Chapter 3.26
FISCAL SUSTAINABILITY AND RESERVE FUNDS

Sections:

3.26.010    Purpose and definitions.

3.26.020    General fund account.

3.26.030    General fund reserves.

3.26.040    Budget stabilization fund.

3.26.050    Infrastructure repair and replacement fund.

3.26.060    Other post-employment benefits (OPEB) fund.

3.26.070    Internal service fund reserves.

3.26.080    Enterprise fund reserves.

3.26.090    Council action required.

3.26.010 Purpose and definitions.

A. The purpose of this chapter is to establish policies and procedures to ensure the city maintains unappropriated fund balances, “reserves,” in the city’s funds.

B. For purposes of this chapter, the following terms shall have the following meanings:

1. “City’s operating expenses” shall mean the city’s general fund operating expenses of the city as set forth in the city’s annual budget which generally includes staff costs and operating expenses of the city and excludes the capital project appropriations.

2. “One-time revenues” shall mean those revenues that the city receives on a one-time or nonregular basis. For example, such revenues may include, but are not limited to, proceeds from the sale of surplus land, one-time unexpected sales tax allocations associated with capital improvements from local retailers, grants, lump sum payments of project fees, nonreoccurring sales tax of fee revenue, etc.

3. “Unappropriated reserves” shall mean unappropriated operating revenues excluding capital project and program appropriations which originate from funding sources that are restricted to projects or programs. [Ord. 18-1455 § 2, 2018; Ord. 17-1432 § 2, 2017; Ord. 12-1363 § 2, 2013.]

3.26.020 General fund account.

There is established a “general fund” into which all sums of money collected by the city for any purpose whatsoever shall be deposited, unless otherwise provided by ordinance or resolution directing the deposit into a specific fund other than the general fund. [Ord. 18-1455 § 2, 2018; Ord. 17-1432 § 2, 2017; Ord. 12-1363 § 2, 2013.]

3.26.030 General fund reserves.

A. There is established within the general fund a “general fund reserve,” which shall be used for emergencies, including, for example, natural disasters and costs associated with such natural disasters.

B. At each and every budget cycle, commencing with fiscal year 2013-2014, and every year thereafter, money from the general fund shall be unappropriated, and shall be deposited into the general fund reserve. The minimum funding level within the general fund reserve shall be 30 percent of the city’s general fund operating expenses. However, the city council shall, on a best efforts basis, take such steps as necessary to achieve the minimum general fund reserve level during the budget process each year through fiscal year 2017-2018. Afterward, the minimum funding levels will become mandatory as defined by this chapter.

C. The 30 percent minimum funding level within the general fund reserve of the city’s general fund operating expenses shall consist of the following and be restricted as per the city’s policy:

• A reserve for economic uncertainty (20 percent of the 30 percent minimum funding level within the general fund reserve) – funds designated to mitigate periodic revenue shortfalls due to downturn in economic cycles, thereby avoiding the need for service-level reductions within the fiscal year; and

• An emergency reserve (10 percent of the 30 percent minimum funding level within the general fund reserve) – funds designated to mitigate costs of unforeseeable emergencies and natural disasters.

The composure of the reserves shall consist of:

1. A minimum of two-thirds of the 30 percent (i.e., 20 percent) shall be held in cash and liquid investments consistent with the city’s investment policy; and

2. An amount not to exceed one-third of the 30 percent (i.e., up to 10 percent) may be held in real property owned and designated by the city, where such real property has an appraised value of at least 125 percent of the dollar amount which the real property constitutes within the city’s general fund reserve.

D. Before the city sells, or otherwise encumbers in such a manner as to significantly impair the value of, any real property referenced in subsection (C)(2) of this section, the city shall comply with subsection (E) of this section and:

1. Identify replacement real property prior to the sale or encumbrance of the current designated property; provided, that the city council approves such replacement;

2. Direct proceeds from the sale or encumbrance of the current designated property into the general fund reserve to maintain the minimum required funding;

3. Increase the amount held in cash or liquid investments to maintain the minimum required funding; or

4. Take any combination of the above actions, such that the city maintains the minimum required funding.

5. Should the sale of any property result in the general fund reserve balance being greater than the 30 percent minimum funding level, the proceeds in excess of the 30 percent minimum funding level will be deposited into the budget stabilization fund or handled in accordance with the requirements of this chapter.

E. To designate real property as being held to satisfy the city’s minimum general fund reserve requirement under subsection (C)(2) of this section, the city shall identify the property by APN and/or address by a resolution adopted at a public hearing at a duly noticed regular city council meeting. The city may remove the real property from this designation only by a subsequent resolution adopted at a public hearing at a duly noticed regular city council meeting. [Ord. 18-1455 § 2, 2018; Ord. 17-1432 § 2, 2017; Ord. 12-1363 § 2, 2013.]

3.26.040 Budget stabilization fund.

A. There is established a “budget stabilization fund” which shall provide the city a cushion to help absorb costs during economic downturns and/or budget shortfalls.

B. The target minimum funding level within the budget stabilization fund shall be no less than $2,000,000 or five percent of the city’s general fund operating expenses, whichever is greater. The city council shall, on a best efforts basis, take such steps as necessary to meet the minimum funding level during the budget process each year.

C. The target maximum funding level for the budget stabilization fund shall be no more than $7,500,000 or 25 percent of the annual city’s general fund operating expenses, whichever is greater.

D. Additional deposits into the budget stabilization fund shall include:

1. One-time general fund revenues and/or projected recurring revenues that exceed 10 percent or more from the previous fiscal year shall be deposited into the budget stabilization fund.

2. Fiscal year-end general fund surpluses shall also be deposited into the budget stabilization fund.

E. Appropriations from the budget stabilization fund require a majority vote of the city council and may be made in order to balance the general fund budget. [Ord. 18-1455 § 2, 2018; Ord. 17-1432 § 2, 2017; Ord. 12-1363 § 2, 2013.]

3.26.050 Infrastructure repair and replacement fund.

A. There is established an “infrastructure repair and replacement fund” which shall provide funding for additional repairs and capital improvements projects related to the city’s infrastructure including streets, roads, parking lots, and storm drains.

B. Once the budget stabilization fund reaches the maximum funding level, 75 percent of the available, excess revenues that would normally be placed into the budget stabilization fund shall be deposited into the infrastructure repair and replacement fund.

C. Appropriations from the infrastructure repair and replacement fund shall require a majority vote of the city council. [Ord. 18-1455 § 2, 2018; Ord. 17-1432 § 2, 2017; Ord. 12-1363 § 2, 2013.]

3.26.060 Other post-employment benefits (OPEB) fund.

A. There is established an “other post-employment benefits (“OPEB”) fund” which shall be available to provide funding to reduce the city’s general fund’s portion of unfunded OPEB liabilities, including, for example, retiree health benefits.

B. Once the budget stabilization fund reaches the maximum funding level, 25 percent of the available, excess revenues that would normally be placed into the budget stabilization fund shall be deposited into the OPEB fund.

C. Appropriations from the OPEB fund shall require a majority vote of the city council. [Ord. 18-1455 § 2, 2018; Ord. 17-1432 § 2, 2017; Ord. 12-1363 § 2, 2013.]

3.26.070 Internal service fund reserves.

A. The city maintains the following internal service funds which provide funding to allocate costs for services provided to all city departments:

1. Information and communication systems;

2. Fleet maintenance;

3. Building maintenance;

4. Fringe benefits;

5. Liability insurance.

B. It is established within each of these internal service funds an unappropriated reserve which shall be used for emergencies, including, for example, natural disasters and costs associated with such natural disasters. At each and every budget cycle, commencing with fiscal year 2013-2014, and every year thereafter, the unappropriated reserve level within internal service funds shall be 30 percent of the internal service funds’ annual budget excluding capital project and equipment appropriations. However, the city council shall, on a best efforts basis, take such steps as necessary to achieve the minimum internal service funds’ reserve levels during the budget process each year through fiscal year 2017-2018. Afterward, the minimum funding levels will become mandatory as defined by this chapter. The 30 percent reserve level may be exceeded. [Ord. 18-1455 § 2, 2018; Ord. 17-1432 § 2, 2017; Ord. 12-1363 § 2, 2013.]

3.26.080 Enterprise fund reserves.

A. The city maintains the following enterprise funds for enterprise operations:

1. Water;

2. Sewer;

3. Waterfront operations;

4. Marina.

B. It is established within each of these enterprise funds an unappropriated reserve which shall be used for emergencies, including, for example, natural disasters and costs associated with such natural disasters. At each and every budget cycle, commencing with fiscal year 2013-2014, and every year thereafter, the target unappropriated reserve level within each enterprise fund reserve shall be 30 percent of each enterprise fund’s fiscal year operating expenses, excluding capital project appropriations. However, the city council shall, on a best efforts basis, take such steps as necessary to achieve the minimum enterprise funds’ reserve levels during the budget process each year through fiscal year 2017-2018. Afterward, the minimum funding levels will become mandatory as defined by this chapter. The 30 percent reserve level may be exceeded. [Ord. 18-1455 § 2, 2018; Ord. 17-1432 § 2, 2017; Ord. 12-1363 § 2, 2013.]

3.26.090 Council action required.

Except as otherwise stated in this chapter, any variance from the policies established within this chapter shall require adoption of a city council resolution by a four-fifths vote of the city council. The council resolution shall set forth the following:

A. A statement of findings supporting the appropriation of reserves or temporary modification of funding levels required by this chapter; and

B. A plan for replenishing the reserves within a reasonable time period when the appropriation causes a reserve to fall below minimum funding levels; and

C. A description of the circumstances or event constituting an emergency. [Ord. 18-1455 § 2, 2018; Ord. 17-1432 § 2, 2017; Ord. 12-1363 § 2, 2013.]