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HomeMy WebLinkAboutReso 2009-264RESOLUTION NO. 2009-264 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA REPLACING THE GENERAL FUND RESERVE POLICY PER THE CITY'S FISCAL HEALTH PLAN WHEREAS, on July 9, 1996, the City Council approved the establishment of a targeted minimum reserve level for the General Fund at 8% of the operating budget; and WHEREAS, the reserves policy was established to protect the fiscal solvency of the City by mitigating the impact of economic fluctuations on revenues, to fiord unforeseen expenditure requirements, to provide minimum levels of cash investment interest revenue, and to avoid the need to borrow for cash management purposes; and WHEREAS, public entities accumulate and maintain reserves to help ensure both financial stability and the continued ability to provide core services; and WHEREAS, sufficient reserves creates financial stability resulting in increased credit quality and allows the public entity to weather times of uncertainty and the impacts of negative events, both major and minor; and WHEREAS, properly-funded reserves allow for the continued maintenance of property and payment of expenses beyond the amount of the funds available for a single fiscal year; and WHEREAS, the General Fund Operating Reserves represent unrestricted resources available for appropriations by the City Council to address extraordinary needs of an emergency nature; and WHEREAS, on January 20, 2009, the City Council endorsed the City Manager's "Fiscal Health Plan" (the "Plan") that was created to address the City's immediate financial emergency as well as its long-term fiscal sustainability, including an update of the General Fund Reserve Policy; and WHEREAS, the proposed policy will provide guidelines for the use of reserves as well as increased minimum reserve levels so that the City's finances are managed in a manner which will (1) continue to provide for the delivery of quality services; (2) maintain and enhance service delivery as the community grows in accordance with the General Plan; (3) minimize or eliminate the need to raise taxes and fees because of temporary revenue shortfalls; and (4) establish the reserves necessary to meet known and unknown future obligations and ability to respond to unexpected opportunities; and WHEREAS, the new policy proposes separate reserve categories to provide for greater distinction and increased security and accountability in the use of reserves, including. (i) General Fund Operating Reserves -minimum 15%; (ii) Economic Contingency Reserves -minimum 5% and (iii) Catastrophic Event Reserves - 3%; and Resolution No. 2009-264 Page 2 WHEREAS, the Economic Contingency Reserve represents monies set aside to mitigate service impacts during a significant downturn in the economy which impacts City revenues such as sales taxes, property taxes, business license taxes, etc.; and WHEREAS, the Catastrophic Event Reserves are monies set aside to fund unanticipated expenses related to a major natural disaster in the City and are associated with the City's Disaster Prepazedness Program; and WHEREAS, in the event that the City Council or its designee proclaims a local emergency, the Catastrophic Event Reserves can be utilized to fund recovery costs until reimbursements from Federal and/or State agencies can be recovered; and WHEREAS, if a major event were to occur where structural damage occurred or if the billing and reimbursement process crossed fiscal years, there could be an impact to the City's reserves; and WHEREAS, establishing a sepazate reserve at reasonable levels would provide the City some flexibility and time to recover the funds without having a significant impact to operations or cash flows; and WHEREAS, since the establishment of the reserve policy in 1996, the City's cash flow receipts for major revenue sources such as Sales Taxes and Motor Vehicle Fees received have changed as a result of the State's revenue shifts causing reductions in the City's monthly cash flow receipts; and WHEREAS, since there is a close correlation between reserve level and cash balance, it is generally true that the higher the reserve level, the larger the cash balance; and WHEREAS, adequate cash balances aze important for two reasons: generating investment interest returns in support of operations, and avoiding the potential cost of having to borrow money on a short-term basis; and WHEREAS, as the reserve levels dropped the City has participated in short term borrowing through the issuance of Tax and Revenue Anticipation Notes (TRANS) over the past two years as it did in the eazly 1990's; and WHEREAS, although the issuance of TRANS has been relatively inexpensive due to favorable market conditions, this is changing as the investment community is shying away from California investments; and WHEREAS, it is estimated that the minimum cash balance required at the beginning of the fiscal yeaz in order to avoid borrowing additional money for ashort-term is approximately $25 million, which further supports the total recommended reserve level of 23%; and Resolution No. 2009-264 Page 3 WHEREAS, the City Council has acknowledged that the reserve levels to be established by this General Fund Reserve Policy are goals that are intended to be achieved over the long- term, and the City Council is adopting this Policy on that basis. NOW, THEREFORE, BE IT RESOLVED that in accordance with the City's previously approved Fiscal Health Plan, the City Council of the City of Chula Vista replaces the City's existing General Fund Reserve Policy with a new Genera] Fund Reserve Policy, a copy of which is on file in the Office of the City Clerk. Presented by Approved as to form by Maria K~ichadoorian B5i-t C. Mee eld Director of Finance/Treasurer City Attu ey PASSED, APPROVED, and ADOPTED by the City Council of the City of Chula Vista, California, this 5th day of November 2009 by the following vote: AYES: Councilmembers: Bensoussan, Ramirez, Thompson and Cox NAYS: Councilmembers: None ABSENT: Councilmembers: Castaneda ATTEST: 0/tv~~ Donna R. Norris, MC, City Clerk STATE OF CALIFORNIA COUNTY OF SAN DIEGO CITY OF CHULA VISTA ~% ~~ Cheryl Cox, ' ayo I, Donna R. Norris, City Clerk of Chula Vista, California, do hereby certify that the foregoing Resolution No. 2009-264 was duly passed, approved, and adopted by the City Council at a regular meeting of the Chula Vista City Counci] held on the 5th day of November 2009. Executed this 5th day of November 2009. ~//n/,,,- , - ~~ /~~!W ~WIiA ~,o/ ~ t//tt/L .0 Donna R. Norris, CMC, City Clerk