Finance Committee Agenda and Packet 2021 07 19

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City Council Finance Committee Meeting Minutes 06/14/21 Page 4 of 6 Reserves are accumulated and maintained to provide stability and flexibility to respond to unexpected adversity and/or opportunities. This policy establishes the reserve amounts the City will strive to maintain in its General Fund and its other major operating funds. Director Watson discussed the specific requirements for the following funds: General Fund Reserves. o The policy sets the minimum reserves at 15% of current operating expenditures. o The policy sets the targeted reserves at 20% of current operating expenditures, in recognition of: ■ the General Fund's reliance on revenue sources that are subject to fluctuations (sales and use taxes); ■ the General Fund's exposure to unexpected and significant one-time expenditure outlays (transfers to the Capital Projects Fund, mid -year changes to operations, disasters, etc.); and ■ the potential drain on General Fund resources from other funds (recurring support transfers to the Open Space & Parks Fund, the Cemetery Fund, and the Recreation Fund). Open Space & Parks Fund Reserves. o The policy sets the minimum reserves at 15% of current operating expenditures. o The Open Space & Parks Fund requires a recurring annual transfer from the General Fund. This annual transfer is calculated by taking the amount of funding provided by the General Fund for Parks in 2007 ($626,900) and inflating that amount on an annual basis by the regional Consumer Price Index for All Urban Consumers. The 2007 funding level for Parks is the starting point for the calculation, since that was the last year that Parks was funded within the General Fund. o The policy states that the City Council will annually consider interfund transfers of excess General Fund or Capital Project Fund balances to the Open Space & Parks Fund for property acquisition reserves. Cemetery Fund Reserves. o The policy sets the minimum reserves at 15% of current operating expenditures. o The Cemetery Fund requires a recurring annual transfer from the General Fund. This transfer is adjusted on an annual basis to ensure that the unrestricted fund balance of the Cemetery Fund is maintained at or above 15% of current operating expenditures. Combined Utility Fund Reserves. o The policy sets the minimum reserves (working capital) at 25% of current operating expenditures (budgetary basis). o This reserve requirement is higher than the other operating funds to further mitigate risk and to ensure a stable fee structure and service level. 5