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RESERVES /DESIGNATIONS OF FUND BALANCE <br />PURPOSE <br />F -2 <br />To establish City Council policy for the administration of financial reserves and fund <br />balances. <br />DISCUSSION <br />A. Back round. Prudent financial management dictates that some portion of the <br />funds available to the City be reserved for future use. Future uses are <br />categorized as either pre - planned projects or unforeseen financial emergencies. <br />B. Structure and Funding of Reserves. This Policy establishes Reserve Accounts or <br />designated Fund Balance levels for moneys being held in reserve. In addition, <br />the sources and eventual use of Reserve Funds are set forth. <br />It is the policy of the City Council that each Reserve identified herein is to be <br />fully funded as part of the annual budget process. If operational or other <br />considerations require the City Council to temporarily override this policy <br />during any fiscal year, the City Manager will recommend to the City Council a <br />plan to restore any Reserves falling below required minimum levels. Reserve <br />levels will be restored as soon as practical, but in not more than 5 years. <br />Each of the City's fiscal reserves is established and maintained for one of four <br />purposes listed in general order of importance below. If the reserve <br />requirements of this policy are unmet in any fiscal year, the City Manager will <br />recommend funding prioritization to the City Council as part of the Budget. <br />C. Use of Reserves. Governing parameters regarding use of funds in Reserve <br />Accounts is established by Council Policy F -3. The City Council decides whether <br />to appropriate funds from Reserve Accounts. Even though a project or other <br />expenditure qualifies as a proper use of Reserves, the Council may decide that it <br />is more beneficial to use current year operating funds or bond proceeds instead, <br />thereby retaining the Reserve funds for future use. Reserve Funds will not be <br />spent for any function other than the specific purpose of the Reserve Account <br />from which they are drawn without a separate City Council Resolution <br />approving that specific action. <br />1