CC Resolution 11006
Resolution No. 11006
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CAMPBELL
AUTHORIZING REVISIONS TO THE CITY'S FINANCIAL POLICIES INCLUDING
RELOCATING THE FINANCIAL POLICIES FROM THE ADMINISTRATIVE
PROCEDURES SECTION TO THE COUNCIL POLICY SECTION OF THE POLICY
MANUAL
WHEREAS, the City's financial policies require periodic review; and
WHEREAS, the majority of the City's current Financial Policies have not been
modified since 1987; and
WHEREAS, the Finance Committee of the City of Campbell reviewed the
proposed changes on February 12, 2009 and concurred with staff's recommended
changes; and
WHEREAS, the City's Financial Policies require Council approval.
NOW, THEREFORE BE IT RESOLVED, by the City Council of the City of
Campbell, that the recommended revisions to the Financial Policies as presented in
Attachment 2 to this report are approved; and
BE IT FURTHER RESOLVED, that the Financial Policies be properly
relocated to the Council Policy section of the Policy Manual.
PASSED AND ADOPTED this 3rd day of March, 2009, by the following roll
call vote:
AYES:
NOES:
ABSENT:
Councilmembers
Councilmembers
Councilmembers
Kotowski, Furtado, Baker, Low, Kennedy
None
None
APPROVED:
/
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Anne Bybee, City Clerk
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CITY OF CAMPBELL
Council Financial Policies
I. Purpose for Adopting Financial Policies (1987)
II. Revenue Policies (Updated 3/3/2009)
III. Expenditure Policies (Updated 3/3/2009)
IV. Budget Policies (Updated 3/3/2009)
V. Reserve Policies (Updated3/3/2009)
VI. Capital Improvement Policies (Updated 3/3/2009)
VII. Cash Management /Investment Policies (Updated 3/3/2009)
VIII. Accounting Policies (Updated 3/3/2009)
IX. Debt Management (Updated 3/3/2009)
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CITY OF CAMPBELL
Council Financial Policies
I. Purpose for Adoptina Financial Policies
The adoption of a set of financial policies establishes a comprehensive set of
guidelines that enable consistent management of the City's fiscal resources. The
policies strive to ensure that the City remains in sound financial condition. Such
policies are intended to ensure that the fiscal aspects of policy issues are
considered whenever and wherever decisions are made.
Adoption of financial policies promotes public confidence and increases the City's
credibility in the eyes of bond rating agencies and potential investors. Such policies
also establish criteria to evaluate the City's financial condition, create a sound
financial base for City operations, and provide the resources to react to potential
financial emergencies in a prudent manner. The creation of such policies
minimizes the possibility of having a combination of incomplete, inconsistent, or
conflicting "informal" and formal policies.
While these formal Financial Policies will be amended periodically, the creation of
these "guideposts" will bring increased consistency to management of the
community's financial resources while establishing criteria/fiscal goals and
ensuring the financial viability of this municipal corporation, the City's
Redevelopment Agency (RDA), and any other legal entity created by the City.
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CITY OF CAMPBELL
Council Financial Policies
II. Revenue Policy
The development and maintenance of balanced and reliable revenue streams will
be the primary revenue objective of the City. Efforts will be directed toward
optimizing existing revenue sources while periodically reviewing potential new
revenue sources. The need to promote a healthy business climate is recognized
as one method to maximize existing revenue sources.
A) Revenue estimates will be prepared on an annual basis during the
preparation of the budget.
B) Revenues will be estimated conservatively using accepted standards
and estimates provided by the state and other governmental
agencies.
C) Alternative revenue sources will be evaluated periodically to
determine their applicability to meet identified City needs.
D) Sources of revenue will be evaluated and modified as necessary to
assure a diversified and growing revenue base that improves the
City's ability to handle fluctuations in individual sources
E) Major revenue categories will be projected on a five year basis.
F) Revenues from a "one-time" or "limited duration" revenue source will
not be used for ongoing operating expenses.
G) Fees and charges for services will be evaluated and, if necessary,
adjusted annually to assure that they generate sufficient revenues to
meet service delivery costs. The City will establish user charges at a
level generally related to the full cost (operating, direct, indirect, and
capital costs) of providing the service, unless Council determines
that a subsidy from the General Fund is in the public interest.
(Reference Council User Fee and Cost Recovery Policy 2.6) The
City will also consider market rates and charges levied by other
municipalities of similar size for like services in establishing rates,
fees, and charges.
H) Enterprise and Internal Service Funds will be self-supporting.
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CITY OF CAMPBELL
Council Financial Policies
III. Expenditure Policies
A) Major expenditure categories will be projected on a five-year
basis.
B) The Proposition 4 Expenditure Limit (the Gann Limit) will be
calculated on an annual basis prior to the adoption of the budget and
will be projected for an additional two years.
C) The City will operate on a current funding basis. Expenditures will be
budgeted and controlled so as not to exceed current revenues plus
the planned use of any accumulated fund balances.
D) The City will take corrective action at mid-year when expenditure and
revenue projections are such that an operating deficit is projected at
fiscal year end. Corrective action may include the use of contingency
reserves.
E) The City will establish a purchasing policy that specifies the
thresholds and scope of purchasing authorizations required.
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CITY OF CAMPBELL
Council Financial Policies
IV. Budaet Policies
The operating/capital budget shall serve as the annual financial plan for the City. It
will serve as the policy document of the City Council for implementing Council
goals and objectives. The budget shall provide the staff the resources necessary to
accomplish City Council determined service levels.
A) Annual budgeted operating expenditures shall not exceed annual
operating revenues, including budgeted use of reserves.
B) The City Manager shall prepare and submit to the City Council
annually a proposed operating and capital budget by June 1 of each
year.
C) An annual operating budget will be adopted by the City Council by
June 30 of each year
D) A mid-year budget status report will be presented to the City Council
no later than February of each year.
E) Budget adjustments within the adopted budget of less than $10,000,
or requiring a transfer from reserves of less than $5,000, may be
approved by the City Manager; otherwise, City Council approval is
required.
F) At least one budget study session will be held annually prior to the
introduction of the budget to the City Council.
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CITY OF CAMPBELL
Council Financial Policies
V. Reserve Policies
A) The General Fund Emergency Reserve shall be maintained at a
level of 10% of the General Fund revenue. This reserve will only be
used in the case of dire need as a result of physical or financial
emergency as determined by the City Council.
B) The General Fund Operating Reserve shall be maintained at a
level of $1 million. This reserve may be used to meet necessary,
but unbudgeted, expenditures during the fiscal year, including mid-
year budget adjustments, and/or to cover minor unanticipated
revenue shortfalls. Funds drawn from this reserve during the year
shall be replenished with the adoption of the ensuing fiscal year
budget.
C) An Economic Fluctuations Reserve shall be maintained, with a
target of $6 million, to provide budget stabilization during an
economic downturn that could otherwise result in significant
reductions in service levels and/or organizational staffing. This
Reserve shall not be less than $2 million. However, if the reserve
balance falls below $4 million, or the City's five-year financial
projections indicate the reserve will fall below this minimum
requirement at any time during this period, City staff shall present
to Council, by the following year's budget adoption, a plan to return
to the target amount within five years.
D) A Capital Improvement Program Reserve shall be maintained at a
level to cover unbudgeted capital improvement costs, to fund future
capital and infrastructure improvements, and to fund anticipated
one-time expenditures in the operating budget. This reserve shall
be targeted at $5 million, including an annual funding target of $1.5
million specifically for infrastructure needs. Any unappropriated
General Fund surplus, not needed to fund other reserves at fiscal
year-end, shall be applied to this reserve.
E) A reserve shall be maintained sufficient to cover 50% of
outstanding compensated absences.
F) Reserves for the replacement of Motor Pool and Information
Technology Pool assets shall be evaluated annually and
maintained at sufficient levels to provide for the replacement of
approximately 50% of the equipment based on accumulated
depreciation and estimated replacement costs.
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CITY OF CAMPBELL
Council Financial Policies
G)
H)
I)
J)
The Workers' Compensation Self-Insurance Reserve will be
maintained at a level deemed adequate to meet projected liabilities
as determined by an actuarial evaluation to be conducted at least
once every two years.
The General Liability Insurance Reserve will be maintained at a
level deemed adequate to meet projected liabilities. This level may
be determined by an actuarial evaluation or derived from estimates
provided by the City's third party risk pool provider, subject to a
minimum level equal to 100% of the self-insured retention (SIR).
Other reserves required by law, contractual obligation or Generally
Accepted Accounting Principles (GAAP) shall be provided for.
The City Manager may, at his/her discretion, establish additional
reserves and/or recommend annual reserve fund replenishments,
deemed necessary and prudent to ensure the fiscal health of the
City, subject to City Council approval.
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CITY OF CAMPBELL
Council Financial Policies
VI. Capital Improvement I Capital Asset Policies
A) A five year Capital Improvement Plan shall be approved on an
annual basis with first year projects adopted in conjunction with the
operating budget.
B) Sufficient financial commitment will be made to preserving the City's
investment in its public facilities (buildings, streets, parks, equipment,
etc.) to assure preservation of these assets.
C) The ongoing maintenance and operating costs of any proposed
capital improvements will be evaluated prior to the approval of any
capital improvement project.
D) Equipment replacement and maintenance shall be projected and
funded throughout its useful life.
E) The annual capital improvement budget shall only include those
projects which funding source is reasonably assured and can be
started within the fiscal year indicated.
F) The capitalization threshold used in determining if a given piece of
equipment qualifies for capitalization is $5,000 per item with a useful
life of greater than two years. Groups of items with individual values
of less than $5,000 each will not be capitalized unless the items are
purchased by an internal service fund and are anticipated to be
replaced in the aggregate.
G) Adequate insurance will be maintained on all capital assets. A
periodic replacement cost evaluation will be performed to insure that
coverage limits are reasonable.
H) The capitalization threshold used in determining if an improvement,
building or other asset acquisition for infrastructure qualifies for
capitalization is $100,000 with a useful life of greater than two years.
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CITY OF CAMPBELL
Council Financial Policies
VII. Cash Management I Investment Policies (See Section 05-30)
A) The City's administrative procedure governing investments shall be
updated and approved by the City Council annually. The City will
invest funds in accordance with the separately adopted investment
policy.
B) A complete report on the City's investment portfolio shall be
presented to the City Council monthly.
C) A cash flow analysis for all funds shall be prepared monthly.
D) The City shall periodically conduct a bid process for the provision of
banking services.
E) The City will invest all funds based on the following criteria:
1) Safety of Invested Funds
2) Maintenance of sufficient liquidity to meet cash flow needs
3) Attainment of the maximum yield possible consistent with the
above priorities.
F) The City will seek local, state and federal grant funding opportunities
to secure funding for both operating and capital projects.
G) Any grants provided to other agencies/organizations by the City will
contain sufficient control elements to ensure their consistent use
within specified guidelines and requirements.
H) Management is responsible for the detection and prevention of fraud,
misappropriations, and other inappropriate conduct. The City will
establish a fraud policy that will aid in the detection and prevention of
fraud as it applies to cash management as well as any impropriety in
the handling of other financial transactions.
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CITY OF CAMPBELL
Council Financial Policies
VIII. Accountina Policies
A) The City's financial records will be audited annually by a reputable
independent certified public accounting firm.
B) An Annual Financial Report will be prepared each year within six (6)
months of the close of the previous fiscal year and will be reviewed
with the City Council Finance Committee and the City Council
consistent with the requirements of Statement on Auditing Standards
112 and 114.
C) Operating budget revenue and expenditure status reports will be
prepared monthly and distributed to all department directors so that
they may effectively and continuously evaluate their financial
performance in a timely manner.
D) The auditor's annual Written Communication on Internal Control
Structure will be reviewed with the City Council Finance Committee
by the audit firm for a recommendation to the City Council consistent
with the requirements of Statement on Auditing Standards 112.
E) Financial records and reporting will be maintained in accordance with
Generally Accepted Accounting Principles (GAAP) and the
requirements of the Governmental Accounting Standards Board
(GASB) and the GFOA.
F) Full and continuing disclosure will be provided in annual financial
statements and in bond representations.
G) The City shall attempt to keep accounting records in such a manner
to receive an unqualified audit opinion and to qualify for a Certificate
of Achievement for Excellence in Financial Reporting from the
Government Finance Officers Association (G.F.O.A.).
H) The City will solicit an RFP for audit services no less frequently than
every five (5) years. Additionally, an audit firm may be retained for a
maximum of 2 consecutive five-year terms. The Council Finance
Committee, City Manager, and Finance Director will review the
qualifications of prospective firms and make a recommendation to
the City Council.
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CITY OF CAMPBELL
Council Financial Policies
IX. Debt Manaaement
A) The City will restrict long-term borrowing to the funding of capital
improvement projects and equipment.
B) The term of debt shall not exceed the expected useful life of the
capital improvement project or equipment.
C) General obligation debt will not exceed 3.75% of the City's assessed
value in accordance with State law. Where possible, the City will use
special assessment, revenue, or other self-funding debt instead of
general obligation bonds.
D) The City will maintain good communications with bond rating
agencies about its financial condition.
E) The City will use refunding techniques where appropriate to allow for
the restructuring of its current outstanding debt to remove or change
restrictive covenants, and/or to reduce annual debt service in an
amount sufficient to justify the costs of refunding/re-issuance.
F) The City may use short-term debt to cover temporary or emergency
cash flow shortages. All such short-term borrowing will be subject to
Council approval.
G) The City may issue inter-fund loans in lieu of outside debt
instruments to meet short-term cash flow needs. Loans will be
permitted only if excess funds are available. The prevailing interest
rate on such loans will be established by the Finance Director. All
terms of such loan including, but not limited to, the principal amount,
interest rate and duration will be subject to Council approval and
must be documented by Memorandum.
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