HomeMy WebLinkAbout(2019, 02/12) - F-3 - AmendedBUDGET ADOPTION AND ADMINISTRATION
PURPOSE
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To establish the policy for the preparation, adoption, and administration of the City's
Annual Budget.
POLICY
A. Budgeting Philosophy.
The City shall prepare and adopt an annual budget by June 30, of each year, as
required by Section 1104 of the City Charter. To the extent practicable, the budget
shall be prepared to generate a surplus in most years by conservatively estimating
projected revenues and liberally estimating projected expenses. Surpluses will be
allocated by the City Council pursuant to Policy F-5 or as otherwise determined
by the City Council.
The City has a wide variety of obligations associated with its activities and shall
establish appropriate reserves for such obligations based upon the best available
information at the time each budget is prepared. The City Council shall direct and
control the planned use of reserves through the budget appropriation process.
Appropriations for operating expenditures shall generally be balanced with
current revenue sources and absent compelling, unexpected circumstances, will
generally not rely on one-time revenue sources or reserves. However, this
constraint is not intended to limit the periodic use of financial resources that were
accumulated over time for a specific purpose or use of reserves consistent with
their intended purpose.
The City Council shall maintain a contingency reserve that shall be a "safety net"
to address exigent circumstances consistent with Council Policy F-2 section E. 1.
This reserve will generally not be used for other purposes. The contingency
reserve will be invested in short-term readily liquid assets so they can be utilized
on short notice.
The budget may be developed with one or more contingency plans to protect
against volatility or unexpected events. When significant uncertainty exists
concerning revenue volatility or threatened/ pending obligations, the City Council
and City Manager reserve the right to impose any special fiscal control measures,
including a personnel hiring freeze, and other spending controls, whenever
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circumstances warrant. The City Council may authorize the use of contingency
reserves for any purpose as set forth by Council Policy F-2.
B. Organization of the Budget.
The Budget shall consist of two volumes: the Budget Detail and the Capital
Improvement Program (CIP).
The Budget Detail is an Operating Budget, which shall also provide historical
trends of summary level information and contains line -by-line detail regarding
operating expenditures and revenue estimates for the prior year, current year and
budget year. Operating expenditures are categorized into five classifications
within the Operating Budget. These are Salaries and Benefits, Maintenance and
Operations, Capital Outlay, Debt Services and Interfund Transfers.
The CIP document provides a summary of current and future planned projects,
basic descriptions of each project, the anticipated funding source and the scope of
work to be performed. CIP improvements are generally major facility or
infrastructure improvement projects managed by the Public Works Department.
The Finance Committee generally will not make a recommendation on the CIP
Budget because it is within the purview of the City Council alone to determine
how best to spend the City's resources. However, to the extent needed capital
improvements or repairs come to the attention of the Finance Committee and the
failure to construct those improvements or make those repairs may expose the City
to financial risk, the Finance Committee may make a recommendation that such
improvements be installed in the coming fiscal year(s). Because of the nature and
scope of the CIP improvements, in most instances, the construction of such
improvements will take place over more than one fiscal year.
The final and complete versions of both budget volumes will be published and
available on the City's website by no later than September 30th.
C. Budget Process.
In November of each year, the Finance Department will prepare a budget calendar
and issue budget instructions to each department for use in preparing the budget.
During December of each year, the Finance Department will prepare updated
revenue estimates and fund balance projections for the current year and prepare
preliminary revenue projections for the next fiscal year. Included in these
instructions will be budget guidelines and, if deemed necessary, appropriation
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targets for each department. These guidelines will be developed by the Finance
Director and approved by the City Manager.
After further refinements of revenue estimates and the completion of Department
proposed expenditure appropriation requests, the Finance Department will
summarize department requests for review by the City Manager. After the City
Manager has reviewed and amended the Department Directors requests, the
Finance Department will prepare the City Manager's proposed budget for the next
fiscal year and shall submit it to the City Council and to the Finance Committee.
The Finance Committee should have the opportunity to question staff and discuss
the Budget Detail on at least two occasions.
The City Council shall hold as many budget study sessions as it deems necessary.
The City Council and the Finance Committee should have a joint meeting (which
may be in a Study Session) not later than the second Council meeting in May to
discuss the Budget Detail. After the joint meeting, the Finance Committee shall
make a recommendation to the City Council on the Budget Detail. Such
recommendation need not include any recommendation on items on the Proposed
Budget Revisions unless the Finance Committee is specifically asked to do so by
the City Council.
All proposed Council changes to the City Manager's proposed budget shall be
itemized in a document referred to as the Proposed Budget Revisions. The City
Council shall hold a budget hearing and adopt the proposed budget with any
desired Proposed Budget Revisions on or before June 30 by formal budget
resolution. When adopted, the proposed budget as supplement by the finalized
Proposed Budget Revisions shall become the final budget.
D. Long -Range Financial Forecast (LRFF).
Strategic planning begins with determining the City's fiscal capacity based upon
long-term financial forecasts of recurring available revenues and future financial
obligations. Prior to the adoption of the annual budget, the Finance Department
will prepare and present to the Finance Committee a Long -Range Financial
Forecast that evaluates known internal and external issues impacting the City's
financial condition. The LRFF is intended to help the City achieve the following:
1. The City can attain and maintain financial sustainability;
2. The City has sufficient long-term information to guide financial decisions;
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3. The City has sufficient resources to provide programs and services for the
stakeholders;
4. Identify potential risks to on-going operations in the long-term financial
planning process and communicate these risks on an annual basis;
5. Establish mechanisms to identify early warning indicators; and
6. Identify changes in expenditure or revenue structures needed to deliver
services or to meet the goals adopted by the City Council.
The LRFF will forecast revenues, expenditures, and the financial position of the
General Fund Contingency Reserve at least five years into the future or longer
where specific issues call for a longer time horizon. The LRFF will identify issues
that may challenge the continued financial health of the City, and the plan will
identify possible solutions to those challenges. Planning decisions shall be made
primarily from a long-term perspective and structural balance is the goal of the
planning process.
E. Administration of the Annual Budget.
During the budget year, Department Directors and their designated
representatives may authorize only those expenditures that are based on
appropriations previously approved by City Council action, and only from
accounts under their organizational responsibility. Any unexpended
appropriations, except valid encumbrances such as commitments already made,
expire at fiscal year-end unless specifically reappropriated by the City Council for
expenditure during the ensuing fiscal year. Department Directors shall not
authorize expenditures above budget appropriations in any given expenditure
Classification within their purview, without additional appropriation or transfer
as specified below. Appropriations may be transferred, amended or reduced
subject to the following limitations:
1. New Appropriations. During the Budget Year, the City Council may
appropriate additional funds, as it deems appropriate, by a City Council
Budget Amendment. The City Manager has authority to approve requests
for budget increases not to exceed $10,000 in any Budget line item or
activity or Capital Project. The ability of the City Manager to approve such
requests must be specifically included in each year's Budget Resolution to
remain valid.
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2. Grants & Donations. The City Manager may accept grants or donations of
up to $30,000 on behalf of the City, but shall refer any such grant or
donation to the City Council for consideration if a condition of such grant
or donation entails any duty of the City to contribute and/or expend a sum
in excess of $10,000 not covered by such grant or donation, or that carries a
future obligation to maintain and/or insure any improvement. The City
Council will be formally notified of all grants or donations on a quarterly
basis by way of a "receive and file" or other Council meeting agenda item.
This ability of the City Manager to accept grants or donations must be
specifically included in each year's Budget Resolution to remain valid.
Additionally, grant related appropriations approved by City Council may
be carried forward to the following fiscal year(s) as long as the grant terms
remain valid, the expenditures are consistent with the previous Council
authorization, and the funds would otherwise need to be returned to the
granting or donor agency. Also, see Council Policy F-25 for specific grant
acceptance and administration procedures.
Grant agreements and restricted donations in excess of $30,000 must be
specifically approved by the City Council. Occasionally, the terms and
conditions of a grant are approved by City Council in a year prior to when
the program activity will take place and therefore, the funds are not
appropriated to carry out the grant at that time. In such cases, the City
Manager may appropriate the funds when they are received, provided the
expenditures clearly meet the amount, terms, nature and intent of the grant
or donation previously approved by City Council.
3. Assessment District Appropriation. Assessment district projects are
typically funded by property owner contributions and bond financing
secured by property assessments. City staff will initially seek appropriation
to advance City resources for the assessment engineering and the design
work related to a proposed assessment district. Since the City's advance is
at risk until a district is formed at a public hearing, the appropriation
related to advanced resources shall be subject to the normal budget policies.
However, once the district has been formed at a public hearing, the City
Council will adopt a "project -length" budget for the assessment district and
City staff will be allowed to roll the appropriations forward into future
fiscal years without rebudgeting the project through the formal CIP
process.
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When assessment bonds are issued to finance the improvements, the bond
issuance costs will be estimated at the maximum amount that would be
required to complete the improvements because it is not known how many
property owners will opt to pay the assessment in full during the cash
collection period, thereby reducing the size of the bond. Finance staff will
also have the authority to reduce Council appropriations (related to bond
issuance costs) after bonds are resized and sold. Money advanced by the
City will be included in the assessment amount and be reimbursed to the
City when the assessment district is formed except to the extent otherwise
agreed to by City Council resolution.
4. Transfers within Departments. During the fiscal year, actual expenditures
may exceed budget appropriations for specific expenditure line items
within departmental budgets. If a departmental budget within a specific
Classification is not exceeded, the Finance Director has the authority to
transfer funds elsewhere within that Classification and Department to
make the most efficient use of those funds appropriated by the City
Council.
5. Transfers between Departments. Further, funds may be realigned between
one Department and another, within the same Classification, with City
Manager approval. For example, if a Fire Department function and the
employee who accomplishes it are replaced by a slightly different function
assigned to the Police Department, the City Manager may authorize the
transfer of appropriated funds to support this function.
6. Transfers between Expenditure Categories. Any reprogramming of funds
(i.e. movement) of funds among the five Classifications within the General
or other Fund(s) requires the City Manager's approval. Any budget
revision that changes the total amount budgeted for any fund (other than
the minor provisions contained in paragraphs E.1. and E.7.b.) must be
approved by the City Council.
7. Transfers between Capital Improvement Projects (CIP). Budget Transfers
between Capital Improvement Projects shall be subject to the following
parameters:
a. Excess Project Appropriations or savings should be closed out and
returned to the project's fund balance. Funds may then be
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reappropriated to a new or existing project with the approval of City
Council.
b. Excess Project Appropriations may also be transferred from one CIP
project to another, if the projects utilize the same funding source and
are for substantially the same project purpose and physical location.
Project appropriation transfers of this nature shall require the
approval of the City Manager.
All proposed budget amendments and transfers will be submitted to the Finance
Director for review and processing prior to City Manager or Council
authorization.
All unexpended and unencumbered appropriations for the operating budget will
be canceled on June 30 of each fiscal year. All appropriations in the Capital
Improvement Budget for projects currently underway and remaining unexpended
at June 30111, as approved by the City Manager, will be appropriated to those
projects in the following fiscal year CIP Budget. Incomplete projects may be
reappropriated by the City Council during the Budget process or by separate
Council action.
F. Management Authorization and Responsibilities. Once the final Budget has been
approved by the City Council, specific City Council approval to make
expenditures consistent with the Budget will not be required except as provided
by other Council Policies and Administrative Procedures. It is the responsibility of
the City Manager and management to administer the City's budget within the
framework of policy and appropriation as approved by the City Council.
1. The Finance Director is responsible for checking purchase requests against
availability of funds and authorization as per the approved Budget.
2. Unless otherwise directed, routine filling of vacancies in staff positions
authorized within the Budget will not require further City Council
approval. However, new position, not addressed by the adopted budget
shall require City Council approval.
3. At fiscal year end, the Finance Director is authorized to record accruals and
transfers between funds and accounts in order to close projects or the books
of accounts of the City in accordance with generally accepted governmental
accounting principles as established by the Government Accounting
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Standards Board, Government Finance Officers Association, and other
appropriate accounting pronouncements. Any net shortage within a Fund
will be recorded as a decrease in Fund Balance. Any net excess will be
recorded as an increase to one or more appropriate Reserve Accounts as
recommended by the Finance Director and approved by the City Manager
or as is otherwise dictated by Council Reserve Policy (F-2). The net change
in fund balances will be reported to City Council through various
documents including Quarterly Financial Reports, the Comprehensive
Annual Financial Report (CAFR), Budget Documents and other financial
presentations. Funds that exceeded appropriations during the year or
ended the year with a deficit fund balance are reported annually in the
CAFR notes to the financial statements. (Information regarding the policy
parameters and administration of City Reserves is contained in City
Council Policy F-2.)
Adopted - January 24,1994
Amended - February 27,1995
Corrected - February 26, 1996
Amended - May 13,1996
Amended - May 26,1998
Amended - August 8, 2000
Amended - May 8, 2001
Amended - April 23, 2002
Formerly F-10, F-11, F-12, and F-21
Amended - April 8, 2003
Amended - April 13, 2004
Amended - September 13, 2005
Amended - October 10, 2006
Amended - August 11, 2009
Amended - September 27, 2011
Amended - February 12, 2019