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Introduce Ordinance No. 1235 regarding Reserve Fund Transparency and Amending the Brea City Code Chapter 2.00 of Title 2 by adding Section 2.00.140
Introduce Ordinance No. 1235 regarding Reserve Fund Transparence and Amending the Brea City Code Chapter 2.00 of Title 2 by adding Section 2.00.140, by title only, and waive further reading.
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 City 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 City 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 serve if a project or operations required the use of reserves outside established programs.
For example, using Fund 182 Fixed Asset Replacement Funds (FARP) for the 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.
The 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 City 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 City Council from changing the terms of repayment or no longer requiring the funds to be repaid
There is no fiscal impact on the General Fund.
William Gallardo, City Manager
Prepared by: Yerika Ambriz, Management Analyst
Concurrence: Kristin Griffith, Administrative Services Director
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