HomeMy WebLinkAbout2014-49 - Amending Council Policy F-2 (Reserve Policy) and Council Policy B-2 (Recreation Fees and Related Equiptment Replacement Reserves)RESOLUTION NO. 2014 -49
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF NEWPORT BEACH AMENDING COUNCIL
POLICY F -2 (RESERVE POLICY) AND COUNCIL
POLICY B -2 (RECREATION FEES AND RELATED
EQUIPMENT REPLACMENT RESERVES)
WHEREAS, the City Council has previously adopted Council Policy F -2 (Reserve
Policy) related to the administration of reserves and fund balances;
WHEREAS, the City Council desires the City Manager to prepare City Financial
Statements in conformity with Generally Accepted Accounting Principles (GAAP);
WHEREAS, Governmental Accounting Standard Board (GASB) issued
Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions,
to be implemented for FY beginning June 15, 2011;
WHEREAS, the implementation of GASB Statement No. 54 is intended to
enhance the usefulness of fund balance information by providing clearer fund balance
classifications that can be more consistently applied; and will shift the focus of fund
balance reporting from the availability of fund resources for budgeting to "the extent to
which the government is bound to honor constraints on the specific purposes for which
amounts in the fund can be spent ;"
WHEREAS, it is desirous to remove restrictions placed on Contingency Reserve
by City Council (the highest level of this government), referred to and defined as
"Commitments" by GASB 54;
WHEREAS, it is desirous to move Contingency Reserve from the "Committed"
classification to" Unassigned" classification of fund balance; and
WHEREAS, the City Council has previously adopted Council Policy B -2
(Recreation Fees and Related Equipment Replacement Reserves) establishing
specified reserve categories and ongoing contributions.
NOW, THEREFORE, the City Council of the City of Newport Beach resolves as
follows:
Section 1: The City Council approves and adopts the amended Council Policy
F -2 as attached hereto and incorporated by reference herein. All prior versions of
Council Policy F -2 are hereby repealed.
Section 2: The City Council approves and adopts the amended Council Policy
B -2 as attached hereto and incorporated by reference herein. All prior versions of
Council Policy B -2 are hereby repealed.
Section 3: The City Council finds this action is not subject to the California
Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will
not result in a direct or reasonably foreseeable indirect physical change in the
environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378)
of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it
has no potential for resulting in physical change to the environment, directly or
indirectly.
Section 4: This resolution shall take effect immediately upon its adoption by
the City Council, and the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 10th day of June, 2014.
ATTEST:
Rush N. Hill, II
Mayor
�4&-
Leilani I. Brown
City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE } ss.
CITY OF NEWPORT BEACH }
I, Leilani I. Brown, City Clerk of the City of Newport Beach, California, do hereby certify that the
whole number of members of the City Council is seven; that the foregoing resolution, being Resolution
No. 2014 -49 was duly and regularly introduced before and adopted by the City Council of said City at a
regular meeting of said Council, duly and regularly held on the 10m day of June, 2014, and that the same
was so passed and adopted by the following vote, to wit:
Ayes: Council Member Gardner, Council Member Petros, Council Member Curry,
Council Member Henn, Council Member Daigle, Mayor Pro Tem Selich,
Mayor Hill
Nays: None
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the official seal of
said City this 11 1h day of June, 2014.
owx q% pmt
City Clerk
Newport Beach, California
(Seal)
RESERVE POLICY
PURPOSE
IVA
To establish City Council policy for the administration of Reserves defined as fund
balances in governmental funds and net working capital in proprietary funds.
BACKGROUND
Prudent financial management dictates that some portion of the funds available to the
City be reserved for future use.
As a general budget principle concerning the use of reserves, the City Council decides
whether to appropriate funds from Reserve accounts. Even though a project or other
expenditure qualifies as a proper use of Reserves, the Council may decide that it is more
beneficial to use current year operating revenues or bond proceeds instead, thereby
retaining the Reserve funds for future use. Reserve funds will not be spent for any
function other than the specific purpose of the Reserve account from which they are
drawn without specific direction in the annual budget; or by a separate City Council
action. Information regarding Annual Budget Adoption and Administration is
contained in City Council Policy F -3.
GOVERNMENTAL FUNDS AND FUND BALANCE DEFINED
Governmental Funds including the General Fund, Special Revenue Funds, Capital
Projects Funds, Debt Service Funds and Permanent Funds have a short -term or current
flow of financial resources, measurement focus and basis of accounting and therefore,
exclude long -term assets and long -term liabilities. The term Fund Balance, used to
describe the resources that accumulate in these funds, is the difference between the
fund assets and fund liabilities of these funds. Fund Balance is similar to the measure
of net working capital that is used in private sector accounting. By definition, both
Fund Balance and Net Working Capital exclude long -term assets and long -term
liabilities.
PROPRIETARY FUNDS AND NET WORKING CAPITAL DEFINED
Proprietary Funds including Enterprise Funds and Internal Service Funds have a long-
term or economic resources measurement focus and basis of accounting and therefore,
include long -term assets and liabilities. This basis of accounting is very similar to that
used in private sector. However, instead of Retained Earnings, the term Net Assets is
used to describe the difference between fund assets and fund liabilities. Since Net
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Assets include both long -term assets and liabilities, the most comparable measure of
proprietary fund financial resources to governmental Fund Balance is Net Working
Capital, which is the difference between current assets and current liabilities. Net
Working Capital, like Fund Balance, excludes long -term assets and long -term liabilities.
GOVERNMENTAL FUND RESERVES (FUND BALANCE)
For Governmental Funds, the Governmental Accounting Standards Board ( "GASB ")
Statement No. 54 defines five specific classifications of fund balance. The five
classifications are intended to identify whether the specific components of fund balance
are available for appropriation and are therefore "Spendable." The classifications also
are intended to identify the extent to which fund balance is constrained by special
restrictions, if any. Applicable only to governmental funds, the five classifications of
fund balance are as follows:
CLASSIFICATIONS
Non- spendable
Restricted
Committed
Assigned
Unassigned
NATURE OF RESTRICTION
Cannot be readily converted to cash
Externally imposed restrictions
City Council imposed commitment
City Manager assigned purpose /intent
Residual balance not otherwise restricted
A. Non - spendable fund balance: That portion of fund balance that includes amounts
that are either (a) not in a spendable form, or (b) legally or contractually required to
be maintained intact. Examples of Non - spendable fund balance include:
1. Reserve for Inventories: The value of inventories purchased by the City but
not yet issued to the operating Departments is reflected in this account.
2. Reserve for Long Term Receivables and Advances: This Reserve is used to
identify and segregate.that portion of the City's financial assets which are not
due to be received for an extended period, so are not available for
appropriation during the budget year.
3. Reserve for Prepaid Assets: This reserve represents resources that have been
paid to another entity in advance of the accounting period in which the
resource is deducted from fund balance. A common example is an insurance
premium, which is typically payable in advance of the coverage period.
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Although prepaid assets have yet to be deducted from fund balance, they are
no longer available for appropriation.
4. Reserve for Permanent Endowment - Bay Dredging: The endowment specifies
that the principal amount will not be depleted and represents the asset
amounts to be held in the Bay Dredging Fund.
5. Reserve for Permanent Endowment - Ackerman Fund: The endowment
specifies that the principal amount will not be depleted and represents the
asset amount to be held in the Ackerman Fund.
B. Restricted fund balance: The portion of fund balance that reflects constraints placed
on the use of resources (other than non - spendable items) that are either (a)
externally imposed by creditors, grantors, contributors, or laws or regulations of
other governments; or (b) imposed by law through constitutional provisions or
enabling legislation. Examples of restricted fund balance are:
1. Reserve for Debt Service: Funds are placed in this Reserve at the time debt is
issued. The provisions governing the Reserve, if established, are in the Bond
Indenture and the Reserve itself is typically controlled by the Trustee.
2. Affordable Housing: A principal provision of the Newport Beach Housing
Element requires developers to provide housing units for lower income
households, the number of which is to be negotiated for each development
project. In lieu of constructing affordable housing, developers have paid into
this reserve which is used at the City Council's discretion to provide alternate
methods for the delivery of affordable housing for lower income households.
3. Park In Lieu: Per NBMC 19.52 and California Government Code Section
664777 (The 1975 "Quimby Act "), a dedication of land or payment of fees for
park or recreational purposes in conjunction with residential development is
required. The fees collected can only be used for specific park or recreation
purposes as outlined in NBMC 19.52.030 and 19.52.070.
4. Upper Newport Bay Restoration Reserve: This reserve is the repository for
funds mandated by SB573, as well as special fees charged to permit holders as
an alternative to meeting certain specified mitigation criteria. In addition to
the mitigation fees, ten percent (10 %) of Beacon Bay lease revenue is placed in
this Reserve. Funds in the Reserve are restricted for Upper Newport Bay
restoration projects.
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5. Permanent Endowment for Bay Dredging: The endowment also specifies that
the interest earnings on the principal amount can only be used for dredging
projects in the Newport Bay.
6. Permanent Endowment for Ackerman Fund: The endowment also specifies
that the interest earnings on the principal amount can only be used for
scholarships provided by the City.
7. Oceanfront Encroachment Reserve: In the early 1990's, it. was discovered by
survey that improvements to several ocean front parcels were encroaching
onto the public beach. The encroachment was relatively minor. The
negotiated solution was for the property owners to pay a permit fee each year
to the City. Revenue thus generated may only be used for ocean front
restoration projects and incidental costs of improvements and maintenance to
enhance public access and use of ocean beaches as approved by the City
Council. This Reserve is the repository for those funds. City Council Policy L-
12 contains additional background and details about the encroachment issue
The external restriction on this balance is imposed by the Local Coastal Plan
(LCP).
C. Committed fund balance: That portion of a fund balance that includes amounts that
can only be used for specific purposes pursuant to constraints imposed by formal
action by the government's highest level of decision making authority, and remain
binding unless removed in the same manner. The City considers a resolution to
constitute a formal action for the purposes of establishing committed fund balance.
The action to constrain resources must occur within the fiscal reporting period;
however the amount can be determined subsequently. City Council imposed
Commitments are as follows:
1. Facilities Financial Planning (FFP) Fund: In conjunction with the City's
Facilities Financial Plan, a sinking fund has been established to amortize the
cost of critical City facilities such as, but not limited to, the Civic Center,
Police Department buildings, Fire Stations, Library Branches and other Facility
Improvement Projects.
The Facilities Financial Planning Program establishes a level charge to the
General Fund that will perpetually replenish the cash flows necessary to
finance the construction of critical City facilities. This plan will be updated
annually as part of the budget process, or as conditions change. The City shall
strive to maintain fund balance in the Facilities Financial Planning Reserve at a
level equal to or greater than the maximum annual. debt service on existing
obligations.
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The eligible uses of this reserve include the cash funding of public facility
improvements or the servicing of related debt.
2. Off Street Parking: Per NBMC 12.44.025 fifty percent (50 %) of parking meter
revenue collected in designated areas is set aside for acquisition, development
and improvement of off street parking facilities within those areas.
3. In Lieu Parking: Per NBMC 12.44.125 the City requires commercial businesses
to provide adequate off - street parking or where this is not possible, businesses
are afforded the opportunity to pay an annual fee and use parking spaces in a
municipal lot, providing such a lot is located within specified proximity to the
business. These funds can only be used to provide additional parking.
4. Neighborhood Enhancement - A: NBMC 12.44.027 directs revenues from
parking meters in Zone 9 shall be apportioned to this Neighborhood
Enhancement A. Funds accumulated will only be used for the purpose of
enhancing and supplementing services to the West Newport area. Both the
nature of the supplemental services and the definition of the area served are
set forth in the Code Section above.
5. Neighborhood Enhancement - B: NBMC 12.44.027 directs that fifty percent
(50 %) of revenues from parking meters in the Balboa Peninsula be
apportioned to this Neighborhood Enhancement B. Funds accumulated will
only be used for the purpose of enhancing and supplementing services in the
Balboa Peninsula. Specific details are contained in the Code Section.
6. Cable Franchise: Pursuant to the provisions of the Newport Beach Municipal
Code, Title 5, Business Licenses & Regulations, Chapter 5.44, in return for the
use of the City's streets and public ways for the purpose of installing,
operating, maintaining, or reconstructing a cable system to provide cable
service, fees are collected by the City from cable providers. Those fees are to
be used by the City for support of Public, Education, and Government access
programming only.
7. Oil and Gas Reserve: The annual $40,000 which is being set aside from the oil
and gas field production revenues is to be used to fund abandoned wells and
facilities as they go out of service.
8. Capital Reappropriation: This reserve represents an administrative procedure
that recognizes a portion of fund balance is not readily available to fund new
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endeavors because it has been reappropriated through the budget adoption
process or amendment process.
D. Assigned fund balance: That portion of a fund balance that includes amounts that
are constrained by the City's intent to be used for specific purposes but that are not
restricted or committed. This policy hereby delegates the authority to the City
Manager or designee to modify or create new assignments of fund balance.
Constraints imposed on the use of assigned amounts may be changed by the City
Manager or his designee. Appropriations of balances are subject to Council Policy
F -3 concerning budget adoption and administration.
E. Unassigned fund balance:
1. Contingency Reserve: The Contingency Reserve shall have a target balance of
twenty five percent (25%) of General Fund "Operating Budget" as originally
adopted. Operating Budget for this purpose shall include current expenditure
appropriations and shall exclude Capital Improvement Projects and Transfers
Out. Appropriation and /or access to these funds are generally reserved for
emergency or unforeseen situations but may, be accessed by Council by simple
budget appropriation. Examples may include but are not limited to the
following:
a. A catastrophic loss of critical infrastructure.
b. A State or Federally declared state of emergency.
c. Any settlement arising from a claim or judgment.
d. Deviation from budgeted revenue projections.
e. Any action by another government that eliminates or shifts revenues from
the City.
f. inability of the City to meet its debt service obligations in any given year.
g. Other circumstances deemed necessary by City Council to meet the claims
and obligations of the City.
Should the Contingency Reserve be used, the City Manager shall present a plan
to City Council to replenish the reserve within five years.
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2. Residual Fund Balance: The residual portion of available fund balance that is not
otherwise restricted, committed or assigned and is above and beyond the
Contingency Reserve target reserve balance.
PROPRIETARY FUND RESERVES (NET WORKING CAPITAL)
In the case of Proprietary Funds (Enterprise and Internal Service Funds), Generally
Accepted Accounting Principles ( "GAAP ") does not permit the reporting of reserves on
the face of City financial statements. However, this does not preclude the City from
setting policies to accumulate financial resources for prudent financial management of
its proprietary fund operations. Since proprietary funds may include both long -term
capital assets and long -term liabilities, the most comparable measure of liquid financial
resources that is similar to fund balance in proprietary funds is net working capital
which is the difference between current assets and current liabilities. For all further
references to reserves in Proprietary Funds, Net Working Capital is the intended
meaning.
A. Water Enterprise Fund
1. Stabilization and Contingency Reserve: This Reserve is used to provide
sufficient funds to support seasonal variations in cash flows and in more extreme
conditions, to maintain operations for a reasonable period of time so the City
may reorganize in an orderly manner or effectuate a rate increase to offset
sustained cost increases. The intent of the Reserve is to provide funds to offset
cost increases that are projected to be short - lived, thereby partially eliminating
the volatility in annual rate adjustments. It is not intended to offset ongoing,
long -term pricing structure changes. The target level of this reserve is fifty
percent (50 %) of the annual operating budget. This reserve level is intended to
provide a reorganization period of & months with zero income or 24 months at a
twenty-five percent (25 %) loss rate. The City Council must approve the use of
these funds, based on City Manager recommendation. Funds collected in excess
of the Stabilization reserve target would be available to offset future rate
adjustments, while extended reserve shortfalls would be recovered from future
rate increases. Should catastrophic losses to the infrastructure system occur, the
Stabilization and Contingency Reserve may be called upon to avoid disruption.to
water distribution.
2. Infrastructure Replacement Funding Policy_: This funding policy is intended to
be a temporary repository for cash flows associated with the funding of
infrastructure replacement projects provided by the Water Master Plan. The
contribution rate is intended to level - amortize the cost of infrastructure
replacement projects over a long period. The annual funding rate of the Water
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Master Plan is targeted at an amount that, when combined with prior or future
year contributions, is sufficient to provide for the eventual replacement of assets
as scheduled in the plan. This contribution policy is based on the funding
requirements of the most current Water Master Plan. There are no minimum or
maximum balances contemplated by this funding policy. However, the
contributions level should be reviewed periodically or as major updates to the
Water Master Plan occur. Annual funding is contingent on many factors and
may ultimately involve a combined strategy of cash funding and debt issuance
with the intent to normalize the burden on Water customer rates.
B. Wastewater Enterprise Fund
1. Stabilization and Contingency Reserve: This Reserve is used to provide
sufficient funds to support seasonal variations in cash flows and in more extreme
conditions, to maintain operations for a reasonable period of time so the City
may reorganize in an orderly manner or effectuate a rate increase to offset
sustained cost increases. The intent of the Reserve is to provide funds to offset
cost increases that are projected to be short - lived, thereby partially eliminating
the volatility in annual rate adjustments. It is not intended to offset ongoing,
long -term pricing structure changes. The target level of this reserve is fifty
percent (50 %) of the annual operating budget. This reserve level is intended to
provide a reorganization period of 6 months with zero income or 24 months at a
twenty -five percent (25 %) loss rate. The City Council must approve use of these
funds, based on City Manager recommendation. Funds collected in excess of the
Stabilization reserve target would be available to offset future rate adjustments,
while extended reserve shortfalls would be recovered from future rate increases.
Should catastrophic losses to the infrastructure system occur, the Stabilization
and Contingency Reserve may be called upon to avoid disruption to wastewater
service.
2. Infrastructure Replacement Funding Polia: This funding policy is intended to
be a temporary repository for cash flows associated with the funding of
infrastructure replacement projects provided by the Wastewater Master Plan.
The contribution rate is intended to level - amortize the cost of infrastructure
replacement projects over a long period of time. The annual funding rate of the
Wastewater Master Plan is targeted at an amount that, when combined with
prior or future year contributions, is sufficient to provide for the eventual
replacement of assets as scheduled in the plan. This contribution policy should
be updated periodically based on the most current Wastewater Master Plan.
There are no minimum or maximum balances contemplated by this funding
policy. However, the contributions level should be reviewed periodically or as
major updates to the Wastewater Master Plan occur. Annual funding is
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contingent on many factors and may ultimately involve a combined strategy of
cash funding and debt issuance with the intent to normalize the burden on
Wastewater customer rates.
C. Internal Service Funds
Back rg ound.
Internal Service Funds are used to centrally manage and account for specific
program activity in a centralized cost center. Their revenue generally comes from
internal charges to departmental operating budgets rather than direct
appropriations. They have several functions.
- -They work well in normalizing departmental budgeting for programs that have
life - cycles greater than one year; thereby facilitating level budgeting for
expenditures that will, by their nature, be erratic from year to year. This also
facilitates easier identification of long term trends.
- -They act as a strategic savings plan for long -term assets and liabilities.
- -Frown an analytical standpoint, they enable appropriate distribution of city -wide
costs to individual departments, thereby more readily establishing true costs of
various operations.
Since departmental charges to the internal service fund duplicate the ultimate
expenditure from the internal service fund, they are eliminated when consolidating
entity -wide totals.
The measurement criteria, cash flow patterns, funding horizon and acceptable
funding Ievels are unique to each program being funded. Policy regarding target
balance and /or contribution policy, gain /loss amortization assumption, source data,
and governance for each of the City's Internal Service Funds is set forth as follows:
1. For all Internal Service Funds: The Finance Director may transfer part or all of
any unencumbered fund balance between the Internal Service Funds provided
that the withdrawal of funds from the transferred fund would not cause
insufficient reserve levels or insufficient resources to carry out its intended
purpose. This action is appropriate when the decline in cash balance in any fund
is precipitated by an off -trend non- recurring event. The Finance Director will
make such recommendations as part of the annual budget adoption or through
separate Council action.
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2. Equipment Maintenance Fund and Equipment Replacement Fund: The
Equipment Maintenance and Replacement Funds receive operating money from
the Departments to provide equipment maintenance and to fund the regular
replacement of major pieces of equipment (mostly vehicles) at their economic
obsolescence.
a. Equipment Maintenance Fund: The Equipment Maintenance Fund acts solely
as a cost allocation center (vs. a pre - funding center) and is funded on a pay -
as- you -go basis by departmental maintenance charges by vehicle type and
usage requirement.. Because of this limited function, the target year -end
balance is zero.
Contribution rates (departmental charges) are set to include the direct costs
associated with maintaining the City vehicle fleet, including fleet
maintenance employee salary and benefits, operating expenses and
maintenance related capital outlay. Administrative overhead and
maintenance facility improvements and replacement costs are to be provided
outside of this cost unit.
Governance , is achieved through annual management adjustment of
contribution rates on the basis of maintenance cost by vehicle and
distribution of costs based on fleet use by department.
b. Equipment Replacement Fund: Operating Departments are charged annual
amounts sufficient to accumulate funds for the replacement of vehicles,
communications equipment, parking equipment and other equipment
replacement determined appropriate by the Finance Director. The City
Manager recommends annual rate adjustments as part of the budget
preparation process. These adjustments are based on pricing, future
replacement schedules and other variables.
The age and needs of the equipment inventory vary from year to year.
Therefore the year -end fund balance will fluctuate in direct correlation to
accumulated depreciation. In general, it will increase in the years preceding
the scheduled replacement of relatively large percentage of the equipment, on
a dollar value basis. However, rising equipment costs, dissimilar future
needs, replacing equipment faster than their expected life or maintaining
equipment longer than their expected life all contribute to variation from the
projected schedule.
Target funding levels shall be determined by the Finance Director after
considering the age, expected life and cash flow anticipated by the
replacement equipment being funded. If departmental replacement charges
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for equipment prove to be excessive or insufficient with regard to this target
funding level, new rates established during the next budget cycle will be
adjusted with a view toward bringing the balance back to the target level over
a three -year period.
3. Insurance Reserve Funds: The Insurance Reserve funds account for the activities
of general liability and workers' compensation claims.
Background.
The City employs an actuary to estimate the liabilities associated with the general
liability and workers compensation activities. The costs typically associated with
these programs include: claims administration, legal defense, insurance
premiums, self insured retention and the establishment of appropriate loss
reserves including "incurred- but -not reported" (IBNR) claims. In a prescribed
measurement methodology, the Actuary estimates the liabilities in conformity
with Generally Accepted Accounting Principles (GAAP).
The Actuary refers to this measurement level in his report as the "Expected
Level." However, because actuarial estimates are subject to significant
uncertainties, actuaries typically recommend that a target funding level be set at
an amount in excess of expected liability as a margin to cover contingencies. A
typical target funding level would be set to obtain a specified confidence level
(the percent chance that resources set -aside will be sufficient to cover existing
claims).
Full funding of the Actuary's "Target Funding Level" establishes a seventy-five
percent (75 %) confidence there will be sufficient resources (including projected
interest) to pay the full amount of existing claims without future contributions.
Funding at the "Expected Level" produces a confidence level of only fifty percent
to sixty-five percent (50 % -65 %). Therefore, the target funding of insurance
reserves should exceed the "Expected Level" to account for adverse estimate
deviation.
Policy & Practice.
The City should target funding of its risk management obligations at not less
than the Expected Level, described above; and not more than an amount
sufficient to establish a seventy-five percent (75 %) Confidence Level. Actuarial
losses should be recovered over a rolling 3 -year basis while actuarial gains
should be amortized over a rolling 5 -year basis. As part of the operating budget,
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each department will be charged a rate equal to its proportionate share of the
total "revenue' required to fund the Insurance Reserve Fund at this level.
To lessen the impact of short -term annual rate change fluctuation, City
management may implement one -time fund transfers (rather than department
rate increases) when funding shortfalls appear to be due to unusually sharp and
non - recurring factors. Excess reserves in other areas may be transferred to the
internal service fund in these instances but such transfers should not exceed the
funding necessary to reach a seventy -five (75 %) confidence level interval.
4. Compensated Absences Fund:
Background.
The primary purpose of flex leave, vacation leave and sick leave is to provide
compensated time off as appropriate and approved. However, under certain
circumstances, typically at separation from service, some employees have the
option of receiving cash -out payments for some accumulated leave balances.
The Compensated Absences Fund is utilized primarily as a budget smoothing
technique for any such leave bank liquidations. The primary purpose of the
Compensated Absences Fund is to maintain a balance sufficient to facilitate this
smoothing.
Policy and Practice.
The contribution rate will be set to cover estimated annual cash flows based on a
three -year trailing average.
The minimum cash reserve should not fall below that three -year average. The
maximum cash reserve should not exceed fifty percent (50 %) of the long term
liability. The target cash reserve shall be the median difference between the
minimum and maximum figures.
Each department will make contributions to the Compensated Absences Fund
through its operating budget as a specified percentage of salary. The Finance
Director will review and recommend adjustments to the percentage of salary
required during the annual budget development process. This percentage will
be set so as to maintain the reserve within the parameters established above.
5. Post Retirement Funding Policies:
a. Pension Funding:
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(i) California Public Emplo3ees Retirement System (CaIPERS): The City's
principal Defined Benefit Pension program is provided through contract
with CaIPERS. The City's contributions to the plan include an actuarially
determined employer contribution that fluctuates each year based on an
annual actuarial plan valuation. This variable rate employer contribution
includes the normal cost of providing the contracted benefits plus or
minus an amortization of plan changes and net actuarial gains and losses
since the last valuation period.
It is the City's policy to make contributions to the plan equaling at least
one hundred percent (100 %) of the actuarially required contribution
(annual pension cost). Because the City pays the entire actuarially
required contribution each year, by definition, its net pension obligation at
the end of each year is $0. Any unfunded actuarial liability (UAL) is
amortized and paid in accordance with the actuary's funding
recommendations. The City will strive to maintain its UAL within a range
that is considered acceptable to actuarial standards. The City Council
shall consider increasing the annual CalPERS contribution should the
UAL status fall below acceptable actuarial standards.
(ii) Laborer's International Union of North America ( LIUNA): The City
provides funds to support a supplemental pension plan for some
employee associations through contract with LIUNA. This is funded at a
fixed percentage of total compensation on a pay -as- you -go basis. The City
is not contractually required to guarantee the level of the ultimate LIUNA
benefit to retirees, nor does it do so. Therefore the City's liability for this
program is full funded each year.
b. Other Post Employment Benefits (OPEB Funding }:
Background.
The City's OPEB funding obligations consists of two retiree medical plans.
New Plan. Effective January 2006, the City and its employee associations
agreed to major changes to the Post Employment Healthcare Plan. New
employees and all current employees participate in a program that requires
certain defined employee and employer contributions while the employee is
in active service. However, once the contributions have been made to the
employee's account, the City has transferred a substantial portion of the
funding risk to the employee.
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Old Plana Eligible employees who retired prior to the "New Plan' and
certain active employees were eligible to continue to receive post - retirement
medical benefits (a defined benefit plan). The cost was divided among the
City, current employees and retirees. In the past, this program was largely
funded on a pay -as- you -go basis, so there was a significant unfunded
liability. Recognizing this problem, the City began contributing to this
obligation in 2001. In 2008, these assets were placed in a pre - funding trust.
The City's intention is to amortize the remaining unfunded liability within 20
years.
Policy & Practice.
New Plan. Consistent with agreements between the City and Employee
Associations, the new defined contribution plan will be one hundred percent
(100 %) funded, on an ongoing basis, as part of the annual budget process.
Funds to cover this expenditure will be contained within the salary section of
each department's annual, operating budget.
Old Plan. The City's policy is to pre fund the explicit (cash subsidy) portion
of the Actuarial Accrued Liability (AAL) of the remnants of the old plan over
a 20 -year amortization period, or less. This amount will be based on the
Annual Required Contribution (ARC) determined by a biennial actuarial
review; subject to review and analysis by the City. The City will strive to
maintain a funded status that will be within a range that is considered
acceptable to actuarial standards. The City Council shall consider increasing
the annual OPEB contribution should the funded status fall below acceptable
actuarial standards.
Adopted January 24,1994 Amended - June 10, 2014
Amended - April 10, 1995
Amended - April 27,1998
Amended - March 14, 2000
Amended - May 8, 2001
Amended - April 23, 2002
Amended -- April 13, 2004
Amended - September 15, 2008
Amended - November 12, 2008
Amended a May 24, 2011
Amended - September 27, 2011
Amended - May 14, 2013
14
RE
RECREATION FEES
The instructional recreational programs for children and adults provided by the
Recreation & Senior Services Department will be conducted for a fee to offset associated
cost with managing such programs. Registration fees will be based on an amount
sufficient to acquire independent contractors, class materials and the administrative
overhead and a facility use fee. Occasionally, it may be necessary to conduct programs
in which revenues are not sufficient to be self - supporting as authorized by Chapter 3.36
of the Municipal Code. The Recreation & Senior Services Director or designee is
authorized to enter into agreements for securing independent contractors for approved
instructional recreation activities.
Adopted - October 1963
Amended - August 30,1966
Amended - November 25,1968
Amended - March 1970
Amended - April 12,1971
Amended - August 9,1971
Amended - February 14,1972
Amended - March 13,1972
Amended - November 11, 1974
Amended - March 24,1975
Amended - December 8,1975
Amended - November 27,1978
Formerly 1 -6
Formerly 1 -2
Amended - November 28,1988
Reassigned - January 24,1994
Amended - February 27,1995
Amended - December 14,1998
Amended - May 8, 2001
Amended - April 8, 2003
Amended - April 13, 2004
Amended - September 13, 2005
Amended - October 10, 2006
Amended - September 27, 2011
Amended - June 10, 2014
1