SIGNIFICANT FINANCIAL AND BUDGETARY POLICIES

Transcription

1 SIGNIFICANT FINANCIAL AND BUDGETARY POLICIES The bsic plicies relted t the City's finncil nd budgetry plicies were frmlized n Nvember 10,1987. These plicies were expnded in subsequent yers with the dptin f the Integrted Budgeting nd Plnning Reslutin (88-87). The mst recent relevnt rdinnce discussing this prt f the City's finncil plicies is Ordinnce N dted My 21,2003. The fllwing sectins entitled Operting Prgrms, Cpitl nd Debt Mngement, nd Accunting, Auditing nd Finncil Plnning re lrgely excerpted frm this rdinnce nd subsequent budget rdinnces tht hve mended these plicies: Operting Plicies Revenues: Current revenues/resurces will be sufficient t supprt current expenditures/expenses. Ech Enterprise Fund will mintin revenues t supprt the full (direct nd indirect) cst f services prvided. An nnul review f ll fees nd chrges will be cnducted t determine the extent t which the full cst f sscited services is being recvered by revenues. Expenditures/Expenses: The Myr hs the uthrity t trnsfer funds t nd frm the budget ccunts within ny deprtment withut limittin. In dditin, the Myr cn uthrize the trnsfer f funds frm ne deprtment t nther deprtment within the sme fund; hwever, such trnsfer cnnt exceed 5% f the deprtment's budget expenditure ccunt grup. All retirement nd emplyee benefit systems will be finnced in mnner t systemticlly fund libilities. The City will ssure tht sufficient funds re prvided t py fr current service plus interest n unfunded libilities plus mrtiztin f the unfunded libilities ver prgrm perid. Recurring expenditures/expenses re t be funded with recurring revenue surces. The Beginning Fund Blnce/Equity reflected in the Budget shll utmticlly be djusted t the munt f the Ending Fund Blnce/Equity s reprted in the Cmprehensive Annul Finncil Reprt fr the prir yer. The revised Beginning Fund Blnce/Equity shll therefter be used t clculte the Ending Fund Blnce/Equity. This plicy pplies t ll funds fr which n nnul budget is dpted by the gverning bdy. The Unssigned Fund Blnce in the Generl Fund shll be mintined t level sufficient t prvide fr temprry finncing f unfreseen needs f n emergency nture nd t permit rderly djustment t chnges resulting frm the termintin f revenue surces.. The level f the Unssigned Fund Blnce in the Generl Fund will be minimum f 5% f ttl expenditures less debt service, beginning nt lter thn Fiscl Yer T the extent tht funds in the Generl Fund Blnce exceed 7.5% f ttl expenses less debt service, the excess funds re vilble upn pprpritin fr nn-recurring expenses. 1-13

2 Cpitl nd Debt Mngement Plicies Any cpitl prject r equipment funded thrugh the issunce f bnds will be finnced fr perid nt t exceed the expected life f the prject/equipment. Weighted verge generl bligtin bnd mturities will be kept t r belw 12 yers. Annul generl bligtin debt service (cntributin) will nt exceed 20% f the ttl Generl Fund revenue, excluding stte nd federl grnts. The City's prctice hs been t mintin n mre thn 20% f the ttl utstnding debt fr ech type f debt in vrible rte structure. The City will issue shrt-term securities fr the purpses f prviding: 1) interim finncing fr lng-term cpitl prjects, 2) finncing f shrt-term ssets t r ner the useful life 3) interim csh-flw/wrking cpitl needs s they rise, nd 4) t reduce the verll interest cst f debt finncing f the City. Accunting, Auditing nd Finncil Plnning Plicies Finncil sttements re prepred in ccrdnce with Generlly Accepted Accunting Principles (GAAP). An nnul udit is perfrmed by n independent public ccunting firm in ccrdnce with Generlly Accepted Accunting Principles nd their pinin will be included in the Cmprehensive Annul Finncil Reprt. Full disclsure is prvided in the Annul Finncil Sttements nd in Officil Sttements relting t bnd sles. These plicy sttements re intended t serve s guidelines fr finncil prctices nd budgetry frmultin nd dministrtin. Therefre, they hve been pplied in estblishing specific ssumptins nd methds used in prepring the FY2012 Budget, s exhibited by the fllwing methds. Bsis f Budgeting nd Accunting In generl, the bsis f budgeting nd the bsis f ccunting used in the preprtin f the City's nnul finncil reprt re the sme fr ll gvernmentl funds, (generl fund, specil revenue fund, debt service fund, nd cpitl prjects), withut exceptin. Revenues nd expenditures re budgeted cnsistent with the City's finncil sttements, which re prepred in ccrdnce with Generlly Accepted Accunting Principles fr ll gvernmentl funds. Gvernmentl funds re ccunted fr n mdified ccrul bsis. This mens tht revenues re recgnized in the ccunting perid in which they becme vilble nd mesurble. Expenditures re recgnized in the ccunting perid in which the fund libility is incurred, with the exceptin f lng-term libility. Significnt receivbles (revenues) nd libilities (expenditures) re recrded in the prir yer's budget up t sixty dys fter fiscl yer end if they represent erned incme r expenditures s f June 30, the lst dy f the fiscl yer. This includes the cst f emplyees' time s well s supplies, services, nd equipment delivered by June

3 Fr Enterprise Funds, the budgeting nd ccunting bsis re the sme except fr deprecitin nd nncurrent expenses. Enterprise Funds re ccunted fr n full ccrul bsis. Revenues nd expenses re recrded when they re erned/incurred. Enterprise Funds fcus n expenses relted t mintennce nd pertins, equipment purchses, nd exclude deprecitin nd ther llctins relted t incme determintin. Revenues received nd expenses pid fr gds nd services delivered by June 30 re credited r chrged t the current fiscl yer's budget. Encumbrnce ccunting is used t reserve funds cmmitted t vendrs fr supplies, services nd equipment thrughut the yer in ll funds. Hwever, encumbrnces fr items nt delivered by June 30 re cnceled nd re-estblished ginst the new fiscl yer budget fr ll perting budgets. Encumbrnces d nt estblish expenditures/expenses r libilities. Apprpritins nd encumbrnces fr cpitl prject funds re mintined in effect until they re liquidted. Reserves In every budget since FY1982, the City's fund blnce level hs been criticl cmpnent f the City's finncil mngement prgrm. Likewise, the Generl Debt Service Fund blnces hve been budgeted t prvide dequte reserves fr debt service pyments in the first seven mnths f the subsequent fiscl yer. Pensin fund cntributins nd emplyee helth cre csts hve been funded with reserve cmpnents thrugh the budget s well. These budgetry plicies were recgnized in the dptin by City Cuncil f the finncil plicies previusly mentined. Reserves exist in tw frms: Thse specificlly creted by rdinnce, nd Thse mintined s inpprprite r unssigned ending fund blnce. Mst f the City's budgetry reserves tke the frm f ending fund blnces nd re cnsequently the result f finncil ctivity s presented in the City's finncil sttements. Generl Fund Reserves The fllwing tble shws the ending unssigned fund blnce s well s the ctul yer end mintennce nd perting csts fr preceding fiscl yers, the estimted yer end csts fr the current fiscl yer nd the prpsed yer end csts fr the subsequent fiscl yer. 1-15

4 Fiscl Yer Histricl Dt FY FY2012 Generl Fund Avilble Fund Blnces ($ thusnds) Unssigned Ending Fund Blnce M&O Expenditures FY1995 FY1996 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 Actul FY2011 Estimte FY2012 Budget 50,682 69,579 84, ,856 80,409 66,590 79,432 80,335 83,027 88, , , , , , , , , , , , ,893 1,030,235 1,064,160 1,105,408 1,206,160 1,199,766 1,235,994 1,279,879 1,368,746 1,459,076 1,567,484 1,668,700 1,676,367 1,692,762 1,598,298 Debt Service Fund Reserves The Generl Debt Service Fund reserves exist t ensure City bndhlders tht the City f Hustn hs set side sufficient resurces t meet debt service requirements. ' A seven-mnth reserve is prvided fr fixed rte bligtins. This reserve cvers principl nd interest munt pyble in the first seven mnths f the fllwing fiscl yer fr thse issues which re funded frm d vlrem txes. This seven-mnth reserve plicy hs existed since FY1983 when the current fiscl yer (July 1 t June 30) nd the tx cllectin pyment dte (Jnury 31) were estblished. The City is required t mintin dditinl reserves due t chnging interest rtes n its vrible rte debt (VRD). Reserves n VRDs re bsed n the munt by which fifteen percent (r the cpped rte f the prgrm, if less thn 15%) exceeds the budgeted interest rte n the utstnding vrible rte debt during the fiscl yer. The City ls issues vrible rte cmmercil pper ntes. The clcultin fr reserves n cmmercil pper ntes re bsed n seven mnths interest n the prjected verge blnce t six percent plus the difference between cp f six percent nd the budgeted interest rte n the munt prjected t be utstnding during the twelve mnth perid fllwing the initil seven mnths. The reserve requirement my nt be necessry in the cse tht the reserves re cvered under credit greement. Enterprise Fund Reserves The City ls mintins Enterprise Fund reserves, which in mst cses, include: One t tw mnths' perting budget (8.33% per mnth f nnul mintennce nd perting expenses). Up t 5% f the vlue f ech system's prperty, plnt nd equipment fr purpses f renewing nd replcing sme. 1-16

5 Amunts sufficient t py the mximum nnul debt service n utstnding bnds. The City stisfies the reserve requirement fr the Enterprise Funds thrugh cmbintin f csh nd surety insurnce. Other Fund Reserves Pensin Funds - The City mkes nnul cntributins t its three emplyee pensin funds in ccrdnce with stte lw r with "meet nd cnfer" greements with the trustees f pensin system s uthrized by stte lw. The nnul cntributins t ech pln re bsed n cturil nlyses, which re perfrmed by independent cturil firms selected by the respective pensin fund brd trustees. Acturil nlyses n ech f the three systems must be perfrmed t lest nce every three yers. The cturil ssumptins nd techniques used in the develpment f ech cturil vlutin re discussed nd pprved by the respective brd f trustees in n pen meeting nd my ls be reviewed by n cturil firm chsen by the City dministrtin. Detils f these ssumptins nd techniques re summrized in ech cturil vlutin which becmes public dcument nce it is dpted by the brd f trustees f fund. Lng-Term Disbility - The Lng-Term Disbility Pln is designed t prvide City emplyees with n incme prtectin pln in the event they becme disbled. The Lng-Term Disbility Fund ws estblished in FY1991 s n Internl Service Fund t budget nd ccunt fr the revenues, expenses, nd utstnding libilities. Funds re prvided t fully fund the utstnding nd prjected future libilities frm existing nd unreprted clims. These reserves will be djusted nnully bsed n n cturil study f the funds. Wrkers' Cmpenstin Administrtin The ptentil libility fr the City emplyees due t injury while n the jb is incresing s the definitin f wrkrelted injuries is expnded. T hndle this incresingly cmplex subject, the City hs tken prctive pprch t its dministrtin f the wrkers cmpenstin prgrm. Resurces frm ccident preventin nd lss cntrl prgrms were cnslidted t enhnce the City's efficiency in hndling these mtters. Accident preventin wrks clsely with lss cntrl t develp prgrms t reduce the City's expsure in this re. The inclusin f this re in risk mngement s revlving fund hs llwed the City t fcus ttentin n quntifying the City's libility n existing nd unreprted clims. Emphsis is plced n trgeting crdinted ccident preventin inititives, tem clims hndling pprch, enhnced crdintin with custmer deprtments, nd erly interventin t fcilitte emplyees return t wrk. These effrts shuld result in decresed munts pid by the City fr wrkers cmpenstin clims. Thrugh needs ssessment exercise, the Centrl Sfety Office is cmmitted t tilring its ctivities t meet the needs f the custmer deprtments. This is being ccmplished by designing prgrms specific t the deprtment ctivities nd internl resurces.. Prperty nd Csulty The ptentil libility resulting frm injuries, prperty dmge, nd trts, which invlve City emplyees, necessittes the prperty nd csulty functin. Prperty nd Libility insurnce prtects the City's finncil nd physicl ssets frm cts f Gd nd ther cuses r chnges. Cntributins t this fund re prvided by the Generl Fund, Enterprise Funds nd prceeds frm Clims nd Judgment Bnds. 1-17

6 Interfund Trnsfers Trnsfers between funds re n integrl prt f the budget. There re fur types f trnsfers. Direct services prvided by deprtment in ne fund t deprtment in nther fund, resulting in: Expenditures in the prvider fund fr ll csts incurred in rendering the service; Revenues in interfund billing revenue ccunt in the prvider fund; nd Expenditures in single expenditure ccunt in the recipient fund. The cst billed includes prprtinte shre f verhed csts, s well s ll direct csts ttributble t the service prvided. Mjr services billed directly re s fllws: Service Airprt fire suppressin Airprt plice prtectin Legl services Lnd cquisitin Prvider Fire Deprtment Plice Deprtment Legl Deprtment Public Wrks & Engineering (PWE) Engineering Cnstructin nd Rel Estte (ECRE) Legl Deprtment Recipient Avitin Deprtment Avitin Deprtment Vrius deprtments/funds Cpitl Imprvement Prject Funds Design nd engineering PWE/ECRE Generl Services Deprtment (GSD) Cpitl Imprvement Prject Funds, Grnt nd Enterprise Funds Signl instlltin Building mintennce services Pyrll PWE GSD ARA Street nd bridge bnd funds Vrius ther deprtments (exctuding Avitin funds) Vrius ther deprtments funds Indirect csts re billed t the Enterprise, Specil Revenue, nd Grnt fundsf the City t recver ech fund 's prprtinte shre f the City's centrl dministrtive nd supprt csts, which re riginlly brne by the Generl Fund. These csts re bsed n the nnul cst llctin pln prepred by the Finnce Deprtment. The City's centrl service deprtments prvide wrkld dt used in the pln. Csts re tken frm the City's udited finncil sttements. Ech dministrtin nd supprt deprtments full cst, including verhed (i.e., rent, cmputer supprt, fringe benefits, nd internl dministrtive csts), is clculted nd llcted t ll deprtments tht receive the service(s). Certin line items in the Enterprise nd Specil Revenue Funds reflect the pyment f these csts t the Generl Fund. Trnsfers f Enterprise Fund nd perting reserves t sinking funds r reserves fr renewl nd replcement, mintennce nd pertins, nd debt service re budgeted in the perting budget f ech Enterprise Fund. 1-18

7 Trnsfers frm the Generl nd Wter nd Sewer Funds t the Generl Debt Service Fund re bsed upn ech fund's llctin shre f the nnul debt service requirements. The Wter nd Sewer Fund nd Generl Fund ech py prtin f previusly issued wter district debt ssumed by the City in nnextins, bsed upn the prprtinte munt f ssets nnexed tht fll int three ctegries: wter fcilities nd imprvements, sewer fcilities nd imprvements, nd dringe r ther generl imprvements. After ech nnextin, the City's uditrs, ccunting, finncil mngement, 'nd utility mngement stff ssume the recrds nd fcilities f the nnexed districts. The prprtins used t llcte ech district's utstnding debt re develped in prprtin t the then current vlue f the district's ssets. Previusly, cntrct tx bligtin pyments were pid by the Wter nd Sewer Fund (Nrthwest Hustn Wter Supply Crprtin bligtins) becuse thse bligtins were incurred strictly t prvide dditinl wter nd sewer system cpcity. During FY1994 these bligtins were refunded with generl bligtin refunding bnds. The Wter nd Sewer Fund cntinues t py the refunding debt service relted t these bligtins. Since 1986, the City hs refunded sme utstnding nnexed wter district bnds by issuing new generl bligtin refunding bnds. A prprtinte shre f the new debt service resulting frm these sles re llcted t Wter nd Sewer Fund becuse the nnexed wter district ssets re still held by thse systems s result f the riginl nnextins. After this llctin is mde, the Wter nd Sewer Fund relizes prprtinte shre f the svings frm the refunding. The Generl Fund trnsfer t the Generl Debt Service Fund is clculted fter ll f the frementined llctins hve been mde. The trnsfers re set t level t ensure tht ll existing nd nticipted debt service bligtins will be met nd reserve requirements re stisfied. 1-19