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HomeMy WebLinkAbout2017-186 CCRMember Kris Lawrence-Anderson introduced the following resolution and moved its adoption: RESOLUTION NO. 2017-186 RESOLUTION ADOPTING AMENDMENTS TO THE FUND BALANCE AND CLASSIFICATION POLICY OF THE BROOKLYN CENTER CITY COUNCIL CODE OF POLICIES WHEREAS, the City Council of the City of Brooklyn Center adopted an amended Fund Balance and Classification Policy on September 11, 2017 included in the City Council Code of Policies; and WHEREAS, revisions to the Financial Policies Section 2.23 Fund Balance and Classification Policy have been reviewed by the City Council; and WHEREAS, Financial Policies Section 2.21 J. Capital Improvements Funding Policy, Budget Policies Section 2.41 Capital Improvements and Special Assessments Construction Fund Expenditure Policy, and Budget Policies Section 2.42 Capital Reserve Fund Policy shall be removed and incorporated into Financial Policies Section 2.23 Fund Balance and Classification Policy. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Brooklyn Center, Minnesota that Financial Policies Section 2.23 Fund Balance and Classification Policy attached hereto as Exhibit 1 be incorporated into the Code of Policies and hereby adopted. November 27, 2017 Date Mayor ATTEST: City Clerk The motion for the adoption of the foregoing resolution was duly seconded by member April Graves and upon vote being taken thereon, the following voted in favor thereof: Tim Willson, Marquita Butler, April Graves, Kris Lawrence-Anderson, Dan Ryan and the following voted against the same: whereupon said resolution was declared duly passed and adopted. RESOLUTION NO. 2017-186 Exhibit I FINANCIAL POLICIES 2.23 Fund Balance and Classification Policy Policy Objective: To provide a definition of the various City funds and to provide direction for classifying the various components of fund balance to indicate the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the fund can be spent. Governmental Funds Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions provide categories and terminology used to describe the components of fund balance in the governmental funds (but it does not apply to the proprietary or fiduciary funds). The City's governmental funds include; General Fund, Special Revenue Funds, Debt Service Funds and Capital Projects Funds. Definitions (as they apply to Governmental Funds under GASB 54): Fund balance - the difference between assets and liabilities reported in a governmental fund. Nonspendable fund balance - amounts that are not in a spendable form (e.g., prepaid items and inventories of supplies). Resources that must be maintained intact pursuant to legal or contractual requirements are also considered nonspendable. Restricted fund balance - amounts subject to externally enforceable legal restrictions (creditors, grantors, contributors, and by law through constitutional provisions or enabling regulations). Unrestricted fund balance - the total of committed fund balance, assigned fund balance, and unassigned fund balance, as described below. Committed fund balance - amounts that can be used only for the specific purposes determined by a formal action of the government's highest level of decision-making authority (City Council). Commitments may be changed or lifted only by the City Council taking the same formal action that imposed the constraint originally. The City Council must take action on these commitments before year end. Assigned fund balance - amounts a government intends to use for a specific purpose; intent can be expressed by the government body or by an official or body to which the governing body delegates the authority. The City Council authorizes the City Manager or the City Manager's designee to assign fund balance that reflects the City's intended use of those funds for the purposes of reporting the City's financial position. Unassigned fund balance - amounts that are available for any purpose in the general fund. Only the General Fund can report a positive amount of unassigned fund balance. Prioritization of fund balance use - when both restricted and unrestricted resources are available for use, it is the City's policy to first use restricted resources and then use unrestricted resources as they are needed, unless otherwise required by the restricting authority. When unrestricted resources are available for use, it is the City's policy to use resources in the following order: 1) committed 2) assigned 3) unassigned. RESOLUTION NO. 2017-186 Exhibit 1 General Fund The General Fund is established to account for all revenues and expenditures which are not required to be accounted for in other funds. Revenue sources include property taxes, license and permit fees, fines and forfeits, charges for services, intergovernmental revenues, investment interest earnings, and transfers. The General Fund's resources finance a wide range of functions including the operations of general government, public safety, and public works. The City shall manage its cash flow needs by having a target unassigned General Fund balance at the close of each fiscal year of 50% to 52% of the next year's General Fund operating budget. Unassigned General Fund monies that are not required for cash flow purposes may be transferred into other funds as may be appropriate or needed during the fiscal year. It is specifically anticipated that transfers will be made to the Street Reconstruction Fund, Capital Improvements Fund, and the Technology Fund when operating results generate a surplus of actual revenues over actual expenditures to serve as a recurring source of funding for those three funds. Special Revenue Funds Special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes other than debt service or capital projects. Governmental accounting standards require that substantial inflows of revenues into a special revenue fund be either restricted or committed in order for the fund to be considered a special revenue fund. Housing and Redevelopment Authority (HRA) Fund - This fund was established to account for housing and redevelopment projects within the City of Brooklyn Center. The HRA has the authority to levy an ad-valorem property tax levy, which is the primary funding source for the Economic Development Authority. b.Economic Development Authority (EDA) Fund - This fund was established to account for the development related activities in the City of Brooklyn Center. The EDA generates the funding to accomplish the development projects from grants, HRA property tax levy, or transfers from other funds of the City. c.Community Development Block Grant (CDBG) Fund - This fund was established to account for the collection of CDBG grant funding for related projects within the City. d. Police Forfeitures Fund - This fund was established to account for the proceeds from property seized by Police Department personnel. The City receives property and money through law enforcement seizures under Federal Law 2IUSCS Section 88 1(e) and Minnesota Statutes, Sections 609.531- 609.5317. 169A.63. ii. The City will use proceeds from these seizures as defined in State law and Department of Justice guidelines. Forfeited property and cash will be used: a.Only for law enforcement purposes, or; b.Only as a supplement to budgeted funds, or; c. Not as a source to supplant ordinary operating expenses. RESOLUTION NO. 2017-186 Exhibit 1 iii. The City will establish procedures to ensure the safekeeping of forfeited property and funds until such time as they are used for approved purposes. e.Tax Increment Funds - These funds were established to account for the collection of tax increment generated revenues for parcels within the districts. These funds are used to finance the various redevelopment activities with the Districts. f.City Initiatives Grant fund - Revenues and expenditures from recurring grants or donations received from outside entities (federal, state, local) are accounted for in the fund. Debt Service Funds Debt service funds account for payments of principal and interest on City debt issuances. Fund balances are considered restricted as they are resources accumulated for principal and interest payments maturing in future years. Capital Project Funds Capital project funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Subledger codes are used to differentiate spending on multiple projects within individual capital project funds. Capital improvements should be included in the City's 15 year Capital Improvement Plan which is adopted by City Council at a public hearing on an annual basis. Role of the Financial Commission - If a review of an expenditure is requested by the City Council from the Financial Commission, the Financial Commission will respond on the basis of the following questions: 1.Does the expenditure comply with the Fund Balance and Classification Policy? 2.Is the expenditure appropriate considering the financial conditions of the City? a. Capital Improvements Fund Large capital expenditures for municipal buildings, furnishings, equipment, computer/radio systems, park and trail improvements, and capital projects made possible through outside funding sources, are accounted for in the Capital Improvements Fund. i. Funding Sources: a.Each year, following the completion of the annual audit (typically July) the year- end fund balance of the General Fund will be reviewed for surplus operating funds. The audited year-end General Fund unassigned fund balance that exceeds 52% of the next year's General Fund operating budget will be transferred to the Capital Improvements fund. b.Each year, following the completion of the annual audit (typically July) the year- end cash balance of the Brooklyn Center Liquor operations will be reviewed for surplus operating funds. The audited year-end Liquor Fund unrestricted cash balance that exceeds three and a half months of the next year's budgeted operating expenses and one year of budgeted capital equipment needs will be transferred to the Capital Improvements find. RESOLUTION NO. 2017-186 Exhibit 1 c.On an annual basis, the City will receipt the greater of $650,000 (or the full amount if less than $650,000) of Local Government Aid (LGA) received OR 50 percent of total LGA. d.Project cost sharing grants from Regional, County, State or Federal governments. e.Tax increment funds as applicable. f.Allocated investment earnings based on the fund's cash balance. Any remaining fund balance at year-end in the Capital Improvements Fund will be carried forward to fund future capital improvement projects as identified in the City's Capital Improvement Plan. ii. Use of Funds: a.The capital improvements fund may be used, pursuant to this policy, for expenditures on capital equipment, infrastructure improvements and construction, and similar projects having an aggregate value in excess of $50,000. The types of expenditures contemplated by this policy include projects such as: building construction, repair, reconstruction, and remodeling, including component systems for heating, ventilation, and air conditioning equipment and furnishings, including furniture, lights, and communications cabling • park landscaping, shelter, and improvements • computer, radio, and telephone systems • City contribution portion of cost-share or grant-funded infrastructure projects b.The expenditures from the capital improvements fund are to be used for governmental capital needs and not for enterprise fund capital needs, except as the general governmental portion of a joint project for both governmental and enterprise purposes. c. Additionally, the capital improvements fund may be used to provide loans to other funds maintained by the City in accordance with the City's special assessment and internal loan interest rate policy. iii. Authority to Spend Expenditures meeting the above criteria may be funded through the capital improvements fund based on the following authority limits: a.Expenditures from $0 to $50,000: Not eligible for funding from the capital improvements fund. Funding is required through the general fund operating budget. b.Expenditures from $50,001 to $300,000: The City Council may, through simple majority, approve these expenditures. RESOLUTION NO. 2017-186 Exhibit 1 c. Expenditures over $300,001: Following a public hearing, the City Council may, through a 4/5ths majority, approve expenditures in this category. iv. Insurance Items Expenditures for repair or replacement of items that are to be reimbursed by insurance proceeds may be accounted for and authorized by the Finance Director. b. Municipal State Aid Construction Fund - In 1957 the Minnesota legislature authorized the establishment of a Municipal State Aid Streets system in all Minnesota cities with a population of 5,000 or greater not to exceed 20 percent of a city's improved local mileage, The City receives an annual allocation of State Aid for streets in two pieces: i.Annual Maintenance Allocation - may be spent on crack sealing, seal coating, signs and striping on streets within the designated MSA system. ii.Annual Construction Allocation - these funds are tied to specific projects that are approved by MNDOT which are then reimbursed over time via an annual allocation. Depending on need and availability of reimbursement funds, the construction funding can lag several years behind the completion of eligible projects in this fund. Capital Reserve Emergency Fund - While the City carries property and casualty insurance, the City may need additional funds beyond insurance proceeds in the event of natural or other disaster impacting its buildings and their contents, as well as other improvements to real property. Also, unanticipated failure of buildings or improvements to buildings may require immediate expenditure of funds for repair or replacement that are not covered by insurance. The funds placed in the Capital Expenditure Reserve Fund are not to be considered a source for planned or recurring capital needs, but only to deal with emergency needs as described due to damage, loss, or failure of existing buildings and other improvements to real property. i.Use of Funds a. Funds may be expended from the Capital Expenditure Reserve Fund for the repair or replacement of buildings or other improvements to real property and their contents where the repair or replacement is necessitated by damage to such buildings or other improvements to real property and their contents due to: • Natural disaster such as a tornado, storm, flood, or earthquake • Fire, vandalism, terrorism, explosion, building or component collapse ii.Authority to Spend Expenditures meeting the criteria for the use of funds may be funded through the Capital Expenditure Reserve Fund upon Resolution of the City Council finding that the criteria for expenditure have been met and that the use of funds would not otherwise be covered by insurance proceeds, except that the City Council may authorize the use of Capital Expenditure Reserve Funds in anticipation of the receipt of insurance proceeds providing that such funds used in anticipation of insurance proceeds are repaid to the Capital Expenditure Reserve Fund from such insurance proceeds. RESOLUTION NO. 2017-186 Exhibit 1 iii. Fund Balance The Capital Expenditure Reserve Fund shall be established at $1,000,000. Such fund balance shall increase each year by the interest earned on the fund balance. In the event that the fund would drop below $1,000,000, the City Manager shall prepare a plan for restoring the balance to $1,000,000. The fund balance target should reflect an analysis of the City's uninsured exposure to the losses identified in this policy. Such plan, as well as whether the balance should be made higher or lower, shall be reviewed by the Financial Commission and City Council. The plan adopted by the City Council shall be included in the budgetary process if the fund's balance is not restored by transfer of existing funds from another fund, such as the Capital Improvement Fund. d. Special Assessments Construction Fund - The Special Assessments Construction Fund accounts for the resources and expenditures required for the acquisition and construction of infrastructure improvements that are financed wholly or in part by special assessments levied against benefited properties. Only those expenses that will be reimbursed via special assessment revenues or paid for from bond proceeds of which the underlying bonds will be repaid solely from special assessments qualify for reporting in the Special Assessments Construction Fund. The special assessments construction fund may be used, pursuant to this policy, for expenditures on infrastructure improvements and similar projects having an aggregate value in excess of $50,000. The types of expenditures contemplated by this policy include projects such as: a.street repair, replacement, and construction b.bridge rehabilitation and construction c. water, sanitary sewer, storm drainage, and street light utility improvements ii. Expenditures meeting the above criteria may be funded through the Special Assessments Construction Fund based on the following authority limits: a.Expenditures from $0 to $50,000: Not eligible for funding from the Special Assessments Construction fund. Funding is required through the general fund operating budget. b.Expenditures from $50,001 to $300,000: The City Council may, through simple majority, approve these expenditures. c. Expenditures over $300,001: Following a public hearing, the City Council may, through 4/5ths majority, approve expenditures in this category. e. Street Reconstruction Fund - This fund was established to provide funds and to account for the expenditure of such funds, for major street infrastructure improvements. The accumulation of funds to provide for such improvements is an attempt to reduce future debt issuance. i. Sources of Funds a.Franchise fees collected from CenterPoint Energy and Xcel Energy b.Bond proceeds to be repaid with property tax levies RESOLUTION NO. 2017-186 Exhibit I ii. Uses of Funds a. Street reconstruction projects performed in accordance with the City's 15 year capital improvement plan, specifically neighborhood reconstruction projects and mill and overlay projects as necessary. f.Technology Fund - The Technology Fund accounts for new technology improvements and the replacement of existing technology and capital items necessary to increase productivity and operating efficiencies. The majority of expenditures in this fund relate to technology infrastructure maintenance and expansion such as servers, switches, wireless access points, surveillance and audio visual technology. Minor technology purchases such as desktop and laptop replacements, monitors, etc. are not permitted in this fund; rather they are coded to the fund and department that utilizes them. g.Additional Capital Project Funds New capital project funds will be created as necessary for projects that warrant separate presentation due to their scope or complexity of funding sources. Enterprise Funds Enterprise Funds are those programs provided by the City which generate their own revenues for operations and capital maintenance. In some cases these funds are expected to generate enough revenue to support capital projects in other funds, thereby reducing the need for use of the property tax levy. The City of Brooklyn Center operates three Enterprise Funds: a.Brooklyn Center Liquor b.Centerbrook Golf Course c. Earle Brown Heritage Center Capital improvement projects in these enterprise funds that exceed a total anticipated cost of $25,000 should be included in a Capital Improvement Plan which is annually adopted by City Council in conjunction with the budget process. Public Utility Funds The Public Utility Funds track the revenues and expenditures for fee based public utility services provided by the City. These funds operate on their own ability to generate revenues and receive no property tax support. Each year the City Council reviews the operations of these funds and sets rates for each service based on the needs for general operations, capital spending and debt service payments. The public utilities include: a, Water Utility Fund b.Sanitary Sewer Fund c.Storm Sewer Fund d. Streetlight Utility Fund e. Recycling Utility Fund Capital improvement projects in these Public Utility finds that exceed a total anticipated cost of $50,000 should be included in the City's 15-year Capital Improvement Plan which is annually adopted by City Council in conjunction with the budget process. RESOLUTION NO. 2017-186 Exhibit 1 Capital Expenditures may be funded through the Public Utility Funds based on the following authority limits: a. Expenditures from $50,001 to $300,000: The City Council may, through simple majority, approve these expenditures. b.Expenditures over $300,001: Following a public hearing, the City Council may, through a 4I5ths majority, approve expenditures in this category. c. Emergency spending is addressed in the City's purchasing policy and those situations may be exempt from this requirement. Internal Service Funds Internal Service funds exist to centralize certain services and then allocate the cost of those services within the government. The City of Brooklyn Center internal services funds include: a. Central Garage The Central Garage is used to fund replacement, maintenance, fueling, and insurance of the City's fleet of vehicles through inter-fund charges to departments. Vehicle replacement costs are updated each year to ensure replacement costs being charged to departments are sufficient to purchase a new vehicle when the useful life has been reached. Replacement equipment and new equipment should be identified and approved by council during the budget process. If new or replacement equipment is needed unexpectedly subsequent to the budget process for that year, the items should be presented to and approved by council prior to purchase. Employee Retirement Benefit - This fund accounts for certain health care insurance benefits for City employees who retire before age 65. Substantially all of the City's full-time police and fire employees and all other full-time employees hired before July 1, 1989 may be eligible for those benefits from the time they qualify for an unreduced PERA pension, until they reach age 65 or become eligible for Medicare. In the event that future costs would exceed funds available, other funds would be charged for the costs associated with their employees. Employee Compensated Absences - This fund accounts for payment of unused vacation and vested sick leave benefits, and the allocation of such costs to the respective departments and funds of the City. d. Pension - GERF/PEPFF - These funds were established to account for the net pension liability and related expense recorded with the adoption of GASB 68 related to the PERA Coordinated plan (GERF) and the PERA Police and Fire plan (PEPFF), respectively, and the allocation of such costs to the respective departments and funds of the City.