HomeMy WebLinkAbout16 ESTABLISHMENT OF GENERAL FUND RESERVE POLICY & SPECIAL FUND ACCOUNT1 AGENDA REPORT
MEETING DATE:
TO:
FROM:
SUBJECT:
SUMMARY:
OCTOBER 16, 2012
Agenda Item 16
Reviewed:
City Manager
Finance Director /A
HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
JEFFREY C. PARKER, CITY MANAGER
ESTABLISHMENT OF A GENERAL FUND RESERVE POLICY AND
SPECIAL FUND ACCOUNT
In January 2012, Mayor Nielsen established as one of his goals the development of a
comprehensive fund balance reserve policy to ensure appropriate reserves are
maintained and that the City of Tustin follows a financial plan that creates fiscal
sustainability for the future.
RECOMMENDATION:
It is recommended that the City Council direct staff to prepare a resolution that
establishes the following policy regarding General Fund reserves and Special Fund
accounts.
FISCAL IMPACT:
Implementing these policies will strengthen the City of Tustin's financial sustainability for
the future.
BACKGROUND:
Staff is recommending the following policy be established for the General Fund reserve
and the establishment of 3 new Special Fund accounts:
1. Maintain a 20% General Fund reserve policy with a provision that only with the
City Council declaring a financial emergency shall the reserves be lowered to
fewer than 15 %. The Government Finance Officers Association which
establishes national standards for local government finance recommends that
cities maintain a minimum of 10 % -12% General Fund reserves. This policy would
Agenda Report — Establishment of a General Fund Reserve Policy and Special Fund Account
October 16, 2012
Page 2
ensure that our standards in Tustin are significantly higher than recommended by
the National organization.
Our current General Fund reserve balance is $9,845,000.00 which is at the 20%
recommended level under our policy.
2. Establish the following Special Fund accounts:
a. Emergency Fund — Recommended $1 million
For use in a City Council declared emergency such as earthquake, flood, and
fire. This fund would augment City operational cost until the city would seek
reimbursement from either the state or federal government.
b. Land Proceeds Fund
These funds would be derived from land sales primarily in the Tustin Legacy
Project, however, could be any City owned property. The funds would be
allocated to insure the infrastructure needs are met in the overall
development of the Tustin Legacy Plan and to support the implementation of
key elements of the City and Legacy project such as economic development
opportunities and development of parks and recreational facilities throughout
the City.
c. Special Capital Project Fund
The money allocated to this fund would provide for the financing of needed
infrastructure where there is currently no dedicated funding source such as
water funds or transportation funds. These would be General Fund
expenditures that would include: technology upgrades, building
construction /upgrades and park enhancements. It is recommended that 25^%
of any fiscal year General Fund surplus be dedicated to this fund.
By establishing the Special Funds accounts along with the conservative 20% General
Fund reserve level, the City of Tustin will have created a financially sustainable
accounting program for the future.
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