guidelines for rate increases. Further debt financing shall generally be limited to one-time capital ~ improvement projects and only under the following circumstances: when the project's useful life will exceed the term of the financing; when the project revenue or specific resources will be sufficient to service the debt; and when the City Council finds the project will benefit the citizens of Port Townsend. Debt financing shall not be considered appropriate for: current operating and maintenance expenses (except for issuing short-term instruments such as revenue anticipation notes or tax anticipation notes); and any recurring purpose (except as indicated above). Tax anticipation debt will be retired annually, and bond anticipation notes will be retired within six months of the completion of the project. Short-term debt outstanding at the end of the year will not exceed 5% of net operating revenues (including tax anticipation notes but excluding bond anticipation notes.) Resolution on Financial Policies, Performance Measures and Priorities Page 8 FISCAL YEAR 2000 CITY OF PORT TOWNSEND FISCAL PERFORMANCE MEASURES General Fund Measures 1. Present Preliminary Draft in executive summary format with full supporting detail as an appendices. 2. Maintain current Property Tax rate ~ 2.24/$1,000. 3. Develop budget stabilization fund (contingency fund) using the 6% allowed levy. 4. Increase projected General Fund balance to 8%. 5. Develop 2% of General Fund available revenues for City reserve and contingency. Program Budget Measures 6. Balance Program Expenditures to Program Revenues within a three year fiscal period. 7. Identify inequities in City fees and recommend revisions and consolidations where feasible. 8. Incorporate any new revenue programs as part of funding projected shortfall in program expenditures. Personnel Measures 9. Decrease staffing by 5% through attrition and early retirement incentives. Fund Management Measures 10. Consolidate subsidized operating accounting Funds and non-essential accounting Funds. 11. Equipment Rental needs to be fully funded and costs allocated accordingly. 12. Submission and financial recommendation regarding surplus real property. 13. Consolidate financial and standardized purchasing and account receivable practices city wide. Utility Measures 14. Utility rates (water/sewer/storm/garbage) should be set to cover operations & maintenance, depreciation, debt & capital improvements. 15. Utility operating expenditures should be reduced by 5%. Capital Program Measures 16. Capital projects should be prioritized based upon: · Available revenue to project expenditures. · Status of project completion with planning design permitting. · Makes use of enhancing existing physical plant assets as alternative to new construction. 17. City capital projects initiatives: · City Hall/Police/Fire facilities. 18. Prepare Councilmanic Bond to acquire property and design services for City capital project initiative. 19. Develop and submit a 7 year revenue, program and financing plan for repair and rehabilitation of City streets. 20. Budget debt service to meet bond covenants. Resolution on Financial Policies, Performance Measures and Priorities Page 9 City Manager Budget Message What do all of those numbers mean? How can I know what it costs for animal control or to issue a building permit? Until now, it would have been impossible for the city budget to answer these questions. The new Program Budget Format provides key financial information on the program costs within the budget. Instead of receiving a list of numbers for city budgets, the City Council and community now have an opportunity to know the cost of providing services in specific city programs. The new Program Budget Format represents a continued effort by staff to simplify the budget process for the City Council. It is also anticipated that the new format will make the budget more user friendly for citizens. The improvements in the budget format and process over the years has moved the budget from simply displaying numbers to a policy document that the City Council can use in providing fiscal leadership to the city. This budget continues to preSent a comprehensive line item format for all city departments. In the future, the city's accounting system will start to track cost based on programs. This will allow for a historical record of actual program cost to be constructed. The new program budget format is still in its very infant stages. In the future, when the program budget is augmented with more detailed historical financial information it should replace the comprehensive line item format that has been used by the city. WE ARE IN GOOD SHAPE... BUT, The pages ahead will provide a summary or the budget process, new programs and services and a summary of funds and revenue. Resolution on Financial Policies, Performance Measures and Priorities Page 10 THE BUDGET PROCESS The development of the budget starts with the City Council in June. The City Council rates specific budget program guidelines that should be focUsed on to develop the budget. The budget program initiatives set the parameters for the city staff to start the budget process. Base Budget The first step in the budget process is for departments to develop their base budgets. The base budget determines the level of expenditures required for departments to maintain current services. It is based on a combination of zero basis for expenditure items, the expenditure trend of the department in the current year and in looking at past years. Reductions The second step in the budget process is for departments to submit reductions in their Base Budget operating cost. Additions Concurrent with budget reductions, departments submit additions to the budget. These additions usually represent new recommended programs or services. Departmental Budget Consensus Meeting All departments meet to review additions and reductions of each department. Expenditure targets and revenue forecasts for the next fiscal year are provided at this meeting. Also, the City Council's budget program guidelines and the city's budget mission are referred to in evaluating proposed reductions and additions. Departments reach consensus on the proposed new supplements and reductions. The consensus is then used to develop the Preliminary Budget. Preliminary Budget The Preliminary Budget is comprised of the additions and reductions that result from the Departmental Budget Consensus Meeting. The Preliminary Budget is submitted to the City Council for them to rate additions and reductions. The results of this rating process are used to develop the final proposed budget. C :~uNNIE\CLERK~RESOLUTN~UDGPOLC .WPD Resolution on Financial Policies, Performance Measures and Priorities Page 11