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RESERVES/ DESIGNATIONS OF FUND BALANCE <br />PURPOSE <br />A q ! 3TIS <br />F -2 <br />To establish City Council policy for the administration of financial reserves and fund <br />balances. <br />DISCUSSION <br />A. Background. 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 />For clarification, the City also has a number of Special Revenue Funds. These <br />Funds are somewhat similar to reserves in that they act as a repository for money <br />that can only be used for specific purposes. Reserves are generally distinguished <br />from Special Revenue Funds in that decisions regarding the purpose and /or the <br />amounts to be set aside, as well as the circumstances for use, normally fall within <br />the authority of the City Council. That authority normally rests largely with an <br />external entity in the case of Special Revenue Funds. <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 />Use of Reserves. The City Council decides whether to appropriate funds from <br />Reserve Accounts. Even though a project or other expenditure qualifies as a <br />proper use of Reserves, the Council may decide that it is more beneficial to use <br />1