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HomeMy WebLinkAbout2016-05-02-Resolutions 16-154_Financial Policy - General Finance PolicyTHE CITY OF WAUKEE,IOWA RESOLUTION 16-154 APPROVING CITY OF WAUKEE FINANCIAL POLICY —GENERAL FINANCIAL POLICY,OF THE STANDARD ADMINISTRATIVE POLICY AND PROCEDURES MANUAL IN THE NAMEAND BY THEAUTHORITYOF THE CITY OF O'AUKEE,IOIYA WHEREAS,the City of Waukee,Iowa is a duly organized municipality within Dallas County;AND, WHEREAS,the Waukee City Council shall approve operating policies and procedures; AND, WHEREAS,City staff has presented the City Council with a General Financial Policy, attached hereto as Exhibit A,and recommends approval. NOW THEREFORE BE IT RESOLVED by the City of Waukee City Council in session this 2"day of May,2016,that the City of Waukee Financial Policy —General Financial Policy,of the Standard Administrative Policy and Procedures Manual is hereby p roved. W1tamF.P ard,a or Attest: Rebecca D.Schuett,City Clerk ROLL CALL VOTE Shane Blanchard Brian Harrison Shelly Hughes Larry R.Lyon Rick Peterson AYE X X X X NAY ABSENT ABSTAIN X Standard Administrative Policy R.Procedures Manual Title:FINANCIAL POLICY Section:GENERAL FINANCIAL POLICY Date of Version:April 11,2016 Resolution No.:¹16-??? SECTION 1 —General Purpose It is the expectation and the general understanding of the City Council and the citizens of Waukee that the City conducts its financial affairs in a thoughtful and prudent manner.The following policies are established to provide the framework within which the City conducts its financial affairs.The policies are divided into the following categories:revenue policies, operating expenditure policies,reserves and contingencies,capital improvements planning, debt management policies,and financial reporting and accounting. SECTION 2 —Revenue Policies Generally,the City of Waukee's revenue policies are intended to serve as guidelines for determining the revenues necessary to provide basic municipal services to the community.It is the City's goal to create and maintain a diversified,yet stable,revenue system to protect it from possible short-term fluctuations in any of its various revenue sources.An important factor in the City's ability to preserve a strong,uniform revenue stream is the diversity and growth of its tax base,which is largely dependent on the vitality of the area's economy.Thus,the City resolutely encourages economic development through the implementation of financial policies that create a favorable tax climate,while meeting service demands of both businesses and residents. General Revenue Policies a.A diversified,yet stable,revenue system will be utilized,to protect the City from possible short-term fluctuations in any of its revenue sources. b.Alternative revenues sources such as user fees may be implemented instead of property taxes when deemed appropriate to fund programs or services.As much as practical,the fees should be established at a level to support the entire C. d. e. cost of providing the program or service. A continuous effort will be made to obtain new revenue sources,such as local option sales taxes,in order to maintain a balanced budget and to reduce the overall reliance on property tax as a major source of funding. Through community and economic development,a broader tax base will be pursued to increase tax revenue and help reduce annual fluctuation in property tax rate. For budgetary purposes,revenue will be projected on a two year basis.Revenue receipts will be monitored routinely,to ensure revenue projection goals are being met. Property Taxes a. b. C. ln order to provide stability and consistency,the property tax levy should remain unchanged,unless determined necessary by the City Council during the annual budget review process. The City's total property tax levy rate shall be reviewed annually and evaluated using the fundamental underlying conditions,economic conditions,service level changes,State or Federal mandates,changes in property tax rollback,or any other changes that affect the City's ability to provide basic City services or maintain sufficient cash reserves. Any increase or decrease in the total levy rate shall not exceed the cumulative effect of the underlying changes.These changes shall be quantified and documented. Urban Renewal —Tax Increment Financing Policy ~Pur ose The City creates urban renewal districts to; a. b. C. d. e. f. g h. Enhance areas within the community for the purpose of stimulating private investment in commercial,industrial,and residential;including development and redevelopment and the investment in public facilities. Respond to an individual capital project or capital projects within designated areas. Support investment in an area believed to have development potential. Promote neighborhood revitalization. Generate money for infrastructure incentives to leverage community growth. Provide adequate public infrastructure of sanitary sewer,storm water management,potable water,streets,and pedestrian walkways to ensure the public health,safety and welfare. Distribute the cost of local development incentives among the various tax units benefited from a long-term increase in property tax revenues. Provide assistance and economic incentives for commercial,industrial and residential development/redevelopment which may not otherwise occur without such assistance and incentives. Guidelines The City shall adhere to Chapter 403 of the Code of Iowa,in the creation of urban renewal plans and subsequent implementation of those plans.The powers granted in this chapter constitute the performance of essential public purposes for the State of Iowa and the City of Waukee.The powers conferred by this chapter are for public uses and purposes for which public money may be expended and for which the power of eminent domain and the police power may be exercised;and that the necessity in public interest for these provisions is declared as a matter of legislative determination. The assessed value of property within each urban renewal district,which is subject to a division of revenue from taxation —tax increment financing (TIF),is determined by the Dallas County Assessor each year. The City utilizes TIF to leverage economic activity,offset taxpayer burden,build public improvements and finance public investment in infrastructure deemed necessary for community growth. Process b. The amount of value reservation required for the next fiscal year is due annually by December 1".And,upon written request from a taxing jurisdiction,meet and confer with that jurisdiction on the intended reservation. Taxable valuation reservation will be based upon the debt and contractual obligations certified with the Dallas County Auditor. Prepare and distribute exhibits,including formulas and calculations of TIF dollars. R tits Distribution of Incremental Pro ert Taxes The City attempts to release to all taxing jurisdictions any additional valuation in the TIF districts when the funds generated by the valuation exceed the amount needed to retire the annual TIF debt in that district.The City is committed to releasing 100%of residential TIF valuation,unless deemed necessary for specific infrastructure project funding. Sunsets The City establishes sunset dates for all TIF districts as provided in Chapter 403.17(10),Code of Iowa,as follows;in an urban renewal area designated an economic development area in which no part contains slum or blighted conditions,the plan shall be limited to twenty years from the calendar year following the calendar year in which the city first certifies to the county auditor the amount of any loans,advances,indebtedness,or bonds which qualify for payment from the division of revenue provided in the Code of Iowa,Chapter 403.19. Powers of Munici alit The City shall have all the powers necessary or convenient to carry out and effectuate the purposes and provisions of Chapter 403.6 and the additional powers granted in Chapter 403.12 of the Code of Iowa. major fluctuations in the reservation requirements.Funds held in reserves will be specifically identified and held for a future debt or contractual obligation. Municipal Enterprises a.User charges and fees should be established at a level sufficient to cover all costs of providing the service,including personnel,operating,debt service,capital equipment and administrative expenses. b.User fees should be re-evaluated and re-calculated,if necessary,annually to reflect cost of service and to guarantee that they remain appropriate and equitable. c.All utilities,including water,sanitary sewer,gas,storm water,solid waste and golf course enterprise programs,should be fully self-supported through user fees or charges. Road Use Taxes All road use tax revenues will be recorded in the Road Use Tax Fund and reports will be provided to the State of iowa per Code of iowa requirements.The City will utilize this fund primarily for eligible operations and maintenance activities and may be utilized for eligible capital improvement funding. Parks &Recreation Fees The City will attempt to cover at least 45%of the total cost of recreation programming by charging fees for recreation activities and use of City facilities and equipment. a.The City will establish and maintain the following fee categories and related cost recovery goals: Maximum Fee Su ort:Program fees should fund 80%or more of the cost for the following programs:special instruction classes,recreation trips and outings,adult sport leagues,major special events,and latchkey services. Partial Fee Su ort:Program fees should fund 33%to 80%of the cost for the following programs:preschool activities,introduction to sports (primary grades),outdoor recreation,and special craft workshops. Minimum Fee Su ort:Program fees should fund up to 33%of the cost for the following programs:community centers and activities,youth centers and activities,minor special events,playground activities,junior athletics,non-sponsored outdoor recreation,and co-sponsored special interest activities. b.Charges will be assessed for use of rooms,shelter facilities,ball fields,special use areas and related equipment for activities not sponsored or co-sponsored by the City.Such charges will generally conform to the fee support categories listed above. c.A vendor's charge of 10%of gross income will be assessed to individuals or organizations using City facilities for money-making activities. d.Fees or charges may be waived only when the City Administrator determines in writing that an undue hardship exists. Federal 5 State Assistance All available funding from Federal and State sources will be pursued to finance appropriate programs,services and capital improvement projects,including those mandated by statute. SECTION 3 —Operating Expenditure Policies Operating expenditures must meet the City of Waukee's requirements to provide services within the framework of available revenues.Fiscal control and long range financial planning is necessary to guarantee that the City's current and future finances will remain sound.The following operating expenditure policies guide the evaluation and control of the City's appropriations and expenditures. a.Expenditure projections for a two-year period will be developed on an annual basis.Projections should include estimates of anticipated operating costs for programmed capital improvement projects,equipment and capital facilities replacement and maintenance schedules. b.Prediction of future expenditures should include the use of a four year staffing plan with anticipated compensation and benefit cost analysis. c.Current expenditures should be paid,in accordance with Council directives,with current revenues or excess cash reserves. d.Current expenditures should not be balanced by postponing needed expenditures,accruing future revenues,issuing short term debt,or paying for routine operating costs out of minimum cash reserves. e.The operating budget should provide for adequate maintenance of fixed assets and equipment,and provide for their orderly replacement. f.All retirement systems should be financed in an actuarially sound manner in accordance with state law,to achieve the goal of systematically funding future liabilities. g.The City will encourage the provision of services through the private sector and other public agencies whenever and wherever greater efficiency and effectiveness can be achieved. h.The City will maintain risk management and safety programs to reduce costs and minimize losses. SECTION 4-Reserves and Contingencies The establishment and maintenance of adequate cash balances and reserves allow the City of Waukee financial flexibility and security,and is recognized as an important factor considered by bond rating agencies and the underwriting community when reviewing City debt issuance. Along with maintaining the City's credit worthiness,such cash balances and reserves provide the means to handle economic uncertainties,local disasters and other unanticipated financial hardships,or downturns in the local or national economy,as well as,to meet cash flow requirements.In addition to the designations noted below,fund balance levels will be sufficient to meet funding requirements for projects approved in prior years that are carried forward into the new year,including debt service reserve requirements,reserves for encumbrances and other reserves or designations required by contractual obligations or generally accepted accounting principles.Deviation from the following general policies by Council may occur based on sound decisions and public interest.When such deviations are made,it shall be specifically noted and included within Council minutes. General Policies a.General Fund cash reserves (fund balance)should be maintained at a level sufficient to provide funding for general governmental operations.It is the City's goal to have a minimum balance at fiscal year-end of not less than 25%of general fund appropriations for the succeeding fiscal year,in order to provide adequate cash flow and emergency cash funding.However,the balance may be lower,but never less than 20%,or higher,if deemed prudent,due to the uncertainty of future revenues or anticipated expenditures. b.Enterprise Fund cash reserves (fund balance)should be maintained at a level sufficient to provide funding to meet 3-6 months of fiscal year expenditures. c.Restricted cash reserves should not be used to finance routine operating expenses that exceed budgeted levels.Routine operating expenses shall be defined as reasonably anticipated reoccurring annual expenditures. d.Cash reserves should not be used to finance capital projects,unless those reserves were specifically identified for a project. e.Excess cash reserves may be used to balance revenues and expenditures as long as the minimum cash reserve requirements of this policy are met. f.Revenues will equal or exceed expenditures for each budget year unless there are funds available in excess of the cash reserves requirements of this policy. g.Short term borrowing,such as tax anticipation notes,in order to meet the requirements in a)through f)of this section is prohibited. h.The City's annual budget is considered balanced if the cash reserve requirements,the working capital requirements and the revenue and expenditure requirements of this policy have been met. Working Capital a.The City will maintain sufficient cash reserves in operating funds for working capital so that short term cash flow financing is not required.The cash reserve will be no less than 25%of the next year's operating budgeted expenditures,the same level as required for the general fund.Operating funds are defined as the general,road use tax,employee benefits and enterprise funds.The cash reserve may be less than 25%,but never less than 20%,if deemed prudent due to the uncertainty of future revenues or anticipated expenditures. b.Short term borrowing,such as tax anticipation notes,in order to meet the preceding working capital requirements is prohibited. Equipment Replacement Reserve Fund The City may establish and maintain an equipment replacement reserve fund to provide for the scheduled purchase of vehicles and equipment,and will consider annually appropriating funds to provide for the timely upgrading and replacement of vehicles and equipment.The amount added to this fund by annual appropriation should be the amount required to maintain the fund at the approved level after credit for the sale of surplus equipment and interest earned by the fund.It is the City's intent that the reserve fund replaces the City's need to borrow funds for vehicle and equipment acquisitions. Capital Project Reserve Fund The City may designate specific fund balance levels for future development of capital projects, to reduce future bond financing requirements.In order to help maintain the fund at approved levels,the Council may annually transfer to the fund any balance from operating funds in excess of the cash reserve requirements within this policy. GASB 54 Statement GASB 54 (Governmental Accounting Standards Board)establishes the following five fund balance classifications:Nonspendable,Restricted,Committed,Assigned and Unassigned.Fund balance classifications assigned,unassigned and committed are considered "unrestricted"fund balances.The order of spending will be as follows:restricted,committed,assigned and unassigned.Restricted funds shall be spent according to the purpose for which they were received.Unassigned funds shall always be spent after committed and assigned funds have been exhausted.The City Administrator and/or Finance Director are authorized to assign fund balances according to specific factors involved.The City Council will have authority to commit fund balance. SECTION 5 —Capital Improvements Planning Policies for the capital improvements program are intended to encourage planning for future growth and infrastructure repair within the framework of the City of Waukee's financial policies. General Policies a.The City should develop and annually update a five-year capital improvements program (CIP).This program should identify future capital project expenditures made necessary by anticipated changes in population,infrastructure replacement and extension,economic base and/or land use. b.The operating and maintenance cost of a proposed capital improvement shall be calculated to determine a "true cost"of each improvement and assist in programming of future overall revenue requirements of the City. c.The CIP will include the costs,timing and sources of funding,and the estimated impact of future revenue requirements for each project.These calculations shall reflect adjustments for inflation. d.The CIP should maintain the City's assets at a level adequate to protect the City's capital investments,minimize future maintenance and replacement costs,and provide for an adequate level of service. e.The City's annual capital improvements budget should be based on the five-year CIP.The budget will include final calculations of revenue sources and related impacts on future availability of revenue for additional projects. f.The annual expenditures identified in the CIP should be fully funded from financial resources that are anticipated to be current and available. g.Grants and similar forms of intergovernmental assistance should be used to finance only those projects identified in the CIP or other planning documents as the community needs. h.A fiscal impact analysis should be performed on all projects for which the City's financial participation is requested by the private sector.This analysis should identify anticipated direct and indirect public costs and revenues associated with the proposed project. Community Projects A project organized by a civic,nonprofit or community group;primarily funded through private donations;constructed on City-owned property and upon completion,to be owned and maintained by the City. Guidelines C. d. Project organizers must consult with a designated City representative on the concept,planning,financing and construction components of the project. Project concepts must be presented to the City Council and receive approval, ensuring the project meets the definition of a community project. Projects must be included in the City Council approved five-year CIP. Projects initiation is at the discretion of the City Council and will be determined based on available funding. Project organizers must present the final funding plan to the City Council.City Council approval of a resolution will be required to initiate the project. Project organizers must submit to the City periodic financial reports on the status of the project funding. SECTION 6 —Debt Management Policies The issuance of debt is a necessity for the financing of many major capital improvements. Determining the method and timing for financing is subject to numerous considerations.The City of Waukee's debt policies are intended to encourage conservative debt management, while maintaining the flexibility to use the various financing mechanisms that are available to the City. The City's overall tax levy must be reflective of the impact of debt issuance.Alternative revenue sources will be used when practicable to maintain an overall tax rate consistent with the general philosophy of municipal service determined by the City Council. The cost of financing through the issuance of debt is also affected by the strength of the City's financial position.Bond ratings and investor's bids are influenced by the City's debt management policies,as well as,the overall financial policies of the City.It is the City's goal to maintain debt management policies that keep outstanding debt within manageable levels and which maintain the City's flexibility to issue debt in the case of unusual circumstances beyond the City's control. General Policies a.Long-term borrowing shall be limited to capital improvement projects that cannot be financed from current revenues,and to capital equipment with a b. C. d. e. f. g. h. j useful life of 20 years or greater,with a purchase cost of 5250,000 or greater. Principal and interest will be scheduled to be within the revenues available for debt service.Long-term debt shall not be used for current operations. Any capital improvement project or capital equipment financed through bonds should be financed for a period not to exceed the expected useful life of the project or equipment. Total debt outstanding,including overlapping debt,will be considered when planning additional debt issuance. The City's share of paving projects,including the cost of over-width or over- depth paving of major streets,should be financed with road use tax funds or other revenue sources when funds are appropriate and available. The City's share of utility projects,including the cost of over-sizing water,sewer, gas and storm water mains,should be financed with utility funds and other revenue sources when funds are appropriate and available. The use of general obligation bonds for projects does not dismiss the potential of pro rata payment for debt service by specifically benefited funds such as water, sewer,gas,storm water,golf course or road use tax. Financing requirements will be reviewed annually.The timing for financing will be based upon the City's need for funds,market conditions and debt management policies. The City will maintain good communications with bond rating agencies about its financial condition.The City will follow a policy of full disclosure on every financial report and bond prospectus. Periodic reviews of all outstanding debt will be undertaken to determine refunding opportunities.Refunding will be considered if and when there is a net economic benefit of the refunding or the refunding is essential in order to release restrictive bond covenants,which affect the operations and management of the City. The City will follow applicable laws,regulations and bond covenants relative to arbitrage and rebate compliance requirements. Debt Limitations a. b. C. Debt will be structured to achieve the lowest possible net cost to the City given market conditions,the urgency of the capital project,the type of debt being issued,and the nature and type of repayment source.Moreover,to the extent possible,the City will design the repayment of its overall debt so as to rapidly recapture its debt capacity for future use.The average maturity of general obligation debt should not exceed the useful life of the asset being financed or a maximum of twenty years and the City shall not utilize bond anticipation notes. Bond issues should be scheduled so that the City's total debt service schedule has relatively level principal and interest payments over the life of the debt. "Backloading"of costs will only be considered when such structuring is beneficial to the City's overall amortization schedule. Total general obligation indebtedness should not exceed 95'/0 of the limit prescribed by State statute,which is currently 5'/0 of actual property values within the City. d.Mindful of the need to adequately program and fund necessary capital improvements,the City will attempt to maintain general obligation bond principal per capita debt levels at rates reflective of infrastructure needs, population growth and bond rating standards. e.All self-imposed debt limitations will not take into account debt issued as a consequence of voter approved bond referendums. SECTION 7 —Financial Reporting and Accounting General Policies a.The City of Waukee will maintain a high standard of accounting practices.To that end,the City will continue to use the latest edition of Governmental Accounting,Auditing,and Financial Reporting (GAAFR)as its source of generally accepted principles (GAAP). b.The City's relationship with its independent public accounting firm will be reviewed at a minimum every six years. c.The City will maintain its budget and accounting system on a cash basis which will be the basis for all interim,internal,and state reporting. d.The City will adhere to a policy of full and open public disclosure of all financial activity and information. Reports a.The City will maintain a budgetary control system and will produce interim financial reports that measure actual revenues and expenditures compared to budgeted revenues and expenditures. Regular monthly and annual reports should present a summary of financial information by major fund and activity type. Monthly reports should be provided presenting actual cash position and investment performance. Each year,the City will employ an independent public accounting firm to perform the annual audit and will make the audit available to all interested parties. iv.The City will comply with all federal and state audit and review regulations,including OMB A-133 single audit and Single Point of Contact (SPOC)review requirements.