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RESOLUTION NO. 2011- 11 A RESOLUTION OF THE CITY OF MOSCOW, IDAHO, A MUNICIPAL CORPORATION OF THE STATE OF IDAHO, ADOPTING A CITY OF MOSCOW FINANCIAL POLICY INCLUDING PROVISIONS RELATED TO REVENUE, OPERATING EXPENDITURES, CAPITAL EXPENDITURES, DEBT, AND FUND BALANCE; PROVIDING THIS RESOLUTION TO BE EFFECTIVE UPON ITS PASSAGE AND APPROVAL ACCORDING TO LAW. WHEREAS, City of Moscow has an important responsibility to its citizens to carefully account for public funds, to manage municipal finances wisely, and to plan the adequate funding of services and facilities desired and needed by the public; and WHEREAS, the City strives to ensure that it is capable of adequately funding and providing local government services needed by its citizens; and WHEREAS, the City's financial policies include specific objectives designed to ensure its continued fiscal well-being; and WHEREAS, some of these objectives include protecting the City Council's policy-making ability by ensuring that impm1ant policy decisions are not controlled solely or principally by financial problems or emergencies, enhancing the Council's effectiveness by providing accurate information regarding programing, operations, and other costs, and providing City Management with accurate and timely information relating to current and anticipated financial conditions; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Moscow, Idaho that the following Financial Policies be in effect and that such policies guides City Management in matters relative thereto. City of Moscow Financial Policies I. General Policy Principles II. Revenue III. Operating Expenditures IV. Capital Expenditures V. Debt VI. Fund Balance RESOLUTION 201 1 ·II FINANCIAL POLICIES SEPTEMI.lER 6, 201 1 PAGE 1 or9 ---PAGE BREAK--- I. GENERAL POLICY PRINCIPLES Statement of Pmpose The City of Moscow, Idaho has an important responsibility to its citizens to carefully account for public funds, to manage municipal finances wisely and to plan the adequate funding of services and facilities desired and needed by the public. The City strives to ensure that it is capable of adequately funding and providing local government services needed by the municipality. Statement of Policy The City's financial policy has specific objectives designed to ensure its continued fiscal well-being. These objectives include: • Protecting the governing body's policy-making ability by ensuring that important policy decisions are not controlled solely or principally by financial problems or emergencies. • Enhancing the Council's policy-making ability by providing accurate information on program, operating, and other costs. • Providing a Treasurer's Rep01t (on the status of the City's treasury), a Revenue Repmi, and a Disbursement Report to Council and City Administration, under oath, by the 10111 day of each month. • Assisting with sound management of the City government by providing accurate and timely inforn1ation on cunent and anticipated financial conditions. • Providing sound principles to guide the important decisions of the Council and of City management which have significant fiscal impact. • Setting forth operational principles that minimize cost and financial risk of government consistent with the services desired and needed by the public. • Employing revenue policies and forecasting tools to attempt to prevent undue or unbalanced reliance on certain revenues, including property tax, and which distribute the cost of municipal services fairly and which provide adequate funds to operate desired programs. • Providing essential public facilities and preventing deterioration of the City's infrastructure, and facilities. • Protecting and enhancing the City's credit rating and preventing default on any municipal debts. • Ensuring, to the greatest extent possible, the legal use and protection of all City funds through efficient systems of financial security and internal control. II. REVENUE POLICY Statement of Purpose This revenue policy is designed to ensure: • Diversified and stable revenue sources, RESOLUTION 201 I- I I FINANCIAL POLICIES SEPTEM OER 6, 20 I I PAGE20F9 ---PAGE BREAK--- • Adequate long-tenn funding by using specific revenue sources to fund related services and programs, • Funding levels which accommodate efficient provision and maintenance of all City services and programs; and • Revenues generated by fees are sufficient to provide City services or programs equitably. Statement of Policy The City will endeavor to maintain a diversified and stable revenue system in order to avoid short-tenn fluctuations that may result from dependence upon a single revenue source. Each existing and potential revenue source will be reviewed annually to ensure that information is kept current and relevant. The City will use one-time revenues for capital expenditures and/or one-time expenditures and not to fund recurring expenditures. All revenue forecasts shall be reasonable and conservative. The revenue forecast shall be projected from every source of revenue based on actual collections from the preceding years and estimated collections from the current fiscal year, while considering known circumstances which wil1 impact revenues for the new fiscal year. revenue reports will be prepared by the Finance Depmiment (Treasurer) no later than ten (1 0) days after the end of each month and presented to the Mayor, City Council and the City Supervisor to keep them abreast of the City's revenues per Idaho Code Section 50- 208. The City will follow a policy of collecting revenues which are due by using all legal avenues. The City will attempt to maximize the application of its financial resources by obtaining supplementary funding through agreements with other public and private agencies for the provision of public services or the construction of capital improvements. The City will consider market rates and charges levied by other public and private organizations for similar services when establishing tax rates, fees and charges. The City will attempt to maximize the utilization of user charges in lieu of ad valorem taxes (property taxes) for services that can be individually identified and where the costs are directly related to the level of service. User fees shall be reviewed each year and adjusted to reflect cost increases or decreases. The City is required by Idaho State Code Sections 63-1311 and 63-1311A to publish notice and hold a public hearing prior to adopting an increase in fees of more than five percent or imposing a new fee. Enterprise Funds and Internal Service Funds will be self-supporting. The City shall recover an administrative transfer fee fi·om enterp1ise operations. The administrative transfer fee shall be considered a payment for administrative support functions oversight management, accounting, human resources assistance, legal, and engineering services). The City will perfonn internal cost studies to assure compliance with City cost recovery. All City funds shall: • Be safely invested, • Ensure a sufficient level to liquidity to meet cash flow needs, RESOLUTION 20 I I - I I FINANCIAl. POLICIES SEPTEMBER 6, 201 I PAGE30F9 ---PAGE BREAK--- • Be invested at the maximum yield with first priority being safety and liquidity, and • Be in accordance with the City Investment Policy III. OPERATING EXPENDITURES POLICY Statement of Purpose City expenditures policy is designed to: • Identify priority services, • Establish appropriate service levels, and • Administer the expenditure of available resources to assure fiscal stability and the effective and efficient delivery of services. Statement of Policy The City will adopt, by appropriation ordinance, a balanced budget and file said ordinance with the Idaho office of the Secretary of State. The City annual budget shall appropriate sufficient funds for operating, recurring expenditures necessary to maintain established quality and scope of City services. Expenditures shall be budgeted and controlled so as to not exceed current revenues plus the planned use of fund balance accumulated through prior years. The City will maintain a budgetary control system managed by the Administration and Finance Departments which will enable it to adhere to the adopted budget. This includes a centralized record keeping system to be adhered to by all departments receiving annual appropriations. Personnel service expenditures will reflect employee resources necessary to provide established quality and scope of City services. The City shall maintain an employee compensation and benefit package competitive in the City's labor market with other similar government entities and when quantifiable, private service industries, to attract and retain a quality workforce necessary for providing high-quality service. Maintenance and supply expenditures shall be sufficient to ensure optimal productivity of City employees. Maintenance expenditures shall be sufficient to address the deterioration of the City's capital assets with available resources. Regular maintenance of City capital assets should be regularly conducted to ensure a relatively stable level of maintenance expenditures each budget year. All City employees will adhere to the City Travel Policy relating to travel, meeting and conference expenses. The City Supervisor shall direct and oversee periodic staff reviews of City programs for both efficiency and effectiveness. Programs that are deemed inefficient and/or ineffective shall be reduced in scope or eliminated. The City shall not use debt or bond financing to fund cmrent operating expenditures/ expenses. RESOLUTION 2011 - 1 1 FINANCIAL POLICIES SEPTEMBER 6, 201 1 PAGE4 or 9 ---PAGE BREAK--- All enterprise activities of the City shall be self-supporting. The City will not use General Fund revenues to subsidize utility operations. The City has fonned a staff Risk Management Committee and will adhere to commonly accepted risk management practices in order to minimize losses and reduce costs. The City Supervisor shall take immediate corrective action if, at any time during the fiscal year, expenditure and revenue estimates are such that an operating deficit is projected at fiscal year-end. Corrective actions may include a hiring freeze, reduction in force, expenditure reductions, fee increases, or use of contingencies. Expenditure deferrals into the immediately following fiscal year, short-term loans, or use of one-time revenue sources shall be avoided. Actual revenue and expense-to-budget reports will be prepared by the Finance Department each month for review by City staff. Such reports shall be prepared and distributed by the 1 01h day of the following month. Additionally, a disbursements report will be prepared by the Finance DepaJ.iment and presented to the Mayor, the City Council, and the City Supervisor to keep them abreast of the City's expenditures and pursuant to Idaho Code. IV. CAPITAL EXPENDITURES POLICY Statement of Pwpose The City Supervisor, in consultation with the City Finance Director and other City employees as necessary, will annually review and monitor the state of the City's capital equipment and infrastructure, setting priorities for its replacement and renovation based on needs, funding altematives, and availability of resources. Statement of Policy The City will develop a multi-year Capital Improvements Plan, update it annually and will make all capital improvements in accordance with the Plan, unless otherwise directed by Council. The Plan will identify all projects likely to be constructed within a ten (1 0) year hmizon. The Plan will reflect for each project the source of funding and will attempt to quantify the project's impact on future operating expenditures. The capital budget process works in conjunction with the regular operating budget process. Capital projects will: • Be constructed to protect or improve the community's quality of life, enhance the community's economic vitality, support new development, and provide significant rehabilitation of the City's infrastructure for sustained services. • Be part of an approved City plan, and/or part of an approved replacement schedule or capital plan. Capital improvements planning and programming shall include the following for the detennination of funding for individual projects: • Design costs; • Right-of-way costs; RESOLUTION 201 I -II fiNANCIAL POLICIES SEPTEMBER 6. 201 I PAGE5 OF9 ---PAGE BREAK--- • Utility construction/adjustment costs; • Construction and contingency costs; • Furnishings and equipment; and • Direct project administration by City employees or outside sources. The City shall minimize the issuance of debt by attempting to supp011 capital projects with appropriations from operating revenues or excess fund balances. The City will determine and use the most effective and efficient method for financing all new capital projects. Utility rates shall be designed to provide for accumulation of resources to replace or renovate aging infrastructure. Multi-year comprehensive plans that include a financial plan shall be developed to provide debt strategies to finance capital items needed. Replacement of capital assets of the Fleet Management and Infonnation Systems funds shall follow the prescribed replacement schedules. The City's Fixed Asset policy will be utilized to determine if a given asset qualifies for capitalization threshold of five thousand dollars ($5,000) per item and an expected useful life in excess of three years. Adequate insurance shall be maintained on all capital assets consistent with the results of annual inventory. The City will maintain all its assets at a level adequate to protect the City's capital interest and to minimize future maintenance and replacements costs. Actual revenue and expense to budget reports will be prepared by the Finance Department for review by City staff. Such rep011s shall be prepared and distributed by the 1oth of the following month. Additionally, a disbursements report will be prepared by the Finance Department and presented to the Mayor, the City Council and the City Supervisor to keep them abreast of the City's expenditures and pursuant to Idaho Code. V. DEBT POLICY Statemeut of Purpose The debt policy ensures that the City's debt: • Does not weaken the City's financial structure, and • Provides limits on debt to avoid problems in servicing debt. This Debt policy is critical for maintaining the best possible credit rating for the City. Statement of Policy The City shall review its outstanding debt annually for the purpose of determining if the financial marketplace will afford the City the opportunity to refinance an issue and lessen its debt service costs. Long term borrowing will be confined to construction of capital improvements or projects which cannot be supported by current annual revenues. RESOLUTION 20 II - II FINANCIAL POLICIES SEPTEMBER 6, 201 1 PAGE60F9 ---PAGE BREAK--- Whenever possible, the City will use special assessment, revenue, or other self-supporting bonds instead of general obligation bonds, so those benefitting from the improvements will bear all or part of the cost of the project financed. When the City finances capital projects by issuing bonds, it will pay back the bonds within a period not-to-exceed the estimated useful life of the project. The Finance Department will regularly monitor outstanding debt issues to verify compliance with debt covenants. Proceeds from long-tenn debt should only be used for construction projects costs, acquisition of other fixed assets, bond issuing costs, debt service reserve requirements, and refunding of outstanding bond issues. The City will not use long-tenn debt for current operations. Long-term debt is considered when a loan extends beyond twelve (12) months. Financing for a period of less than twelve (12) months is considered a short term loan and not debt. The City will maintain good communications with bond rating agencies regarding its financial condition. The City will follow a policy of full disclosure on every financial report and borrowing prospectus. VI. FUND BALANCE POLICY Statemellt ofPmpose The purposes of the City's Fund Balance funds are to provide: • A stable funding source for expenditures that fluctuate significantly each year, such as equipment acquisitions and replacements; • Working capital to maintain a sufficient cash flow; • A stable credit rating; • A voidance of future debt; • Reduction of outstanding debt; • Reserves, contingencies, and ending fund balances of the various operating funds at levels sufficient to protect the City's credit, as well as the City's financial position for emergencies. Statement of Policy The City will maintain a fund balance for the purpose of maintaining working capital for each operating fund below in an amount greater than or equal to: FUND General Fund Street Fund RESOLUTION 201 1 - 1 1 FINANCIAL POLICIES BALANCE Three months of the ensuing fiscal year operating budget Three months of the ensuing fiscal year operating budget SEPTEMBER 6. 201 1 PAGE 7 OF9 ---PAGE BREAK--- Parks and Recreation Fund 1912 Center Fund A1t Fund Water Fund Sewer Fund Sanitation Fund Information Systems Fund Fleet Management Fund Debt Service Hamilton Fund Three months of the ensuing fiscal year operating budget Two months of the ensumg fiscal year operating budget Three months of the ensuing fiscal year operating budget Three months of the ensuing fiscal year operating budget Three months of the ensuing fiscal year operating budget Three months of the ensuing fiscal year operating budget Two months of the ensuing fiscal year operating budget Two months of the ensuing fiscal year operating budget The next years' interest payments for each bond issue Pursuant to Council goal established in 2003 that the corpus of the account shall be sufficient to provide interest income to meet the pliorities of debt service, maintenance and operations of the Hamilton Indoor Recreation Center. The remainder shall be utilized in confonnance with the tenns of the Hamilton gift. On an annual basis, after the year-end audit has been completed, City staff shall produce a schedule of all fund surpluses and deficits, with projections of reserve requirements and a plan for use of any excess surplus for the ensuing year. The schedule will be used not only to ensure compliance with stated policies, but also to analyze the total reserve and surplus finances so that the policies, as provided, do not inadve1tently create adverse effects. The City Supervisor and Finance Director may make changes to such policies in the use of financial reserve and/or use of any surplus based on the needs identified in the schedule. The City Council has final authority to allocate and appropriate these funds either by amending the current year budget or by appropriating funds in the ensuing budget year. It is the intent of the City to use all surpluses generated to meet reserve requirements, to avoid future debt and reduce outstanding debt. Any surpluses in the General Fund at year end shall be used to fund any or all of the following, in no specific order: • Capital equipment replacement programs for Fleet Management and Information Systems; • Capital projects for aging infrastructure or new projects; • Retirement or refinancing of existing debt. RESOI.U'IJON 201 1 - 1 1 fiNANCIAL POLICIES SEPTEMBER 6, 2011 PAGF. 8 or 9 ---PAGE BREAK--- Fund transfers may occur when surplus fund balances are used to support non-recurring capital expenses or when needed to satisfy debt service obligations. The City will exercise diligence in avoiding the appropriation of fund balance for recurring operating expenditures. In the event fund balance is appropriated for recurring operating expenditures to meet the needs of the community, the budget document shall include an explanation of the circumstances requiring the appropriation and the methods to be used to arrest the future use of fund balance for operating expenditures. That this Resolution shall become effective as ofi11 day of September, 2011. PASSED AND APPROVED by the Mayor and City Council of the City of Moscow, Idaho, this 6111 day of September, 2011. RESOLUTION 201 1 - II FINANCIAL POIJCTES SEP !"EMBER 6, 20 I I PAGE90F9