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HomeMy WebLinkAbout2004 02-19 FCAAGENDA Brooklyn Center Financial Commission Thursday, 19 February 2004 ` 7:00 PM Council Commission Conference Room 1. Call to Order II. Roll Call III. Approval of Agenda IV. Meeting Minutes 0 20 October 2003 17 November 2003 V. Election of Chairperson for 2004 Chairperson shall appoint Vice Chairperson VI. Welcome and Orientation of New Members VII. Discussion of process to Review Council Compensation VIII. Other Business IX. Adjournment • • AGENDA Brooklyn Center Financial Commission Thursday, 19 February 2004 7:00 PM Council Commission Conference Room I. Call to Order II. Roll Call III. Approval of Agenda • IV. Meeting Minutes 20 October 2003 17 November 2003 V. Election of Chairperson for 2004 Chairperson shall appoint Vice Chairperson VI. Welcome and Orientation of New Members VII. Discussion of Process to Review Council Compensation VIII. Other Business IX. Adjournment • I • I Financial Commission Work Session Meeting Minutes 20 October 2003 1. Call to Order The meeting was called to order at 6:40 PM (This is a joint work session with the Brooklyn Center City Council) 2. Roll Call Members Present: Commissioners Blarney, Hruska, Elftman and Wilkinson Others Present: City Manager Michael McCauley and Assistant City Manager Curt Boganey 3. Utilities • City Manager McCauley discussed the 2003 — 2007 utility rate study. Rate increases were revised to lower levels in this study requiring a revision of budgeted revenues after higher rates were used in the draft budget. 4. Enterprise Funds (non-utility) City Manager McCauley discussed the budgets for Centerbrook and the Earle Brown Heritage Center. In addition, members were informed that a pro-forma for a second liquor store would be included in the 2004 budget. 5. Adjournment The joint work session was adjourned at 8:10 PM • • Financial Commission Work Session Meeting Minutes November 17, 2003 1. Call to Order The meeting was called to order by Chair Escher at 6:30 PM (This is a joint work session with the Brooklyn Center City Council) 2. Roll Call Members Present: Chair Escher, Commissioners Hruska, Elftman and Nemec Others Present: City Manager Michael McCauley and Assistant City Manager/Acting Fiscal and Support Services Director Curt Boganey 3. Budget Review City Manager McCauley provided updated information regarding the 2004 budget and the process. Major changes since the 18 August 2003 review were • staffing reductions increasing from five to six full time positions • an additional $ 25,000 proposed for technology needs • • wage increases of 2% at 1 January 2004 followed by a 1% additional increase at 1 July 2004 • contribution increase of $ 75 to the cafeteria plan per employee • addition of $ 5,000 for deer management • funding of 26 patrol officers • elimination of low housing aid • street maintenance increases to cover use of a mechanic for snow plowing and larger amounts of seal coating following larger street reconstruction projects • contingency of $ 13,526 The capital Improvements Program for 2004 through 2008 was also discussed by Mr. McCauley. 4. Adjournment The work session meeting adjourned at 8:17 PM. • Memorandum Date: 11 February 2004 To: Financial Commission From: Daniel Jordet Director of Fiscal & Support Services Re: Background for Agenda Items 19 February 2004 Item V. Election of Chairperson The Chairperson is elected by the Commission at the first meeting of each year, as indicated on page 4 of the Financial Commission Documents attachment. The Chairperson then appoints a Vice Chairperson. Council Member Kathleen Carmody will be serving as City Council Liaison in • 2004. As the newly appointed Director of Fiscal & Support Services, I will be serving you as staff support person. Item VI. Welcome and Orientation of New Members The Financial Commission Documents attachment will serve to familiarize new members with some of the guiding principle and policies of the Financial Commission and of the City of Brooklyn Center. If you have any questions about these materials please contact me at either djordet©ci.brooklyn-center.mn.us or call me at 763/569-3345. Item VII. Discussion of Process to Review Council Compensation The Financial Commission reviews the compensation of the City Council every two years. 2004 is a year to be engaged in this process. A discussion on the parameters of this review will be discussed at this time. cc: City Manager McCauley • I City of Brooklyn Center Financial Commission Documents i Document Page Roster of Appointed Members 1 Enabling Resolution of the City Council 3 Financial Management Policies 7 Fund Balance Policy 15 BROOKLYN CENTER FINANCIAL COMMISSION Chairperson and six members • Do Escher, Chairperson Mark N ec 310 th Avenue North 5538 Cam en Avenue North Brookl Center,MN 55429 Brooklyn Cnter, MN 55430 nickie73 CcuttcaS1-. ✓e Mark.NemecC State.MN.US (763) 561-4 3 (763) 566-1415`0); (651) 297-1944 Appointed: 7/1 /92 Appointed: 6/149 Appointed Chair..,8/17/92 Term expires: 12/4/06 Term expires: 12/ I/05 \ \ \\\ \ Lawrence Peterson \ Timothy Elftmann5830 June Avenue North \ 301 Howe Lane \ ooklyn Center,MN 55 9 ooklyn Center,MN 55429 L P • ' T' I ann@Compuserve.com` (763),537-7022 (h); (612) 87 727 (w) (763 537-2279 Appoh4ed: 10/25/93 Appoted: 7/13/98 Term ex4res: 12/31/04 Term ex Tres: 12/31/05 \ Susan Shogren Smith Jay Hruska ` > 600 62nd Avenue North •5012 North L �ac Drive Brooklyn Center, MN 55430 Brooklyn Centec,MN 55429 E-MAIL: �75,/,.At .St--tk-isu. S,au • 'hruska@visi.co (763) 566-5927 63) 535-4637 Appointed: 1/26/04 A ointed: 3/13/95 Term expires: 12/31/05 Te expires: 12/31/ Robert"lylilne 6824 Be rd Avenue North '`, Brooklyn Center,MN 55429' E-MAIL: \\ (763) 561-3( 3 Appointed: 1 6/04 Term expires: /31/05 2004 City Cuncil Liaison Kathleen Carmody(h) (763) 566-3114 counatmembercarmody@ci.brooklyn-center.mn.us City Manager Michael McCauley(w) (763) 569-3309 mmccaul @ci.brooklyn-center.mn.us Director of Fiscal d Support Services Dan Jordet(w) (763) 569-3345 djordet@ci.b' oklyn-center.mn.us • 1 [January 27,2004] • This page has been left blank intentionally. • 2 • RESOLUTION NO. 91-115 RESOLUTION NO. 92-99 RESOLUTION NO. 92-168 RESOLUTION NO. 95-78 RESOLUTION NO. 98-13 RESOLUTION NO. 99-110 RESOLUTION ESTABLISHING A BROOKLYN CENTER FINANCIAL COMMISSION AND DEFINING DUTIES AND RESPONSIBILITIES WHEREAS,the Brooklyn Center City Council established by Resolution Nos. 91- 115 and 92-99 an ad hoc task force for the express purpose of reviewing the fiscal impacts of State of Minnesota budgetary problems on Brooklyn Center and assisting the City Council in formulating priorities and responses to a limited fiscal resource situation; and WHEREAS,on June 22, 1992,the ad hoc City Financial Task Force presented to the City Council a report entitled"General Fund Budget Prioritization Process"which was accepted by the City Council; and WHEREAS, there is an ongoing need to formulate priorities and responses to continuing limited fiscal resources. NOW,THEREFORE,BE IT RESOLVED by the Brooklyn Center City Council that • there is hereby established within the City of Brooklyn Center an advisory Financial Commission as follows: Subdivision 1. TITLE: This organization shall be known as the Brooklyn Center Financial Commission. Subdivision 2. SCOPE: The scope of activity of this Commission shall consist of advising the City Council regarding matters relevant to the City's financial status. Subdivision 3. PURPOSE:The Commission shall serve as an advisory body to assist the City Council in evaluating and developing fiscal policies, fiscal procedures, Mayor and Council Member total compensation,budgetary and capital matters,and such other issues as may be assigned to the Commission by the City Council or referred to it by the City Manager. The Commission may also identify and recommend to the City Council issues and matters for Commission and/or staff review. Subdivision 4. COMPOSITION: The Commission shall be composed of a chairperson and six(6) members, all of whom shall be appointed and serve as set forth in Subdivision 5. Subdivision 5. MEMBERS METHOD OF SELECTION• TERM OF OFFICE• REMOVAL: • 3 Chairperson: The Chairperson shall be elected by majority vote of the Financial Commission membership. The election shall be conducted at the Financial Commission's first regular meeting of the calendar year,or in the case of a vacancy, within two regularly scheduled Financial Commission meetings from the time a vacancy of the chair occurs. The Chairperson may be removed by majority vote of the Financial Commission membership. The Chairperson shall assure fulfillment of the following responsibilities in addition to those otherwise described herein: 1. Preside over meetings of the Commission; 2. Appear or appoint a representative to appear, as necessary, before the City Council to present the viewpoint of the Commission in matters relevant to the City's financial status as it relates to business under consideration by the City Council; 3. Review all official minutes of the City Council and other advisory commissions for the purpose of informing the Financial Commission of matters relevant to city finances. Vice Chairperson: A Vice Chairperson shall be appointed annually by the Chairperson from the members of the Commission. The Vice Chairperson shall perform such duties as may be assigned by the Chairperson and shall assume the responsibilities of the chair in the absence of the Chairperson. 411 Members' Term of Office: Members of the Commission shall be appointed by the Mayor with majority consent of the Council. The terms of office shall be staggered three-year terms,except that any person appointed to fill a vacancy occurring prior to the expiration of the term for which his or her predecessor was appointed shall be appointed only for the remainder of such term. Upon expiration of his or her term of office, a member shall continue to serve until his or her successor is appointed and shall have qualified. Terms of office for members of the Commission shall expire on December 31 of respective calendar years. In the event an appointed Commissioner suffers from an extended illness,disability, or other activity preventing proper fulfillment of duties, responsibilities, rules and regulations of the Commission,the Commissioner may be temporarily replaced by an interim Commissioner appointed by the Mayor with majority consent of the City Council. Qualifications for Membership: Members of the Commission shall be residents of the City of Brooklyn Center while serving on the Commission and have an interest in the financial operations of the City. 4 Representation Requirements: Members shall be appointed upon the basis of qualification and interest and to reflect a general representation of the diversity of the community. Conflict of Interest: Commissioners shall comply with provisions of the City of Brooklyn Center's business ethics policy. Resignations. Removal from Office• Vacancies: Commissioners may resign voluntarily or may be removed from office by the Mayor with consent by majority vote of the City Council. Three consecutive unexcused absences from the duly called Commission meetings or unexcused absences from a majority of duly called Commission meetings within one calendar year shall constitute automatic resignation from office. The City Council liaison shall inform the Mayor and City Council of such automatic resignations. Vacancies in the Commission shall be filled by Mayoral appointment with majority consent of the City Council. The procedure for filling Commission vacancies is as follows: 1. Notices of vacancies shall be posted for 30 days before any official City Council action is taken; 2. Vacancies shall be announced in the City's official newspaper; • 3. Notices of vacancies shall be sent to all members of standing advisory commissions; 4. Applications for Commission membership must be obtained in the City Clerk's office and must be submitted in writing to the City Clerk; 5. The City Clerk shall forward copies of the applications to the Mayor and City Council; 6. The Mayor shall identify and include the nominee's application form in the City Council agenda materials for the City Council meeting at which the nominee is presented; 7. The City Council, by majority vote,may approve an appointment at the City Council meeting at which the nominee is presented. Compensation: Commissioners shall serve without compensation. Subdivision 6. RULES AND PROCEDURES: The Commission shall adopt such rules and procedures not inconsistent with these provisions as may be necessary for the proper execution and conduct of business. Subdivision 7. MEETINGS: The initial meeting of the Commission shall be 5 convened at the call of the Chairperson within thirty(30)days after appointment by • the Council. Thereafter, regular meetings shall be held with date and time to be determined by the Commission. Special meetings may be called by the Chairperson. Subdivision 8. STAFF: The City Manager shall assign one member of the administrative staff to serve as staff to the Commission. The staff member assigned shall perform such clerical and research duties on behalf of the Commission as may be assigned the City Manager. Subdivision 9. EX OFFICIO MEMBERS: The Mayor, or his or her City Council designee,shall serve as an ex officio member of the Commission,privileged to speak on any matter but without a vote, and shall provide a liaison between the Commission and the City Council. • • 6 CITY OF BROOKLYN CENTER, MINNESOTA O FINANCIAL MANAGEMENT POLICIES Adopted June 8, 1992 I. 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 also has the responsibility to its citizens to provide both short-term and long-term future financial stability. 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. The financial policies will be reviewed periodically to ascertain if modifications are necessary. II. 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 and to prevent financial difficulties. 2. To provide sound principles to guide the important decisions of the City Council and of management which have significant fiscal impact and to enhance the City Council's policy-making ability by providing accurate information on program costs. 3. 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. 4. 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 and assist sound management of the city government by providing • accurate and timely information on financial conditions. 7 5. To provide essential public facilities and prevent deterioration of the City's public • facilities and its capital plant. 6. To protect and enhance the City's credit rating and prevent default on any municipal debts. 7. To ensure the legal use and protection of all City funds through a quality system of financial and internal controls. 8. 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 A. Capital Improvement Budget Policies 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 biennially. • 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 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, a maintenance and replacement schedule will be developed and followed. 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 over the length of all • new projects. 8 • B. Revenue Policies 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 and to minimize property taxes. 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 staff will recommend revised user fees with review by the City Council on an annual bases,to adjust for the effects of inflation on the City's cost of providing services. 8. 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. 9. Whenever user charges and fees are determined to be appropriate for City services,those charges and fees will generally be established at a level which will recover the full cost of providing the service, including administrative costs. C. Debt Policies • 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. 9 S 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. 411 11. The City will require Minimum Assessment(Taxable Valuation)Agreements on all projects in which the City is providing development assistance through tax increment fmancing or committing its bonding authority. This will ensure minimal cash flow(increment)to repay obligations,provide another level of review before commitment(by the City Assessor), and to the minimal value agreed upon, eliminate tax appeals during the agreement period. D. Reserve Policies 1. The City will maintain an undesignated and reserved 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 formulas shall be designed to establish a fund balance at a level which is sufficient to avoid issuing debt to meet current operating needs. 2. 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. • 10 111 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 ensure 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%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 and which provides proper safeguards for the keeping of the City's investments. F. Accounting,Auditing and Financial Reporting Policies 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. 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. • 11 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: a. Loss Prevention. Prevent negative occurrences. b. Loss Control. Reduce or mitigate expenses of a negative occurrence. c. Loss Financing. Provide a means to finance losses. d. Loss Information Management. Collect and analyze relevant data to make prudent loss prevention,loss control and loss financing decisions. 2. The City's Risk Management Program will: • a. Analyze all 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. In accordance with Chapter 7, Section 7.06 of the City Charter,the total sum appropriated in the General Fund annual budget shall be equal to the total estimated General Fund revenue and the allocated General Fund balance. 2. 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. 3. 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 expenditure of a non-recurring nature. • 12 • 4. The City Manager,when submitting the Proposed Budget to the City Council, shall submit a balanced budget in which appropriations shall not exceed the total of the estimated General Fund revenue and the fund balance available after applying the Adequate General Fund Balance Formula. 5. Prior to adopting the General Fund Annual Budget,the City Council shall review the Adequate General Fund Balance Police Formula. 6. In the event that there is a shortfall of revenues in a current year budget,the City Manager may recommend the use of a portion of the General Fund balance not to exceed the amount available after deducting amounts reserved for items not readily convertible to cash or reserved for working capital or already appropriated to the General Fund current budget as shown on he most recent Adequate General Fund Balance Policy Formula as established by the City Council. 7. The budget will provide for adequate maintenance of the capital plant and equipment, and for their orderly replacement. 8. The budget will provide for adequate funding of all retirement systems. 9. The City will maintain a budgetary control system to assist in adhering to the budget. • • 10. The City administration will.prepare regular monthly reports comparing actual revenues and expenditures to the budgeted amount. 11. 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. 12. 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. 13. Where possible,the City will integrate performance measurement and productivity indicators with the budget. 14. 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 Policy The City will maintain,and periodically review,a formal written ethics policy for all City employees and elected officials. • 13 J. Role of Auditors • The City's independent auditors shall 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. • • 14 • City of BROOK-LYN CENTER, MINNESOTA FUND BALANCE POLICY I. PURPOSE • On December 22, 1980, the City Council adopted an "Adequate General Fund Balance Policy Formula" as set forth in M&C No. 80-31. Since State Statutes, the City Charter, or City Ordinances do not regulate the size of a City's General Fund Balance, the purpose of the policy formula is to determine what a reasonable amount should be held by the City's General Fund in reserve and provide a way of measuring that amount on an annual basis. The fund balance is a product of one of two sources: (1) the excess of (or deficiencies of) revenues over expenditures of the Fund, accumulated over the years since the inception of the fund; and (2) permanent transfer of monies from another.Fund. • Certain asset items contained within the fund balance are items which cannot be readily converted to cash and, therefore, must remain in the fund balance. Among these items are taxes receivable, accounts receivable, and inventories of supplies. In addition, monies within the fund balance are needed for, and should be reserved for, other purposes. Among these, is a need for • "working capital." Working capital, simply stated, is funds needed for expenditures which must be made prior to receipt of revenues in forthcoming periods of time. The City has a fairly consistent level of expenditures, particularly payroll (which consists of about 60% of total expenditures), and a rather sporadic pattern of revenue receipts. This combination causes a cash flow problem. The working capital is the bridge over these gaps between expenditures and the receipt of revenue. The primary sources of revenue for the General Fund are local real estate taxes and intergovernmental revenue. Revenue from these sources are usually received on a • semi-annual basis. Major tax settlements are made in July and December, while major expenditures occur in the early part of the budget year. The City must wait approximately six months into the budget year for a large amount of its revenues. If monies are not available • during these periods, the City must resort to tax-anticipation borrowing. Tax-anticipation borrowing is both costly and would be reflected in the City's bond rating. The absence of such borrowing is a positive factor in bond rating.. Therefore, a sufficient amount of working capital is needed to carry the City through these periods. The current formula sets the working capital at a maximum of 25% of the total General Fund Budget. This provides funds for three months of expenditures. Money should also be reserved to provide a "cushion" for the replacement of possible revenue short falls in the budget: The cutback of local government aid due to a projected state surplus deficit is a good example of a need for some sort of cushion. An economic downturn can also .cause a reduction in building and other permit fees, recreation revenue, other intergovernmental revenue, charges for services, and of course, cause property • tax delinquencies. The formula currently reserves an amount'equal to 5% of the taxes levied for General Fund purposes to hedge against loss of revenue from tax delinquencies and an 410 amount equal to 10% of all other estimated budget revenues to hedge against over-estimation and economic downturn. Funds should also be reserved for unanticipated needs which may develop 15 lune S. 1992 during the budget year. However, the City Charter does provide for a contingency appropriation within the budget itself, and we do annually appropriate funds for that purpose. • Any amount in the General Fund Balance in excess of the amount determined to be adequate by the formula may be used to fund the next year's budget or be transferred to another fund, such as the Capital Project Fund. Funds transferred to the Capital Projects Fund can be used for major capital outlay, including construction or acquisition of major permanent facilities having a relatively long life or to reduce the debt incurred for capital outlays. Since the adoption of the formula in 1980, the collection of both property taxes and local government aid have been pushed back even further, and nothing is received from those sources until after July 1st of each year. We have done an analysis of when actual revenues were received and actual expenditures during budget years 1988 and 1989. Both years show an accumulated cash shortage of approximately 37% prior to July 1. Because revenue collections will be delayed even further in 1990 and future years, we.recommend that the formula be changed to increase the amount to be reserved for working capital from 25% of the total General Fund current year budget to 40%. II. POLICY The Policy is the "Adequate General Fund Balance Policy Formula" attached as Exhibit I. • • • • • • • 16 June 3, 1992 CITY OF BROOKLYN CENTER • ADEQUATE GENERAL FUND BALANCE POLICY FORMULA AS ESTABLISHED BY THE CITY COUNCIL ON DECEMBER 22, 1980 (LAST AMENDED BY RESOLUTION 98-48 ON MARCH 23, 1998) Latest Audited Total Fund Balance at December 31, 1997 $6,601,780 Minimum Required Fund Balance Elements: 1. Items Not Readily Convertible to Cash: a. Accounts Receivable 51,154 b. Advances.to Other Funds 105,074 $156,228 • 2. Amount Appropriated to the General Fund Current • Year Budget: 1998 $2,712 3. Amounts to be Reserved for Working Capital and Variances from Revenue Estimates: (45% of Total General Fund Current Year Budget, less debt service) 45% of: $12,145,336 = $5,465,401 Minimum Required Fund Balance $5,624,341 Amount in Excess of Minimum Required Fund Balance $977,439 • Amount Available per Formula for Other Use in Current Year $488,719 17 ADQFDBAL.XLS 1997 1/8/99 1:08 PM CITY OF BROOKLYN CENTER ADEQUATE GENERAL FUND BALANCE POLICY FORMULA • AS ESTABLISHED BY THE CITY COUNCIL ON DECEMBER 22, 1980 Revised to reverse the effect of reporting for unrealized gains or losses on investments Latest Audited Total Fund Balance at December 31, 1997 $6,721,780 Unrealized Gains or Losses (subtract gains or add back losses) (120,000) Adjusted Total Fund Balance at December 31, 1997 $6,601,780 Minimum Required Fund Balance Elements: 1. Items Not Readily Convertible to Cash: a. Accounts Receivable 51,154 b. Advances to Other Funds 105,074 $156,228 2. Amount Appropriated to the General Fund Current Year Budget: 1998 $2,712 3. Amounts to be Reserved for Working Capital and Variances from Revenue Estimates: (45% of Total General Fund Current Year Budget, less debt service) 45% of: $12,145,336 = $5,465,401 Minimum Required Fund Balance $5,624,341 Amount in Excess of Minimum Required Fund Balance $977,439 Amount Available per Formula for Other Use in Current Year $488,719 • 18 ADQFDBAL.XLS 1997(2) 1/8/99 1:08 PM