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Agenda Item 7.

City Council Meeting

Meeting Date:	10/18/2022
FROM:	Bill Gallardo

Subject:

Reserve Fund Transparency Ordinance Discussion

RECOMMENDATION

Council to discuss and provide staff direction

BACKGROUND/DISCUSSION

Mayor Pro Tem Parker has brought forth a proposal to strengthen transparency on the use of City Reserves by the adoption of an Ordinance. (Attached)

Reserves can be simply defined as the “savings account” within the various City funds. The savings are the result of revenues exceeding expenditures and the surplus each year remains within the respective fund as reserves. The General Fund, by Council policy direction, maintains a 25% minimum reserve fund (Savings) of annual operating expenses in case of extreme need or hardship. The City has on occasion obligated reserves in various funds to complete specific capital improvement projects. For example, funds from Fund 130 Community Benefit Economic Development Fund (CBED), have been set-aside each year with its intended purpose to be used for the completion of “legacy projects”. The Council earlier this year transferred funds from CBED to begin the long-awaited improvements to Arovista Park.

In 2009, during the great recession reserves were used to maintain city operations and a small amount of reserves were used during the onset of the Covid-19 pandemic. The use of these reserves was all done with the knowledge and support of the City Council.

The proposal as presented would do several things if a project or operations required the use of reserves outside established programs.

For example using Fund 182 Fixed Asset Replacement Funds (FARP) for completion of a Fund 420 Water Utility Project would require a process as described below. If FARP used its own funds or reserves to complete a project within the FARP program no extra measures or process would be required.

Recommended process would be as follows:

• Require a City Council resolution acknowledging the use of reserves for an identified purpose.

• Indicate in the resolution if the Council’s intention is to pay back or replenish the fund, staff will come back within 60 days with a plan for repayment.

• If the intended purpose or their use does not need to be repaid or returned to the fund that statement must be in the adopting resolution.

• Nothing shall prohibit the Councils from changing the terms of repayment or no longer requiring the funds to be repaid.

• If repayment has been authorized the obligation shall be noted in the City’s financial statements.

SUMMARY
In the FY 2022-23 Adopted Budget, staff enhanced the wording in the fiscal policies section of the budget to account for the use of any future reserves (attached); however, the effect of placing this into an ordinance elevates it awareness to public and community. Staff is not opposed to this change, as previously identified, seldom do we use reserves for expenses outside its intended purpose or program.

RESPECTFULLY SUBMITTED:

William Gallardo, City Manager

Attachments
Submitted by Mayor Pro Tem Glenn Parker
Excerpt from Fiscal Policies Statement