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Page 1 of 3 Ogden City Council Meeting: May 16, 2017 FY2018 FINANCIAL PRINCIPLES Action: Adopt or Not Adopt Resolution Executive Summary The Council will consider adopting a Joint Resolution establishing the FY2018 Financial Principles. These principles are used to guide financial management and budgetary decisions throughout the fiscal year. Background Each year the Council and Mayor jointly adopt financial principles to guide and direction budgetary and financial management decisions throughout the fiscal year. Prior to FY2015, the Principles were adopted with the budget. Beginning in FY2015, the Council began adopting the Principles prior to receiving the Mayor’s budget as way to provide additional guidance during preparation of the Mayor’s proposed budget. April 18, 2017 The Financial Principles were scheduled for consideration on the Council’s agenda. During the work session prior to the meeting, the Council determined the Principles would be pulled from the agenda and considered at a later date. During the regular meeting the Principles were removed from the common consent agenda as agreed in the work session. May 9, 2017 The Council held an additional work session to review and discuss the proposed Financial Principles. Proposal Council and Administrative Staff are recommending adoption of the Financial Principles prior to preparation of the FY2018 Budget in order to establish the financial policies that will guide preparation of the budget. ---PAGE BREAK--- Page 2 of 3 Ogden City Council Meeting: May 16, 2017 The proposed FY2018 Financial Principles include several changes from the FY2017 Financial Principles. However, most of the changes are incidental, non-substantive changes relating to grammar and punctuation. Headings were added to paragraphs, there are several changes that clarify or remove redundant language, and sections addressing the same policy were combined. There are three substantive changes proposed: General Principles 11. Strategic Planning. Beginning in FY2018, the City will use a rolling five-year financial model for the General Fund budgeting which will be used to project future budget needs and revenues, thus informing a long-term, sustainable and strategic budgeting process. City Debt 4. Bond Ratings. The City will monitor financial, economic and demographic indicators that impact bond ratings and make every effort to assure the highest rating possible. The City will maintain effective communication with bond rating agencies regarding its financial condition and will follow a policy of full disclosure on every financial report and bond prospectus. The second establishes a goal for the City’s fund balance or reserve as follows: Reserve Policies General Fund 2. Operating Reserve. The City will maintain an operating reserve in the General Fund of at least 5% of annual General Fund revenues as required by Utah Code, Section 10-6-116(4). The minimum 5% and the maximum 25% include amounts reserved in the unassigned, committed, and assigned categories of General Fund fund balance. Beginning in FY2018, revenues permitting, ---PAGE BREAK--- Page 3 of 3 Ogden City Council Meeting: May 16, 2017 the City will set a goal to increase the minimum reserve by an additional 1% per year until the reserve reaches at least 10% of annual General Fund revenues. A red-lined copy of the FY18 Financial Principles showing changes from the FY17 version is attached. Council Staff Contact: Janene Eller-Smith, (801)629-8165 ---PAGE BREAK--- JOINT RESOLUTION 2017- A JOINT RESOLUTION OF THE OGDEN CITY COUNCIL AND MAYOR MICHAEL P. CALDWELL ESTABLISHING GOVERNING FINANCIAL PRINCIPLES RELATING TO GENERAL FINANCIAL MANAGEMENT, USER FEES, CAPITAL IMPROVEMENTS, DEBT, INVESTMENTS, AND RESERVES. WHEREAS, the City Council and the Mayor are committed to managing the City’s finances in accordance with Utah State law, generally accepted accounting practices, and citizen expectations; and WHEREAS, it is the desire of the City Council and the Mayor to establish general and specific financial principles to govern all City financial practices; and WHEREAS, the adoption of such principles is intended to not only establish general financial policy but also provide city staff with guidance in managing the City’s finances and direction for preparation of the City’s annual budget; NOW, THEREFORE BE IT RESOLVED BY THE OGDEN CITY COUNCIL AND MAYOR MICHAEL P. CALDWELL that the City hereby establishes and adopts the Financial Principals set forth at Attachment A. PASSED AND ADOPTED this day of 2017. ATTEST: Tracy Hansen, City Recorder Marcia L. White, Council Chair ATTEST: Tracy Hansen, City Recorder Michael P. Caldwell, Mayor APPROVED AS TO FORM: LEGAL DATE ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 1 Attachment A OGDEN CITY COUNCIL & MAYOR POLICY FINANCIAL PRINCIPLES General Principles 1. Revenues. The City will project its annual revenues using all available dates to complete the analysis. Conservative estimates will be used to develop the annual budget. 2. Balanced Budget. The City will propose and adopt structurally balanced budgets in all City funds to support and maintain financial sustainability. A structurally balanced budget requires recurring revenues to equal or exceed recurring expenditures. If a structural imbalance occurs, a plan will be developed and implemented to bring the budget back into structural balance. 3. Mayor’s Proposed Budget. When transmitting the proposed budget, the Administration will include a concise narrative affirming the proposed budget is balanced. If the structural balance changes between the proposed and adopted budgets, the Administration will clearly delineate the changes and the proposed results. 4. Non-Recurring Revenues. Non-recurring resources such as proceeds from asset sales, debt refinancing, one-time grants, revenue windfalls, budget savings and similar nonrecurring revenues shall not be used for current or new ongoing operating or program expenses unless necessary to establish structural balance in the General Fund. Appropriate uses of one-time resources include establishing and rebuilding reserves, early retirement of debt, capital expenditures and other non-recurring expenditures. 5. Insufficient Funding Options. If the City’s projected tax base will be insufficient to fund government services at existing levels, the City will do the following: a. Identify and implement cost cutting measures; b. Consider reducing government service levels; c. Consider new or increased user fees; or d. Propose incremental property tax rate increases. 6. Annual Budget Maintenance Expenses. The Annual Budget will fund adequate maintenance and/or replacement of the capital plant and equipment. The City will annually Formatted: Font: Bold Formatted: Font: Bold Formatted: Font: Bold Formatted: Font: Bold ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 2 project its equipment replacement and maintenance needs for at least the next three years and develop and adhere to the maintenance and replacement schedule. 7. Quarterly Report. Not later than 45 days after the end of each quarter, the Administration shall provide quarterly financial reports to the City Council that include the following: a. Actuals to budgeted revenues and expenditures b. Balance sheet for governmental funds c. Fund balance analysis for governmental funds d. Cash balance analysis for proprietary funds These reports are not required to contain notes to the financial statements. Estimates can be included where appropriate. 8. GAAP. The City will maintain financial records consistent with generally accepted accounting principles established for local government entities. 9. Mayor’s Budget Message. The Mayor’s budget message will include a list of issues that may or will have on-going or future financial impacts that require additional consideration or planning. The list of issues should cover all City funds including the Redevelopment Agency and the Municipal Building Authority. 10. Employee Salaries. The City will make funding for employee pay for performance or step increases a budget priority. 11. Strategic Planning. Beginning in FY2018, the City will use a rolling five-year financial model for General Fund budgeting, which will be used to project future budget needs and revenues, thus informing a long-term, sustainable and strategic budgeting process.. User Fees 1. Establishing Fees. The Annual Budget shall include funding for programs which can be reasonably funded by user fees. The Council will establish policy outlining the total cost of the program and, if appropriate, specifying the costs to be offset by a fee. There shall be a rational basis for the percentageestablishing any fee. When establishing these percentagesfees, the City will consider: Formatted: Font: Bold Formatted: Font: (Default) Times New Roman, 12 pt Formatted: Space After: 10 pt, No bullets or numbering, Tab stops: Not at 0.5" Formatted: Indent: Left: 0.38", No bullets or numbering, Tab stops: Not at 0.5" Formatted: Font: Bold ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 3 a. Rates charged by other public and private providers, b. Costs required to change the rate, c. The ability of the users to pay, and d. Other policy considerations whether a fine should serve as a deterrent). 2. Annual Adjustment. The City will adjust evaluate user fee rates annually based on an analysis of the criteria listed above, and propose adjustments as appropriate. Capital Improvement Program & Fund 1. CIP Plan. The City will make all capital improvements in accordance with an adopted capital improvement plan. 2. Annual Review and Update. The City will develop a multi-year plan for capital improvements and update it annually. 3. Maintenance Levels. The City will maintain all capital assets at a level adequate to protect the City’s capital investment and to minimize future maintenance and replacement costs. 4. Costs and Funding Sources. The City Administration will identify estimated costs and potential funding sources for each capital project proposal before it is submitted to the City Council for approval. City Debt 1. Bonded Debt. State law limits general obligation bonded debt used for general purposes to 4% of the reasonable fair cash value of the City’s taxable property. 2. Water and Sewer Debt. State law also limits general obligation bonded debt for water and sewer purposes to 4% of the reasonable fair cash value of property plus any unused portion of the amount available for general purposes. 3. Debt Burden/Capacity. The City combines use of cash on hand with long-term financing to minimize the debt burden and extend the City’s debt capacity for future projects. Formatted: Font: Bold ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 4 4. 4. Bond Ratings. The City will monitor financial, economic and demographic indicators that impact bond ratings and make every effort to assure the highest rating possible. The City will maintain effective communication with bond rating agencies regarding its financial condition, and. The City will follow a policy of full disclosure on every financial report and bond prospectus. 5.4. 6.5. Debt Service. The City limits debt to projects which cannot be reasonably funded over a few years and to terms which are consistent with the useful life of the project being undertaken. 7.6. Rates/Costs. The City seeks the least costly financing option available. All debt commitments are shall be reviewed by the City Treasurer who looks for opportunities to combine bond issues, or for alternative financing methods that will achieve the lowest possible interest rates and issuance costs. 8.7. Type of Debt. The City will explore all options for bonding including special assessment, revenue, other self-supporting bonds, and general obligation bonds. 9.8. The City will maintain effective communication with bond rating agencies regarding its financial condition. The City will follow a policy of full disclosure on every financial report and bond prospectus. 10.9. Interfund Transfers. In order to establish appropriate accountability and accounting consistency, all Interfund transfers are to be approved by the City Council. The Finance Manager will recommend appropriate transfers to the City Council annually in conjunction with the budget process. 11.10. Negative Balances. Balances in overdraft must be addressed within 90 days from the end of each fiscal year. If any overdraft cannot be cleared within 90 days from the end of the fiscal year the City Council will be notified prior to the end of the 90 day period. The plan to address any overdraft that cannot be cleared by the end of the 90 day period must be approved by the City Council. City Investments Formatted: Font: Bold Formatted: Tab stops: Not at 0.38" ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 5 1. Cash Flow Analysis. The City will regularly conduct a cash-flow analysis of all funds. Disbursement, collection, and deposit of all funds will be scheduled to insure ensure maximum cash availability. 2. Pooling. The City will pool cash when possible from several different funds for investment purposes. 3. State Money Management Act. The City will invest City funds in accordance with the State Money Management Act. 4. Contract Banking Services. The City will contract with appropriate financial institutions for a specified, limited period of time. Fees for each service rendered shall be clearly delineated. Reserve Policies General Fund 1. Contingency. The City may will strive to establish and maintain a General Fund contingency reserve General Fund to cover unanticipated expenditures, or to meet unexpected l increases in service delivery costs. This reserve will be established at a level not to exceed one-half of one percent of the general operating fund. 2. Operating Reserve. The City will maintain an operating reserve in the General Fund of at least 5% of annual general General fund Fund revenues as required by Utah Code, Section 10-6-116(4). The minimum 5% and the maximum 25% include amounts reserved in the unassigned, committed, and assigned categories of General Fund fund balance. Beginning in FY2018, revenues permitting, the City will striveset a goal to increase the minimum reserve by an additional 1% per year until the reserve reaches at least 10% of annual General Fund revenues. 3. The City will make funding for employee pay for performance or step increases a budget priority.. Utility Enterprise Funds 3.Unrestricted Net Assets. The minimum required level of unrestricted net assets is 5% of the budgeted revenue of individual enterprise activities budgeted revenue of the upcoming fiscal year. Formatted: Font: Bold Formatted: Font: Bold ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 6 4. 5.4. Unrestricted net assets in the enterprise funds do not have State required minimum or maximum balances. 6.5. Minimum Reserve Standards. The City will establish and maintain the same minimum standards imposed on the General Fund for the utility enterprise funds (Water, Sewer, Storm Sewer and Refuse). The City will also ensure all bond covenants regarding reserves are met. 7.6. The minimum required level of unrestricted net assets is 5% of the individual enterprise activities budgeted revenue of the upcoming fiscal year. 8.7. Reserves Over Set Minimums. The City will allow unrestricted net assets to accumulate to a level greater than 5% to allow for continual improvement and replacement of the existing systems according to a reasonable schedule as needed. Enterprise Funds 9. In any year in which the City Council appropriates funding for employee pay for performance or step increases in the General Fund a proportionate amount of enterprise fund revenue will also be appropriated to pay for performance increases for employees compensated out of enterprise funds. Legislative History: Adopted by Joint Resolution of the Ogden City Council & Mayor on May 2, 1995. Amended on June 13, 2006, June 12, 2007, June 22, 2010, June 21, 2011, June 19, 2012, June 18, 2013, February 24, 2015, March 8, 2016, May 9, 2017. Formatted: Indent: Left: 0.5", No bullets or numbering ---PAGE BREAK--- Page 1 of 1 Ogden City Council Work Session: May 9, 2017 FY2018 FINANCIAL PRINCIPLES Purpose ofWork Session: To Review the Proposed FY2018 Financial Principles Executive Summary The Council will discuss a proposed Joint Resolution establishing the FY2018 Financial Principles. These principles are used to guide financial management and budgetary decisions throughout the fiscal year. Background Each year the Council and Mayor jointly adopt financial principles to guide and direction budgetary and financial management decisions throughout the fiscal year. Prior to FY2015, the Principles were adopted with the budget. Beginning in FY2015, the Council began adopting the Principles prior to receiving the Mayor’s budget as way to provide additional guidance during preparation of the Mayor’s proposed budget. April 18, 2017 The Financial Principles were scheduled for consideration on the Council’s agenda. During the work session prior to the meeting, the Council determined the Principles would be pulled from the agenda and considered at a later date. During the regular meeting the Principles were removed from the common consent agenda as agreed in the work session. Proposal The proposal is to adopt the Joint Resolution adopting the FY2018 Financial Principles. Council Staff Contact: Janene Eller-Smith, (801)629-8165 ---PAGE BREAK--- JOINT RESOLUTION 2017- A JOINT RESOLUTION OF THE OGDEN CITY COUNCIL AND MAYOR MICHAEL P. CALDWELL ESTABLISHING GOVERNING FINANCIAL PRINCIPLES RELATING TO GENERAL FINANCIAL MANAGEMENT, USER FEES, CAPITAL IMPROVEMENTS, DEBT, INVESTMENTS, AND RESERVES. WHEREAS, the City Council and the Mayor are committed to managing the City’s finances in accordance with Utah State law, generally accepted accounting practices, and citizen expectations; and WHEREAS, it is the desire of the City Council and the Mayor to establish general and specific financial principles to govern all City financial practices; and WHEREAS, the adoption of such principles is intended to not only establish general financial policy but also provide city staff with guidance in managing the City’s finances and direction for preparation of the City’s annual budget; NOW, THEREFORE BE IT RESOLVED BY THE OGDEN CITY COUNCIL AND MAYOR MICHAEL P. CALDWELL that the City hereby establishes and adopts the Financial Principals set forth at Attachment A. PASSED AND ADOPTED this day of 2017. ATTEST: Tracy Hansen, City Recorder Marcia L. White, Council Chair ATTEST: Tracy Hansen, City Recorder Michael P. Caldwell, Mayor APPROVED AS TO FORM: LEGAL DATE ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 1 Attachment A OGDEN CITY COUNCIL & MAYOR POLICY FINANCIAL PRINCIPLES General Principles 1. Revenues. The City will project its annual revenues using all available dates to complete the analysis. Conservative estimates will be used to develop the annual budget. 2. Balanced Budget. The City will propose and adopt structurally balanced budgets in all City funds to support and maintain financial sustainability. A structurally balanced budget requires recurring revenues to equal or exceed recurring expenditures. If a structural imbalance occurs, a plan will be developed and implemented to bring the budget back into structural balance. 3. Mayor’s Proposed Budget. When transmitting the proposed budget, the Administration will include a concise narrative affirming the proposed budget is balanced. If the structural balance changes between the proposed and adopted budgets, the Administration will clearly delineate the changes and the proposed results. 4. Non-Recurring Revenues. Non-recurring resources such as proceeds from asset sales, debt refinancing, one-time grants, revenue windfalls, budget savings and similar nonrecurring revenues shall not be used for current or new ongoing operating or program expenses unless necessary to establish structural balance in the General Fund. Appropriate uses of one-time resources include establishing and rebuilding reserves, early retirement of debt, capital expenditures and other non-recurring expenditures. 5. Insufficient Funding Options. If the City’s projected tax base will be insufficient to fund government services at existing levels, the City will do the following: a. Identify and implement cost cutting measures; b. Consider reducing government service levels; c. Consider new or increased user fees; or d. Propose incremental property tax rate increases. 6. Annual Budget Maintenance Expenses. The Annual Budget will fund adequate maintenance and/or replacement of the capital plant and equipment. The City will annually Formatted: Font: Bold Formatted: Font: Bold Formatted: Font: Bold Formatted: Font: Bold ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 2 project its equipment replacement and maintenance needs for at least the next three years and develop and adhere to the maintenance and replacement schedule. 7. Quarterly Report. Not later than 45 days after the end of each quarter, the Administration shall provide quarterly financial reports to the City Council that include the following: a. Actuals to budgeted revenues and expenditures b. Balance sheet for governmental funds c. Fund balance analysis for governmental funds d. Cash balance analysis for proprietary funds These reports are not required to contain notes to the financial statements. Estimates can be included where appropriate. 8. GAAP. The City will maintain financial records consistent with generally accepted accounting principles established for local government entities. 9. Mayor’s Budget Message. The Mayor’s budget message will include a list of issues that may or will have on-going or future financial impacts that require additional consideration or planning. The list of issues should cover all City funds including the Redevelopment Agency and the Municipal Building Authority. 10. Employee Salaries. The City will make funding for employee pay for performance or step increases a budget priority. 11. Strategic Planning. Beginning in FY2018, the City will use a rolling five-year financial model for General Fund budgeting, which will be used to project future budget needs and revenues, thus informing a long-term, sustainable and strategic budgeting process.. User Fees 1. Establishing Fees. The Annual Budget shall include funding for programs which can be reasonably funded by user fees. The Council will establish policy outlining the total cost of the program and, if appropriate, specifying the costs to be offset by a fee. There shall be a rational basis for the percentageestablishing any fee. When establishing these percentagesfees, the City will consider: Formatted: Font: Bold Formatted: Font: (Default) Times New Roman, 12 pt Formatted: Space After: 10 pt, No bullets or numbering, Tab stops: Not at 0.5" Formatted: Indent: Left: 0.38", No bullets or numbering, Tab stops: Not at 0.5" Formatted: Font: Bold ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 3 a. Rates charged by other public and private providers, b. Costs required to change the rate, c. The ability of the users to pay, and d. Other policy considerations whether a fine should serve as a deterrent). 2. Annual Adjustment. The City will adjust evaluate user fee rates annually based on an analysis of the criteria listed above, and propose adjustments as appropriate. Capital Improvement Program & Fund 1. CIP Plan. The City will make all capital improvements in accordance with an adopted capital improvement plan. 2. Annual Review and Update. The City will develop a multi-year plan for capital improvements and update it annually. 3. Maintenance Levels. The City will maintain all capital assets at a level adequate to protect the City’s capital investment and to minimize future maintenance and replacement costs. 4. Costs and Funding Sources. The City Administration will identify estimated costs and potential funding sources for each capital project proposal before it is submitted to the City Council for approval. City Debt 1. Bonded Debt. State law limits general obligation bonded debt used for general purposes to 4% of the reasonable fair cash value of the City’s taxable property. 2. Water and Sewer Debt. State law also limits general obligation bonded debt for water and sewer purposes to 4% of the reasonable fair cash value of property plus any unused portion of the amount available for general purposes. 3. Debt Burden/Capacity. The City combines use of cash on hand with long-term financing to minimize the debt burden and extend the City’s debt capacity for future projects. Formatted: Font: Bold ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 4 4. 4. Bond Ratings. The City will monitor financial, economic and demographic indicators that impact bond ratings and make every effort to assure the highest rating possible. The City will maintain effective communication with bond rating agencies regarding its financial condition, and. The City will follow a policy of full disclosure on every financial report and bond prospectus. 5.4. 6.5. Debt Service. The City limits debt to projects which cannot be reasonably funded over a few years and to terms which are consistent with the useful life of the project being undertaken. 7.6. Rates/Costs. The City seeks the least costly financing option available. All debt commitments are shall be reviewed by the City Treasurer who looks for opportunities to combine bond issues, or for alternative financing methods that will achieve the lowest possible interest rates and issuance costs. 8.7. Type of Debt. The City will explore all options for bonding including special assessment, revenue, other self-supporting bonds, and general obligation bonds. 9.8. The City will maintain effective communication with bond rating agencies regarding its financial condition. The City will follow a policy of full disclosure on every financial report and bond prospectus. 10.9. Interfund Transfers. In order to establish appropriate accountability and accounting consistency, all Interfund transfers are to be approved by the City Council. The Finance Manager will recommend appropriate transfers to the City Council annually in conjunction with the budget process. 11.10. Negative Balances. Balances in overdraft must be addressed within 90 days from the end of each fiscal year. If any overdraft cannot be cleared within 90 days from the end of the fiscal year the City Council will be notified prior to the end of the 90 day period. The plan to address any overdraft that cannot be cleared by the end of the 90 day period must be approved by the City Council. City Investments Formatted: Font: Bold Formatted: Tab stops: Not at 0.38" ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 5 1. Cash Flow Analysis. The City will regularly conduct a cash-flow analysis of all funds. Disbursement, collection, and deposit of all funds will be scheduled to insure ensure maximum cash availability. 2. Pooling. The City will pool cash when possible from several different funds for investment purposes. 3. State Money Management Act. The City will invest City funds in accordance with the State Money Management Act. 4. Contract Banking Services. The City will contract with appropriate financial institutions for a specified, limited period of time. Fees for each service rendered shall be clearly delineated. Reserve Policies General Fund 1. Contingency. The City may will strive to establish and maintain a General Fund contingency reserve General Fund to cover unanticipated expenditures, or to meet unexpected l increases in service delivery costs. This reserve will be established at a level not to exceed one-half of one percent of the general operating fund. 2. Operating Reserve. The City will maintain an operating reserve in the General Fund of at least 5% of annual general General fund Fund revenues as required by Utah Code, Section 10-6-116(4). The minimum 5% and the maximum 25% include amounts reserved in the unassigned, committed, and assigned categories of General Fund fund balance. Beginning in FY2018, revenues permitting, the City will striveset a goal to increase the minimum reserve by an additional 1% per year until the reserve reaches at least 10% of annual General Fund revenues. 3. The City will make funding for employee pay for performance or step increases a budget priority.. Utility Enterprise Funds 3.Unrestricted Net Assets. The minimum required level of unrestricted net assets is 5% of the budgeted revenue of individual enterprise activities budgeted revenue of the upcoming fiscal year. Formatted: Font: Bold Formatted: Font: Bold ---PAGE BREAK--- Attachment A – Financial Principles FY2017F2018 6 4. 5.4. Unrestricted net assets in the enterprise funds do not have State required minimum or maximum balances. 6.5. Minimum Reserve Standards. The City will establish and maintain the same minimum standards imposed on the General Fund for the utility enterprise funds (Water, Sewer, Storm Sewer and Refuse). The City will also ensure all bond covenants regarding reserves are met. 7.6. The minimum required level of unrestricted net assets is 5% of the individual enterprise activities budgeted revenue of the upcoming fiscal year. 8.7. Reserves Over Set Minimums. The City will allow unrestricted net assets to accumulate to a level greater than 5% to allow for continual improvement and replacement of the existing systems according to a reasonable schedule as needed. Enterprise Funds 9. In any year in which the City Council appropriates funding for employee pay for performance or step increases in the General Fund a proportionate amount of enterprise fund revenue will also be appropriated to pay for performance increases for employees compensated out of enterprise funds. Legislative History: Adopted by Joint Resolution of the Ogden City Council & Mayor on May 2, 1995. Amended on June 13, 2006, June 12, 2007, June 22, 2010, June 21, 2011, June 19, 2012, June 18, 2013, February 24, 2015, March 8, 2016, May 16, 2017. Formatted: Indent: Left: 0.5", No bullets or numbering ---PAGE BREAK--- 4 ---PAGE BREAK--- Attachment A – Financial Principles F2018 1 Attachment A JOINT OGDEN CITY COUNCIL & MAYOR POLICY FINANCIAL PRINCIPLES General Principles 1. Revenues. The City will project its annual revenues using all available dates to complete the analysis. Conservative estimates will be used to develop the annual budget. 2. Balanced Budget. The City will propose and adopt structurally balanced budgets in all City funds to support and maintain financial sustainability. A structurally balanced budget requires recurring revenues to equal or exceed recurring expenditures. If a structural imbalance occurs, a plan will be developed and implemented to bring the budget back into structural balance. 3. Mayor’s Proposed Budget. When transmitting the proposed budget, the Administration will include a concise narrative affirming the proposed budget is balanced. If the structural balance changes between the proposed and adopted budgets, the Administration will clearly delineate the changes and the proposed results. 4. Non-Recurring Revenues. Non-recurring resources such as proceeds from asset sales, debt refinancing, one-time grants, revenue windfalls, budget savings and similar nonrecurring revenues shall not be used for current or new ongoing operating or program expenses unless necessary to establish structural balance in the General Fund. Appropriate uses of one-time resources include establishing and rebuilding reserves, early retirement of debt, capital expenditures and other non-recurring expenditures. 5. Insufficient Funding Options. If the City’s projected tax base will be insufficient to fund government services at existing levels, the City will do the following: a. Identify and implement cost cutting measures; b. Consider reducing government service levels; c. Consider new or increased user fees; or d. Propose incremental property tax rate increases. 6. Annual Budget Maintenance Expenses. The Annual Budget will fund adequate maintenance and/or replacement of the capital plant and equipment. The City will annually ---PAGE BREAK--- Attachment A – Financial Principles F2018 2 project its equipment replacement and maintenance needs for at least the next three years and develop and adhere to the maintenance and replacement schedule. 7. Quarterly Report. Not later than 45 days after the end of each quarter, the Administration shall provide quarterly financial reports to the City Council that include the following: a. Actuals to budgeted revenues and expenditures b. Balance sheet for governmental funds c. Fund balance analysis for governmental funds d. Cash balance analysis for proprietary funds These reports are not required to contain notes to the financial statements. Estimates can be included where appropriate. 8. GAAP. The City will maintain financial records consistent with generally accepted accounting principles established for local government entities. 9. Mayor’s Budget Message. The Mayor’s budget message will include a list of issues that may or will have on-going or future financial impacts that require additional consideration or planning. The list of issues should cover all City funds including the Redevelopment Agency and the Municipal Building Authority. 10. Employee Salaries. The City will make funding for employee pay for performance or step increases a budget priority. 11. Strategic Planning. Beginning in FY2018, the City will use a rolling five-year financial model for General Fund budgeting, which will be used to project future budget needs and revenues, thus informing a long-term, sustainable and strategic budgeting process. User Fees 1. Establishing Fees. The Annual Budget shall include funding for programs which can be reasonably funded by user fees. The Council will establish policy outlining the total cost of the program and, if appropriate, specifying the costs to be offset by a fee. There shall be a rational basis for establishing any fee. When establishing fees, the City will consider: a. Rates charged by other public and private providers, b. Costs required to change the rate, c. The ability of the users to pay, and d. Other policy considerations whether a fine should serve as a deterrent). ---PAGE BREAK--- Attachment A – Financial Principles F2018 3 2. Annual Adjustment. The City will evaluate user fee rates annually based on an analysis of the criteria listed above, and propose adjustments as appropriate. Capital Improvement Program & Fund 1. CIP Plan. The City will make all capital improvements in accordance with an adopted capital improvement plan. 2. Annual Review and Update. The City will develop a multi-year plan for capital improvements and update it annually. 3. Maintenance Levels. The City will maintain all capital assets at a level adequate to protect the City’s capital investment and to minimize future maintenance and replacement costs. 4. Costs and Funding Sources. The City Administration will identify estimated costs and potential funding sources for each capital project proposal before it is submitted to the City Council for approval. City Debt 1. Bonded Debt. State law limits general obligation bonded debt used for general purposes to 4% of the reasonable fair cash value of the City’s taxable property. 2. Water and Sewer Debt. State law also limits general obligation bonded debt for water and sewer purposes to 4% of the reasonable fair cash value of property plus any unused portion of the amount available for general purposes. 3. Debt Burden/Capacity. The City combines use of cash on hand with long-term financing to minimize the debt burden and extend the City’s debt capacity for future projects. 4. Bond Ratings. The City will monitor financial, economic and demographic indicators that impact bond ratings and make every effort to assure the highest rating possible. The City will maintain effective communication with bond rating agencies regarding its financial condition and will follow a policy of full disclosure on every financial report and bond prospectus. ---PAGE BREAK--- Attachment A – Financial Principles F2018 4 5. Debt Service. The City limits debt to projects which cannot be reasonably funded over a few years and to terms which are consistent with the useful life of the project being undertaken. 6. Rates/Costs. The City will seek the least costly financing option available. All debt commitments shall be reviewed by the City Treasurer who looks for opportunities to combine bond issues, or for alternative financing methods that will achieve the lowest possible interest rates and issuance costs. 7. Type of Debt. The City will explore all options for bonding including special assessment, revenue, other self-supporting bonds, and general obligation bonds. 8. Interfund Transfers. In order to establish appropriate accountability and accounting consistency, all Interfund transfers are to be approved by the City Council. The Finance Manager will recommend appropriate transfers to the City Council annually in conjunction with the budget process. 9. Negative Balances. Balances in overdraft must be addressed within 90 days from the end of each fiscal year. If any overdraft cannot be cleared within 90 days from the end of the fiscal year the City Council will be notified prior to the end of the 90-day period. The plan to address any overdraft that cannot be cleared by the end of the 90-day period must be approved by the City Council. City Investments 1. Cash Flow Analysis. The City will regularly conduct a cash-flow analysis of all funds. Disbursement, collection, and deposit of all funds will be scheduled to ensure maximum cash availability. 2. Pooling. The City will pool cash when possible from several different funds for investment purposes. 3. State Money Management Act. The City will invest City funds in accordance with the State Money Management Act. 4. Contract Banking Services. The City will contract with appropriate financial institutions for a specified, limited period of time. Fees for each service rendered shall be clearly delineated. ---PAGE BREAK--- Attachment A – Financial Principles F2018 5 Reserve Policies General Fund 1. Contingency. The City will strive to establish and maintain a General Fund contingency reserve to cover unanticipated expenditures or to meet unexpected increases in service delivery costs. This reserve will be established at a level not to exceed one-half of one percent of the general operating fund. 2. Operating Reserve. The City will maintain an operating reserve in the General Fund of at least and not greater than 25% of annual General Fund revenues as required by Utah Code, Section 10-6-116(4). The minimum 5% and the maximum 25% include amounts reserved in the unassigned, committed, and assigned categories of General Fund fund balance. Beginning in FY2018, revenues permitting, the City will set a goal to increase the minimum reserve by an additional 1% per year until the reserve reaches at least 10% of annual General Fund revenues. Utility Enterprise Funds 3. Unrestricted Net Assets. The minimum required level of unrestricted net assets is 5% of the budgeted revenue of the individual enterprise activities for the upcoming fiscal year. Unrestricted net assets in the enterprise funds do not have State required minimum or maximum balances. 4. Minimum Reserve Standards. The City will establish and maintain the same minimum standards imposed on the General Fund for the utility enterprise funds (Water, Sewer, Storm Sewer and Refuse). The City will also ensure all bond covenants regarding reserves are met. 5. Reserves Over Set Minimums. The City will allow unrestricted net assets to accumulate to a level greater than 5% to allow for continual improvement and replacement of the existing systems according to a reasonable schedule as needed. Legislative History: Adopted by Joint Resolution of the Ogden City Council & Mayor on May 2, 1995. Amended on June 13, 2006, June 12, 2007, June 22, 2010, June 21, 2011, June 19, 2012, June 18, 2013, February 24, 2015, March 8, 2016, May 16, 2017.