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F -2 • <br />current year operating funds or bond proceeds instead, thereby retaining the <br />Reserve funds for future use. Reserve Funds will not be spent for any function <br />other than the specific purpose of the Reserve Account from which they are <br />drawn without a separate City Council Resolution approving that specific action. <br />Information regarding Annual Budget Adoption and Administration is <br />contained in City Council Policy F -3. <br />C. Categories of Reserves. <br />1. Accounting Reserves. Generally accepted governmental accounting <br />practices require identification of generic reserve funds for certain <br />purposes. These accounts represent the unspendable portions of fund <br />balance, such as inventories and long -term receivables, as well as funds <br />that are legally restricted by some external source, such as debt service <br />reserves and encumbrances. Reserving funds for a contract awarded in <br />one year but not completed until a succeeding year is one example of an <br />accounting reserve for encumbrance. <br />2. Contingency Reserves. Contingency Reserves represent funds for • <br />unexpected financial emergencies. One example requiring the use of this <br />Reserve is the adverse impact of natural disasters such as earthquake or <br />flooding on revenue availability, as well as increased demand for City <br />services. Other examples are unexpected loss or reduction of a key <br />revenue source; special projects, programs, or price changes mandated by <br />another government entity; and emergency capital projects needed to deal <br />with unforeseen structural failure. <br />3. Designated Reserves. These Reserves are designated for known or <br />anticipated events. Such events require large, non - recurring financial <br />outlay, such as the replacement of systems and equipment or major capital <br />improvements. <br />4. Stabilization Reserves. Stabilization Reserves enhance the orderly <br />management of the Operating Budget by stabilizing revenues and <br />expenditures, which fluctuate beyond the ability of City staff to control or <br />predict. One example is the annual change in retirement contribution <br />rates mandated by the Public Employee Retirement System (PERS). Other <br />examples are changing prices for utilities and fuel, market value <br />adjustment for investment earnings, and volatility in certain special <br />2 •