Chapter 3.28
CITY ENHANCEMENT FUND
Sections
3.28.010 Generally
A city enhancement fund is hereby created from appropriations to be made by the council by ordinance. These funds shall be held perpetually in trust for the benefit of the present and future generations of Kodiak residents. The city enhancement fund shall be maintained separate and apart from all other funds and accounts of the city. The principal goal shall be to preserve principal and maintain purchasing power. [Ord. 1430 §4, 2023; Ord. 1113, 2000; Ord. 1044 §1, 1997]
3.28.020 Deposits
(a) If the unassigned fund balance of the general fund equals or exceeds six months of general fund operating expenditures as of July 1 of the current fiscal year, 50 percent of the prior fiscal year’s general fund surplus shall be deposited in the city enhancement fund upon the city council’s acceptance of the independent annual audit. For purposes of this subsection, a “general fund surplus” is defined as the excess of revenues and other financing sources over expenditures and other financing uses, plus any residual equity transfers in less any residual equity transfers out, as identified in the audited general fund statement of revenues, expenditures, and changes in fund balance.
(b) Fifty percent of the gross proceeds from the sale or lease of municipal real property will be deposited in the city enhancement fund; provided, however, that proceeds allocated to enterprise funds and proceeds from the lease of property with an annual income of less than $10,000 shall be exempt from these deposit requirements.
(c) Any actual earnings from the fund shall be deposited in the city enhancement fund until the reconciliation of the inflation proofing at the end of each fiscal year.
(d) The council may, by ordinance, make additional appropriations to the fund at any time. [Ord. 1447 §2, 2024; Ord. 1376 §1, 2018; Ord. 1113, 2000; Ord. 1060 §4, 1998; Ord. 1044 §1, 1997]
3.28.030 Investment
The assets of the enhancement fund shall be invested in investment vehicles that provide exposure to asset classes or implementation strategies which have been approved by a strategic asset allocation resolution as adopted by the city council.
(a) Fund Level Investment Guidelines. The fund will use low cost, efficient investment vehicles (mutual funds and/or exchange traded products—“ETPs”) for all equity exposure. For the fixed-income portion of the portfolio, the investment manager may use both mutual funds/ETPs or individual fixed-income securities. The fund will achieve its objective via long only, unlevered investments. The fund is prohibited from engaging in direct short sales or margin transactions.
(b) Investment Vehicle Level Investment Guidelines. The city council will take a conservative posture on derivative securities in order to maintain a risk averse nature. Since it is anticipated the new derivative products will be created each year, it is not the intention of this code to list specific derivatives that are prohibited from investment; rather it will form a general policy on derivatives. The city council recognizes that derivatives may be utilized within investment vehicles as a portfolio management tool. Derivative used within a product is permissible when utilized for the purpose of creating or enhancing exposure to an asset class or implementation strategy. Due to the inherent characteristics of derivatives, embedded leverage is permissible when fully collateralized. Net exposure exceeding the asset value of the investment vehicle is prohibited. Exposure must be net long at all times.
(c) The enhancement fund’s strategic asset allocation will be determined based upon the desired return, risk tolerance, and other investment parameters. The appropriateness and characteristics of the strategic asset allocation will be reviewed and confirmed by city council by a resolution. [Ord. 1430 §5, 2023; Ord. 1113, 2000; Ord. 1044 §1, 1997]
3.28.040 Inflation proofing
(a) Each fiscal year, the funds shall be inflation proofed from the earnings of the city enhancement fund as calculated by multiplying the city enhancement fund balance at the beginning of each fiscal year by an inflation factor. The inflation factor will be determined by calculating the average percentage increase in the U.S. Department of Commerce Consumer Price Index for U.S. city average, all items’ indices, January index, for the five-year period ending with the current fiscal year.
(b) Earnings in excess of the inflation-proofing amount shall be deposited in the general fund by the close of each fiscal year.
(c) If the unassigned fund balance of the general fund equals or exceeds six months of general fund operating expenditures as of July 1 of the current fiscal year, and earnings of the city enhancement fund are not in excess of the inflation-proofing amount, the general fund shall transfer to the enhancement fund the amount by which earnings do not equal the inflation-proofing amount by the close of each fiscal year. [Ord. 1376 §2, 2018; Ord. 1113, 2000; Ord. 1044 §1, 1997]
3.28.050 Appropriations
No funds from the principal of the city enhancement fund shall be appropriated except by an ordinance approved by at least five members of the council. This restriction shall in no way affect the obligations of the city under any present or future bond covenants. [Ord. 1113, 2000; Ord. 1044 §1, 1997]