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HomeMy WebLinkAbout1991 11-12 FTFA• MEETING NOTICE FINANCIAL TASK FORCE TUESDAY, NOVEMBER 12, 1991 7 P.M. CITY COUNCIL CHAMBERS BROOKLYN CENTER CITY HALL 1. 1992 City Manager's Proposed Budget 2. Proposed Financial Management Policies ENCLOSURES: Minutes of October 28, 1991, meeting Proposed Financial Management Policies 0 ,..+uarscs~ :r • (AMEMOI ) DEPARTMENT OF FINANCE TO: Chair and Members of the Brooklyn Center Financial Task Force Gerald G. Splinter, City Manager FROM: Director of Finance DATE: November 6, 1991 SUBJECT: PROPOSED FINANCIAL MANAGEMENT POLICIES I have attached a draft of the Proposed Financial Management Policies for the City of Brooklyn Center: You may recall that Mr. Cliff Hoffman from Deloitte and Touche, the City's independent auditors, suggested to the Financial Task Force that the City staff develop the policies for City Council approval. As noted, this is a draft version that staff has developed. We would like to discuss it with the Task Force, fine tune it, and then submit it to the City Council. Any suggestions that you may have for improvement will be welcomed. We will be discussing these policies at our next meeting. Paul W. Holmlund 0 • DRAFT City of BROOKLYN CENTER, MINNESOTA PROPOSED FINANCIAL MANAGEMENT POLICIES 1. PURPOSE The City of Brooklyn Center has a responsibility to its citizens to carefully account for public funds, to manage municipal finances wisely, and to plan the adequate funding of services desired by the public, including the provision and maintenance of public facilities. The City must ensure that it is capable of adequately funding and providing local government services needed by the community. Further, the financial policies set forth herein, provide the basic framework for the overall fiscal management of the City. Operating independently of changing circumstances and conditions, these policies assist the decision making process of the City Council and Administration. Most of the policies represent long standing principles, traditions and practices which have guided the City in the past and have helped maintain financial stability over the past years. These financial policies will be reviewed periodically to ascertain if modifications are necessary. H. OBJECTIVES In order to achieve this purpose, this plan has the following objectives for the City's fiscal performance: 1. To protect the City Council's policy-making ability by ensuring that important policy decisions are not controlled by financial problems or emergencies. 2. To enhance the City Council's policy-making ability by providing accurate information on program costs. 3. To assist sound management of the City government by providing accurate and timely information on financial condition. 4. To provide sound principles to guide the important decisions of the City Council and of management which have significant fiscal impact. • 5. To set forth operational principles which minimize the cost of local government, to the extent consistent with services desired by the public and which minimize financial risk. November 6, 1991 -1- • DRAFT 6. To employ revenue policies which prevent undue or unbalanced reliance on certain revenues, especially property taxes; which distribute the costs of municipal services fairly; and which provide adequate funds to operate desired program. 7. To provide essential public facilities and prevent deterioration of the City's public facilities and its capital plant. 8. To protect and enhance the City's credit rating and prevent default on any municipal debts. 9. To ensure the legal use and protection of all City funds through a quality system of financial and internal controls. 10. The City Will maintain a Risk Management Program that will minimize the impact of legal liabilities, natural disasters or other emergencies. III. FINANCIAL MANAGEMENT POLICIES 14. CapItalIinpzrovemeta.- etPeaficies • 1. The City will make all capital improvements in accordance with an adopted Capital Improvement Budget. 2. The City will develop a multi-year plan for capital improvements and update it at least biannually. 3. The City will enact an annual Capital Budget based on the multi-year capital improvement plan. Future capital expenditures necessitated by changes in population, changes in real estate development, or changes in economic base will be calculated and included in Capital Budget projections. 4. The City will coordinate development of the Capital Improvement Budget with the development of the operating budget. Future operating costs associated with new capital improvements will be projected and included in operating budget forecasts. 5. The City will use the intergovernmental assistance to finance only those capital improvements which are consistent with the adopted capital improvement plan and City priorities, and for which operating and maintenance costs have been included in operating budget forecasts. 6. The City will project its equipment replacement and maintenance needs for the next several years and will update this projection each year. From this projection, i a maintenance and replacement schedule will be developed and followed. November 6, 1991 -2- • DRAFT 7. The City staff will identify the estimated costs and potential funding sources for each capital project proposal before it is submitted to the City Council for approval. 8. The City will determine the least costly financing method aver the length of all new projects. Revenue P6106i 1. The City will attempt to maintain a diversified and stable revenue system to shelter it from short-run fluctuations in any one revenue source. 2. The City will estimate its annual revenue by an objective conservative analytical process. 3. The City will project revenues for the next three years and will update this projection annually. Each existing and potential revenue source will be reexamined annually. 4. The City will maintain sound appraisal procedures to keep property values correct. • Property will be assessed at the legally mandated market value for each type of property. Reassessments will be made of all property at least every four years. 5. The City will follow an aggressive policy of collecting property tax revenues. The annual level of uncollected property taxes should generally not exceed two percent. 6. Each year the City will recalculate the full costs of activities supported by user fees to identify the impact of inflation and other cost increases. 7. The City will establish user charges and fees at a level related to the full cost of providing the service including indirect costs. 8. The City staff will recommend revised user fees with review by the City Council on an annual basis, to adjust for the effects of inflation on the City's cost of providing services. 9. The City will set fees and user charges for each Enterprise Fund, such as Water and Sewer, at a level which fully supports the total direct and indirect costs of the activity. Indirect costs include the cost of annual depreciation of capital assets. 10. The City will set fees and user charges for other activities, such as recreational services, at a level to support the direct costs of providing the services for all programs except those oriented to the youth and/or senior citizen population. November 6, 1991 -3- . DRAFT C Debt Policres 1. The City will confine long-term borrowing to capital improvements or projects which cannot be financed from current revenues. 2. When the City finances capital projects by issuing bonds, it will pay back the bonds within a period not to exceed the expected useful life of the project. 3. On all projects, at least 50% of the principal shall be retired within ten years. 4. The City will attempt to keep the average maturity of General Obligation Bonds at or below 20 years. - 5. Total debt service for General Obligation debt will not exceed five percent of total annual locally generated operating revenue in the general, special revenue, and proprietary funds. 6. Total General Obligation debt will not exceed two percent of the market valuation of taxable property. 7. Where possible, the City will use special assessment, revenue or other self- supporting bonds instead of General Obligation Bonds. 8. The City will not incur debt to support current operations. 9. The City will maintain good communications with bond rating agencies regarding its financial condition. The City will follow a policy of full disclosure in every financial report and bond prospectus. 10. Direct net-debt (gross debt less debt fully supported by revenues) per capita shall not exceed $600 per capita. D Reserve Policies 1. The City will maintain an undesignated and unreserved General Fund balance in an amount determined by applying the Adequate General Fund Balance Policy Formula as established by the City Council. The formula shall be reviewed annually by the City Council. The formula shall be designed to establish a fund balance at a level which is sufficient to avoid issuing debt to meet current operating needs. 2. The City will annually appropriate a contingency appropriation in the General Fund budget, not to exceed five percent of the total budget, to provide for unanticipated expenditures of a non-recurring nature. November 6, 1991 -4- I • DRAFT 3. If the City Council deems it appropriate to reduce fund balances for the portion above the formula amount, such reductions shall not exceed 50% of the excess for one year. E Investment Policies:.... . 1. The City will make cash flow analysis of all funds on a regular basis. Disbursement, collection and deposit of all funds will be scheduled to insure maximum cash availability. 2. When permitted by law, the City will pool cash from several different funds for investment purposes. 3. The City will invest at least 98 percent of its idle cash on a continuous basis. 4. The City will analyze market conditions and investment securities to determine what yield can be obtained, and attempt to secure the best possible return on all cash investments. 5. The City's accounting system will provide regular information concerning cash • position and investment performance. 6. The City will maintain a formal written investment policy which will contain legal and administrative guidelines necessary to ensure that the City's available funds will be invested to the maximum extent possible, at the highest rates obtainable at the time of the investment, consistent with minimizing credit and market risk. 7. The City shall have no significant investment balances in GASB 3 credit risk category. Accounm&'fl ' iiS and Financial ReP~jqgPolicies 1. The City will establish and maintain a high standard of accounting practices. 2. The accounting system will maintain records on a basis consistent with accepted standards for local government accounting using a modified accrual basis of accounting for all governmental funds and an accrual basis of accounting for Enterprise and Internal Service Funds. Accounting policies will reflect the principle of charging current taxpayers and/or users for the full cost of providing current services. 3. Regular monthly and annual financial reports will present a summary of financial activity by major types of funds. November 6, 1991 -5- . DRAFT 4. Where possible, the reporting system will provide monthly information on the total cost of specified services by type of expenditure and, if necessary, by fund. 5. An independent public accounting firm will perform an annual audit and will publicly issue an opinion concerning the City's finances. G Risk Management. Policies 1. The City Will maintain a Risk Management Program that will minimize the impact of legal liabilities, natural disasters or other emergencies through the following activities: ■ Loss Prevention - Prevent negative occurrences. ■ Loss Control - Reduce or mitigate expenses of a negative occurrence. ■ Loss Financing - Provide a means to finance losses. ■ Loss Information Management - Collect and analyze relevant data to make prudent loss prevention, lass control and loss financing decisions. 2. The City's Risk Management Program will: a. Analyze all of the City's risks. b. Avoid risks whenever possible. c. Reduce risks whenever possible. d. Transfer risks to other entities when possible. e. Of those risks that must be retained, it shall be the City's policy to fund risks which the City can afford and transfer all other risks to insurers. 3. The City will maintain an active Safety Committee comprised of City employees. 4. The City will periodically conduct educational safety and risk avoidance programs, through its Safety Committee and with the participation of its insurers, within its various departments. 5. The Safety Committee will report to the City Manager, at least annually, on the results and costs of the City's Risk Management Program for the preceding year. The City Manager shall report annually to the City Council. H . Operating Budget Policies 1. The City will pay for all current expenditures with current revenues. The City will avoid budgetary procedures that balance current expenditures at the expense of meeting future year's revenues, or rolling over short-term debt, or that rely on accumulated fund balances to meet current obligations. 2. The budget will provide for adequate maintenance of the capital plant and . equipment, and for their orderly replacement. November 6, 1991 -6- 0 3. The budget will provide for adequate funding of all retirement systems. DRAFT 4. The City will maintain a budgetary control system to assist in adhering to the budget. 5. The City administration will prepare regular monthly reports comparing actual revenues and expenditures to the budgeted amount. 6. Each year the City will update expenditure projections for its Enterprise Funds for the next three years. Projections will include estimated operating costs of future capital improvements included in the Capital Budget. 7. The Operating Budget will describe the major goals to be achieved, and the services and programs to be delivered for the level of funding provided. 8. Where possible, the City will integrate performance measurement and productivity indicators with the budget. 9. Enterprise funds shall be budgeted to have positive net income plus a sufficient margin to provide for replacement cost of property, plant, and equipment. I. ! Ethics Pottcy_ The City will maintain, and periodically review, a formal written ethics policy for all City employees and elected officials. J Roie of Auditors The City's independent auditors should be required, in the course of their audit, in the form of their management letter, to report any conditions that appear to be violations of our financial management policy. • November 6, 1991 -7-