Finance Committee Agenda and Packet 2021 08 23

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LL C�tyof Louisville COLORADO - SINCE 1878 Reserve Policies FINANCIAL POLICIES Policy Section: 2 Adopted by: Council Action Effective Date: November 4, 2019 Purpose and Scope The City of Louisville desires to maintain an appropriate level of financial resources to guard its citizens against service disruption in the event of unexpected revenue shortfalls or unanticipated one-time expenditures. This policy is also intended to document the appropriate reserve levels to protect the City's credit worthiness and maintain its good standing with bond rating agencies. 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. This policy also stipulates the conditions under which those reserves may be used and how the reserves will be replenished if they fall below established reserve amounts. The City will measure its compliance with this policy as of December 31st of each year, as soon as practical after final year-end information is audited and becomes available. Policies 2.1 General Fund Reserves. The minimum unrestricted fund balance of the General Fund shall be maintained at or above 15% of current operating expenditures. For purpose of this policy, operating expenditures are defined as all expenditures less any interfund transfers to other funds, regardless of whether the transfers are considered recurring or non -recurring. While the minimum unrestricted fund balance is set at 15% of current operating expenditures, the targeted unrestricted fund balance will be at or above 20% of current operating expenditures. This higher target is 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). The use of General Fund reserves will be limited to addressing unanticipated, non -recurring needs. Reserves shall not normally be used for recurring annual operating expenditures. 51