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HomeMy WebLinkAbout1859Resolution No. 1859 (Amending or Repealing Resolutions) CFN = 186 -Budget CFN = 198 -City Council Passed -6/5/2012 Financial Polic1es Resolution ' j 1 RESOLUTION NO. A RESOLUTION of the city counc1l of the c1ty of Kent, Washington, adoptmg fmanc1al, accountmg, and budgetary pol1c1es mtended to prov1de short and long-term gu1dance to c1ty staff for the purpose of ach1ev1ng fmanc1al stab1l1ty and ach1evmg goals established in the City Council's Strategic Plan. RECITALS A. The city council has created and implemented a new strategic plan that sets forth tasks, obJectives and goals Intended to ach1eve the council's VISIOn that Kent become "a safe, connected, and beautiful c1ty, nchly diverse w1th culturally VIbrant urban centers." B. As the counCil developed this new plan, it has also created a new set of financ1al, accounting and budgetary pol1c1es that are mtended to offer short and long-term guidance to c1ty staff as the c1ty moves toward accomplishing the goals established 1n the strategic plan. C. These pol1c1es w1ll provide gu1dance to th1s and future counc1ls as they develop the c1ty's b1enn1al budgets. D. Just as the strategic plan reflects goals and a vision the c1ty strives to achieve, these pol1c1es reflect the fmanc1al goals and VISion for the c1ty. Accordmgly, the council implements these pol1c1es today w1th the 1 Financial Policies Resolution understanding that not all goals can be achieved immediately, but rather will be achieved over time. THE CITY COUNCIL OF THE CITY OF KENT, WASHINGTON, DOES HEREBY RESOLVE AS FOLLOWS: RESOLUTION SECTION 1. -Reotals. The foregomg rec1tals are Incorporated by th1s reference. SECTION 2. -PoliCies Adopted. The City of Kent F1nanc1al PoliCieS attached as Exh1b1t A are adopted. SECTION 3. -Severab1l1ty. If any one or more sect1on, subsect1on, or sentence of th1s resolution 1s held to be unconst1tut1onal or mval1d, that dec1s1on shall not affect the valid1ty of the remaming port1on of th1s resolut1on and that remammg port1on shall mamta1n its full force and effect. SECTION 4. -Effective Date. Th1s resolution shall take effect and be 1n force immediately upon 1ts passage. PASSED at a regular open public meeting of the c1ty of Kent, Washington, th1s .5 day of ~'-t--"-'---'----- 2 Financial Policies Resolution ATTEST: ~ ~ -.. .::. .:....-.. -~ .-· ,;,"':' APPROVED AS TO FORM: ~B~NEY I hereby cert1fy that this is a true and correct copy of Resolution No. I flfij , passed by the c1ty council of the City of Kent, Washmgton, the 5 day of r~ 1 2012, ~L) P \Civii\Resolutlon\Downtown Strateg1c Action Plan Final docx 3 Financial Policies Resolution Exhibit A FINANCIAL POLICIES FINANCIAL STABILITY POLICIES General Fund Reserves-The target for the General Fund Contingency Reserve IS 1 0% of the General Fund budgeted expenditures or an amount that Will ma1nta1n suffic1ent cash flow, whichever 1s greater The pol1cy 1s des1gned to prov1de a f1scal cush1on, meet seasonal cash flow shortfalls If the General fund reserves goes below 10%, based on the endmg fund balance on December 31 of each year, the C1ty shall take steps to rebu1ld the reserve w1th1n the next fiscal year. Strategic Opportunities Fund -The C1ty shall annually transfer any amount m excess of the 10% contingency reserve 1n the General Fund to th1s fund Th1s fund Will act as 1f 1t 1s a permanent fund except that 1t may be used to take advantage of Investment opportun1t1es that may anse Th1s fund shall only be utilized by an appropnat1on approved by C1ty Counc1l In the event any ofth1s fund IS used 1n an economic downturn to stabilize c1ty finances, such appropnat1on shall be repaid to the fund annually over the next three years Capital Reserve Fund-The C1ty shall annually budget a m1mmum of $250,000 mto a reserve for the general cap1tal needs of the C1ty Such fund may be used for unant1c1pated cap1tal needs typically resulting from a natural d1saster Th1s fund 1s des1gnated to act as a stab11izat1on fund for general cap1tal and may, w1th a specific appropnat1on by C1ty Counc1l, be used for Investment m revenue producmg cap1tal projects Th1s fund shall be enumerated m the budget and accrue each year Contingency for Unanticipated Costs-The C1ty w111 annually budget no less than $500,000 in the General fund for unanticipated costs Th1s amount, 1f unused, Will be transferred m to a project account unt1l the amount reaches a max1mum of $1,500,000 If the fund or any port1on of 1t IS used, the C1ty shall restore the balance to 1ts $1,500,000 w1th1n three years Equipment Replacement Fund-The C1ty w1ll ma1nta1n an Equipment Replacement Fund adequately funded to replace a fleet of vehicles and other heavy equipment at the1r scheduled replacement t1me Technology cap1tal replacement shall be funded through departmental charges and other revenues suff1c1ent to replace both hardware and software at the end of the1r useful life Self Insurance Program -The C1ty Will ma1nta1n an actuanally sound self insurance program for unemployment, worker's compensation, l1ab11ity Insurance and health Insurance All of the msurance programs are accounted for as separate cost centers w1th1n one parent Insurance fund Beg1nn1ng 1n 2011, the liability Insurance fund IS funded through commerc1al1nsurance for cla1ms over $250,000 Pension Funds-The C1ty w1ll ma1nta1n an actuanally sound Firemen's Rel1ef and Pens1on Fund. Maintenance and Operational Planning-Mamtenance of current assets shall take pnonty over new cap1tal projects whenever possible The C1ty Counc1l shall ensure that there are stable sources of revenue to fund ongomg maintenance of cap1tal assets Before any new capital asset IS approved, staff shall present an est1mate of the life cycle and maintenance cost Such costs shall be 1ncluded 1n the budgets for the following years The C1ty Council shall not approve of new cap1tal projects unless there 1s funding for the ongo1ng maintenance of the asset The C1ty shall ma1nta1n an Inventory of all C1ty assets and costs of maintenance of those assets Exh1b1t A OPERATING BUDGET POLICIES City Target Issues-The C1ty Council w1ll update 1ts strategic plan 1n the early spnng of each year The staff Will use th1s plan for development of the follow1ng year's budget pnont1es and the next b1enn1al budget Budget Kickoff-The Mayor and City Council shall meet in the Spnng of even numbered years to plan the following b1enn1al budget and agree on the ant1c1pated revenues on wh1ch the preliminary budget Will be based The C1ty Counc1l shall rev1ew revenue est1mates and prev1ew potential changes to revenues The C1ty Council shall then approve the revenue amount that Will be used by the Mayor to form the 1n1t1al prel1mmary budget The Mayor and C1ty Council w1ll meet add1t1onally 1n late Summer to re-rev1ew the revenue est1mates to adJust them more closely to the add1t1onal revenue 1nformat1on that has become available w1th the passage of t1me Any changes resultmg from th1s meet1ng shall be incorporated mto the preliminary budget to be considered by C1ty Council Program Reviews -The Mayor shall perform a periodic rev1ew of staff and programs of the City for both efficiency and effectiveness Alternate methods of delivery Will be evaluated for prov1d1ng serv1ces Programs that are determined to be 1neffic1ent, meffect1ve, or 1ncons1stent w1th the C1ty Council's strateg1c goals shall be reduced 1n scope or eliminated Preliminary Budget -The Mayor shall propose a preliminary budget 1n the Fall of even numbered years The preliminary budget Will be developed 1n accordance w1th the revenues approved by the C1ty Council at the budget kickoff as amended If the preliminary budget IS based on revenues 1n excess of those approved by C1ty Council, the Mayor w1ll present the JUStification for the Increased revenues or the add1t1onal proposed revenue sources Structurally Balanced Budget-The Mayor shall present, and the C1ty Council shall adopt a budget 1n wh1ch ongomg revenues equal or exceed ongo1ng expenditures One t1me revenues shall not be used to pay for recurnng expenditures ConseNative Expenditure Budgeting-The C1ty Will ma1nta1n 1ts conservative expenditure budgeting w1th respect to budgeting ex1st1ng full t1me pos1t1ons for a full year Acceptance of Grants-The C1ty shall rev1ew any requirements for ongomg costs from any grant for operational purposes Any requirement to fund any port1on of the costs as a cond1t1on of rece1pt of the grant shall be a cons1derat1on 1n the dec1s1on to accept or reJect the grant Self Supporting Proprietary Funds-The City's water, sewer and golf course enterprise funds will be self support1ng along w1th 1ts Internal serv1ce funds The cost of prov1d1ng serv1ces IS expected to be fully funded from charges for the serv1ce If the funds produce a loss, rates w1ll be adJusted to ach1eve, at m1n1mum, a break even status If debt has been 1ssued wh1ch requ1res a certa1n level of return, rates and charges Will be adJusted to ach1eve those returns Health Insurance ReseNes -The target reserve for the Health Insurance Fund shall be two t1mes IBNR Full Cost of SeNice-The C1ty w111 def1ne 1ts bas1c serv1ces to our res1dents. The serv1ces w1ll be evaluated as to the1r full cost This mformat1on w1ll be Incorporated and presented as a sect1on of the annual budget Exhtbtt A REVENUE AND COLLECTIONS Aggresstve Collection Effort-The City wtll follow an aggresstve policy of collecting all momes due the Ctty to the extent that the collection efforts rematn cost effecttve Retmbursements on a timely basis-Many grants occur on a cost reimbursement basis To maxtmtze the Ctty's avatlable tnvestable funds, retmbursement should be pursued on a ttmely basts User Charges Related to Costs -The Ctty wtll review fees and charges on an annual basts and will modtfy charges to adequately keep pace wtth tncreastng costs of provtdtng servtces User Charges and Taxes Related to Market Rates-The Ctty wtll constder tts user charges and tts tax rates tn connectton wtth those of comparable stzed communtttes and stmtlar servtce provtders, so that tt wtll provtde reasonable rates to mamtatn tts advantage tn the market place tn attracttng bustnesses and restdences to the Ctty of Kent CAPITAL BUDGETING Committed Special Revenue Funds -The Ctty will maintain its practice of destgnattng tts street and capttaltmprovement revenue sources tncludtng a percentage of tts sales tax collecttons for the fundtng of tts capttaltmprovement program Capita/Improvement Program -The Ctty wtll update tis capttal factlittes plan on an annual basts as requtred by the Growth Management Act A preltmtnary plan wtll be establtshed early tn the budgeltng process to serve as a gutdeltne during the year, wtth a ftnal amendment adopted wtth the adoptton of the operattng budgets to reflect the necessary changes tn the Ctty's Comprehenstve Plan DEBT POLICIES Projects Funded by Bonds-The use of long-term debt shall be mtntmtzed The Ctty should tssue debt only for major capttal projects Debt should only be authonzed for projects where the life of the asset constructed or acqutred exceeds the life of the debt Debt Service-To ensure that the Ctty always meets all of thetr debt obltgattons, payments on outstandtng debt shall be the htghest prtonty before payment for other capttal expenditures Bond Rating-The Ctty wtll conttnue to strive to tmprove tts bond ratmg by improving tts financtal stabtltty Debt Capacity -The Ctty stnves to matntatn adequate avatlable debt capactty for large top pnority projects Bonding Limitations -Dtrect General Obligatton Debt wtll not exceed 1.5% of assessed value, dtrect and tndtrect debt wtll not exceed 4% of assessed value, duratton of the debt wtll not exceed 15 years Revenue Debt Covenants-Wtll be based on the volattltty of the revenues Arbitrage regulations-Wtll be stnctly followed. Special Assessment Guaranty Fund-The Ctty wtll stnve to matnlatn adequate reserves for rettrement of spectal assessment debt through the matntenance of a spectal assessment guaranty fund at least 10% of outstandtng spectal assessment debt lnterfund Borrowing -The Ctty wtll use interfund borrowing where such borrowing is cost effecttve to both the borrowtng and the lendtng fund, and the funds wtll not be needed by the loantng fund dunng the term of the loan Such borrowtng shalltmplement Counctl dtrected poltcy tn a stmpltfied manner, such as borrowmg assoctated wtth tntenm ftnanctng for local tmprovement dtstnct projects A repayment plan Exh1b1t A should be approved along w1th the loan The Mayor may approve loans for a term of one year The Council must approve loans w1th terms longer than one year INVESTMENT POLICY Investment Security & Earnings Maximization-An investment policy was implemented per Ordinance #3278 1n 1996 wh1ch detail the City's investment guidelines The pnmary objective IS to preserve the pnnc1pal of the Investment portfolio while max1mlz1ng the portfolio's return FINANCIAL REPORTING Reporting frequency -Monthly budget and actual reports Will be available to departments and a quarterly report Will be presented to the C1ty Council Operat1ons Committee Annual Report-Will be completed w1th1n 180 days. Reporting Improvements-The City Will stnve to cont1nue to make Improvements 1n its financial report1ng scheme so that 1nformat1on available to the public, the City's govern1ng bod1es and other c1ty departments IS t1mely and the best available for sound financial dec1s1ons Bondholders' Report-The C1ty Will prepare an annual report to bondholders Full Disclosure-All public reports Will conta1n full and complete disclosure of all matenal matters Financial Trend Monitoring -The City will develop a program to evaluate its financial cond1t1on and establish a system for correct1ng any defic1enc1es noted Annual Audits -The City will ass1st the State Auditor's Office 1n whatever way possible 1n conjunction w1th the preparation of the annual audit, and w1111mplement mod1ficat1ons !dent1f1ed by the State Aud1tor to 1mprove the City's Internal control and financial pract1ces Updates to these Policies-The Operations Comm1ttee of the C1ty Council shall rev1ew these policies at least every four years It IS recommended that the rev1ew 1s done b1enmally dunng the budget process Exh1b1t A ACCOUNTING Generally Accepted Accounting Principles-The City Will ma1nta1n 1ts position as a leader 1n producing f1nanc1al reports 1n conformance With generally accepted accountmg pnnc1ples and pronouncements by the Governmental Accounting Standards Board Basis of Accounting-The bas1s for accounting for the general fund, spec1al revenue, debt service, capital projects and agency funds 1s mod1f1ed accrual Modified accrual recogn1zes revenues when they become both measurable and available to f1nance expenditures of the current penod The bas1s of account1ng for the enterpnse, Internal serv1ce funds and pens1on trust fund IS full accrual The appropnate bas1s IS used throughout the budgeting, accounting and reporting processes, w1th few exceptions as noted below Full accrual is a method of accounting that matches revenues and expenses w1th the penod to wh1ch they relate, rather than focus1ng on actual cash flows In th1s method, for example, an asset IS depreciated as 1t IS "used up", and the expense IS recognized 1n penod1c Increments, rather than assum1ng the asset holds 1ts value unt1l1t IS actually disposed of However, s1nce the focus 1n budgeting 1s on the revenues and expendable accounts, deprec1at1on and amort1zat1on are not considered budgetary accounts, and are excluded from the budgetmg system Likewise, debt serv1ce and cap1tal expenditures are presented as the payments occur, departing from GAAP 1n th1s regard, 1n the budget document Also, Trust and Agency Funds that may not be expended for governmental operations are excluded from th1s budget document. The presentation of the program budget departs from the basis of the legal budget by ehm1nat1ng inter city transactions and allocating the net Increases or decreases from Internal serv1ces to the usmg programs. Th1s IS done to g1ve the user a more complete picture of the total costs of the operating programs l 1 ' Exh1b1tA BUDGET AND ACCOUNTING STRUCTURE The C1ty of Kent, as all governmental umts, operates 1ts budget and accounting system based on a fund structure Funds are established to segregate spec1f1c revenue to ensure the1r expenditure w1thm applicable legal and contractual prov1s1ons Revenues are allocated to and accounted for 1n indiVIdual funds based on the purposes for which they are to be spent and the means by which the spending activities are to be controlled The C1ty of Kent operates w1th seven bas1c fund types W1th1n each fund type there may ex1st one or more IndiVIdual funds The C1ty of Kent operates w1th 26 indiVidual funds The fund types are l1sted below under the1r three major subheadings. FUND/PURPOSE GOVERNMENTAL FUNDS General Fund The General Fund is the principal operating fund of the C1ty It accounts for the f1nanc1al resources of the C1ty which are not accounted for 1n any other fund Pnnc1pal sources of revenue are property taxes, sales and use taxes, utility taxes, licenses and perm1ts, state shared revenues, charges for serv1ces and Interest 1ncome Pnmary expenditures are for general C1ty adm!mstrat1on, police and fire protection, eng1neenng and planning serv1ces, park and street ma1ntenance, and cultural and recreatiOnal services Special Revenue Funds Spec1al Revenue Funds are used to account for spec1f1c revenue sources that would otherwise be accounted for 1n the General Fund, but for which there ex1sts certain legal restnct1ons as to the use of certain revenues The revenue IS segregated 1nto Individual spec1al revenue funds to ensure expenditure for a designated purpose. Pnnc1pal sources of revenue are state shared fuel tax, earmarked sales and utility taxes and community development block grant funds The major port1on ofthese resources are transferred to other funds for debt retirement, capital acquiSition and spec1f1c purposes operations RELATIONSHIP TO OTHER FUNDS The General Fund "buys" services from the Internal Service Funds fuel and rental of vehicles from the Equ1pment Rental Fund, supplies, postage, photocopy, pnnt1ng and graphiCS, cable TV serv1ces, data process1ng and telephone serv1ces from Central Serv1ces, facility maintenance and operation serv1ces from Facilities, and 1nsurance from the Insurance Fund Costs are allocated to all funds 1n an effort to d1stnbute accounting, budgetmg, legal and human resource serv1ces as well as street, engmeenng and park serv1ces General Fund also transfers funds for m1nor projects Taxes and grants are collected 1n the Street Fund, LEOFF1 Ret1rees Fund, Lodging Tax Fund, Youth Teen Programs Fund, Capital Improvement Fund, Cnm1nal Just1ce Fund, Community Development Block Grant Fund, Other Operatmg Projects Fund, and the Kent Events Center Operating Fund Transfers from the Street and Capital improvement Funds are pnmanly to the Capital Project Funds or the L TGO Debt Serv1ce Fund Exhibit A BUDGET AND ACCOUNTING STRUCTURE FUND/PURPOSE Debt Service Funds Debt Serv1ce Funds are used to account for the accumulation of resources to be used for the retirement of general long-term debt The C1ty has three types of general long-term debt for wh1ch resources are accumulated general obligation long-term debt (voted, general obligation long-term debt and L TGO) and spec1al assessment debt Sources of revenue to fund the retirement of general obligat1on long-term debt are property taxes and transfers 1n from other funds Spec1al assessments are lev1ed and rece1ved to ret1re spec1al assessment debt Capital Projects Funds Cap1tal Projects Funds are used to account for the financ1ng of major one t1me only cap1tal projects other than those financed by Propnetary Funds Sources of revenue are proceeds of debt Issuance, grants, and transfers from other funds PROPRIETARY FUNDS Enterprtse Funds Enterpnse Funds are used to account for the f1nancmg of serv1ces provided to the general public where all or most of the costs Involved are pa1d for by user charges Operat1ons financed as enterpnse funds are operated 1n a manner s1m1lar to pnvate busmess enterpnses Kent's enterpnse funds are funded through water, sewer, and dra1nage ut1l1ty charges and recreational charges at the C1ty's golf complex RELATIONSHIP TO OTHER FUNDS The Debt Serv1ce Funds rece1ve the transfers from the Spec1al Revenue Funds, Water Fund and Sewerage Funds to pay pnnc1pal and Interest on L TGO debt 1ssues. Transfers are received from Spec1al Revenue and other funds as a part1al source of funds needed to complete projects The Enterpnse Funds "buy" serv1ces from the Equipment Rental Fund for equ1pment rental and fuel, from the Insurance Fund for 1nsurance needs, from the Central Serv1ce Funds for stores, telephone, postage, photocopying, pnntmg and graph1cs, cable TV serv1ces, data process1ng and telecommun1cat1ons, and from the Fac11it1es Fund for facility maintenance and operat1on serv1ces The Enterpnse Funds also reimburse the General Fund for cost allocations for budget1ng, account1ng, human resource, legal and eng1neenng costs wh1ch relate to Enterpnse Funds Other funds purchase utilities at the same rate as the general public Exhibit A BUDGETANDACCOUNTINGSTRUCTURE FUND/PURPOSE Internal Service Funds Internal Serv1ce Funds are used to account for the fmancmg of spec1f1c serv1ces performed by designated orgamzat1ons w1th1n the C1ty for other orgamzat1ons w1thm the C1ty The C1ty's Equ1pment Rental, Central Serv1ce, Fac1l1t1es Mamtenance and Plannmg, and Insurance Funds prov1de centrally admm1stered serv1ces then generate revenue by billing the orgamzation to which the serv1ce 1s prov1ded FIDUCIARY FUND TYPES Trust and Agency Funds Trust and Agency Funds are used to account for assets held by the C1ty as trustee or agent for md1v1duals, pnvate organ1zat1ons or other governmental un1ts S1nce the1r funds are not expendable for C1ty operations they are not 1ncluded m the budget However, per state aud1tor requirements, est1mates are provided for the1r act1v1t1es RELATIONSHIP TO OTHER FUNDS Centralizes costs for equipment rental, central serv1ces and Insurance These serv1ces are "sold" to other funds at cost plus a reserve for future needs. Exh1bitA BUDGET AND SPENDING CONTROL SYSTEM Budgets serve as control mechanisms m the operations of governmental units Legal budgetary (expenditure) control m the C1ty of Kent IS ma1nta1ned at the fund level Adm1n1strat1on can amend budgets, w1th no overall dollar 1ncrease between departments, w1th1n a fund Supplemental appropnat1ons that amend total expenditures, or 1n the case of Propnetary Funds amend work1ng capital, requ1re a C1ty Council ordmance All operatmg budgets lapse at the end of the b1enmum W1th1n each year of the b1enmum, a smgle year allocation Will be adopted and operate as 1f 1t were an annual budget General and Special Revenue Funds control expenditures w1th a legal bienn1al budget at the fund level Debt Serv1ce Funds operate under the control of the bond mdentures wh1ch established them Capital Projects Funds operate under the control of total project authonzat1on, rather than the annual budget Propnetary Funds control expenditures w1th a flexible budget whereby the expenditure Increases must be offset by mcreased resources Though budgetary contrails at the fund level, budget and actual 1nformat1on IS ma1nta1ned by project, organ1zat1on, program and object Both budget and actual mformat1on 1s presented on a GAAP bas1s of accounting, when presented by fund. The C1ty must adopt 1ts b1enn1al budget by December of the precedmg f1scal year Th1s usually follows s1x months of analysis by staff and C1ty Council The f1rst step Involves the establishment of the baseline revenue budget by the C1ty Counc1l The second step 1s to rev1ew the C1ty Council Strategic Goals and begm budget development to ass 1st in ach1ev1ng those goals Third, undertake a program rev1ew to ensure that current program offenngs are 1n agreement w1th C1ty Council goals and pnont1es The emphasis IS placed on the General and Spec1al Revenue Funds s1nce the operat1on of other funds are t1ed to ordinances, contractual agreements or separately established rate structures Once the baseline operations have been rev1ewed and adjusted based on admm1strat1ve policy, program expansion 1s 1ncluded to the level of projected available resources after the establishment of sufficient fund balances A m1d-b1enn1um rev1ew IS undertaken dunng the second year of the b1enn1um 1n which any changes to the 1n1t1al est1mates of revenues and expenditures are to be rev1ewed Such changes w1ll be presented by the Mayor and discussed by the C1ty Council Any agreed upon changes shall be approved w1th an ordmance adoptmg changes to the b1enn1al budget After the preliminary budget document IS prepared, the C1ty Council spends approximately one month rev1ew1ng 1t Public meet1ngs are held to gather public 1nput When the budget rev1ew and f1nal adjustment penod IS complete a balanced budget as requ1red by state law 1s adopted by ord1nance After adoption, penod1c budget adjustments that affect total fund expenditures are made as approved by C1ty Council, but a final budget adjustment ordmance covenng all approved changes IS adopted at year end or the begmnmg of the next b1enn1um