HomeMy WebLinkAboutMinutes - February 5, 2019 SSLODI CITY COUNCIL
SHIRTSLEEVE SESSION
CARNEGIE FORUM, 305 WEST PINE STREET
TUESDAY, FEBRUARY 5, 2019
A. Roll Call by City Clerk
An Informal Informational Meeting ("Shirtsleeve" Session) of the Lodi City Council was held
Tuesday, February 5, 2019, commencing at 7:02 a.m.
Present: Council Member Johnson, Council Member Nakanishi, and Mayor Pro Tempore
Kuehne
Absent: Council Member Mounce, and Mayor Chandler
Also Present: City Manager Schwabauer, City Attorney Magdich, and City Clerk Ferraiolo
NOTE: Council Member Johnson participated in the meeting via teleconference.
B. Topic(s)
B-1 Receive Presentation on Staff's Proposed Updates to Budget and Fiscal Policies (CM)
Deputy City Manager Andrew Keys provided a PowerPoint presentation regarding budget and
fiscal policies and biannual review. Specific topics of discussion included background, proposed
changes, Measure L, pensions, fund balance/reserves, fund level change, replacement funds,
Capital Improvement Program, and next steps.
Mayor Pro Tempore Kuehne stated he would like to see a depreciation schedule added to track
information technology infrastructure, as well as vehicles and equipment, for items other than
personal computers and related technical systems. Specifically, he was interested in expanding
the scope to including tracking infrastructure needs, such as the City's broadband (i.e. fiber ring).
Mr. Keys stated staff can work on creating such a list that could include deferred maintenance
items.
With regard to the Capital Improvement Program recommendation to increase the project size
from $10,000 to $25,000, Council Member Johnson stated he sees no problems with the current,
lower threshold, which does not seem to hold up or delay projects. Mr. Keys stated the lower
threshold may present a few challenges when combined with some of the new recommendations
presented in the proposed budget policies, which aim to provide additional transparency and a
clearer CIP document. He added that the recommended change will not deviate how staff
delivers projects.
Mike Lusk, member of the public, questioned how the Capital Improvement Program will work
when it overlaps budgets and is transferred year to year, specifically how it will affect utility rates
that are set based on the capital project needs. He asked if there would be a line item adjustment
in future rate schedules to offset what ratepayers previously paid.
Mr. Keys stated that capital projects are budgeted along with a rate model on an assumption that
a project will cost a certain amount, whether it is spent in one fiscal year or crosses to another.
Even if money is collected from rates for a particular project and was not spent, the money will roll
forward along with the project to pay for it. The only time an issue would arise is if Council
changed its mind and cancelled a project after setting aside money from rates. City Manager
Schwabauer added that, if a rate is set to cover a $100 million project that goes away over
10 years, there will come a point when money is being over -collected and an adjustment will be
necessary. For the most part, however, funding is needed on a continuing basis for both new
capital projects and maintaining, repairing, or replacing old infrastructure. He stated the water
utility is an exception because water meters will largely be finished soon, which Council
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recognized by setting a sunset on the rates. Because the rate model anticipates future projects,
Council has the ability to see where there is an over -collection and can stop or reduce rates.
C. Comments by Public on Non -Agenda Items
None.
D. Adjournment
No action was taken by the City Council. The meeting was adjourned at 7:47 a.m.
ATTEST:
Jennifer M. Ferraiolo
City Clerk
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TM
CITY OF LODI
COUNCIL COMMUNICATION
AGENDA ITEM
B -I
AGENDA TITLE: Receive Presentation on Staff's Proposed Updates to the Budget and Fiscal Policies
MEETING DATE: February 5, 2019
PREPARED BY: Deputy City Manager
RECOMMENDED ACTION. Receive presentation on staff's proposed updates to the Budget and
Fiscal Policies.
BACKGROUND INFORMATION: On October 19, 2016, the City Council adopted the City of Lodi
Budget and Fiscal Policies. The policy calls for biannual review.
Current policy has been in effect for the Fiscal Years 2017/18 and
2018/19. The biannual update presented at this meeting will be in effect for Fiscal Years 2019/20 and
2020/21 upon approval.
Staff will be presenting proposed changes to the Budget and Fiscal Policies for the next two years'
budget cycles. The changes are recommended to align with other Council policies adopted subsequent
to the current Budget and Fiscal Policies, incorporate Measure L, enhance transparency for capital
improvement, vehicle, equipment and Information Technology needs as well as clarifying fund level
controls in the budget.
FISCAL IMPACT:
Once adopted, the new Budget and Fiscal Policies will be used to build the
next two budgets and guide implementation of those budgets. Fiscal
impact will depend on the final adopted policies.
FUNDING AVAILABLE: Not applicable.
a4g-‘f
Andrew Keys
Deputy City Manager
APPROVED:
Stephen Schwabauer; City Manager
City of Lodi
PROPOSED
Budget and Fiscal Policies
CITY OF
CALIFORNIA
Adopted October 19, 2016
1. Purpose
The City's primary financial objective is to maintain the fiscal stability of the
organization. The purpose of this policy is to establish guidelines for budget
development, administration, and management as well as outline the City's fiscal policies
in regard to cost recovery of various programs, target reserve levels in all funds and
funding mechanisms for various programs.
2. Budget Development
The budget will reflect the goals and priorities of the Council each year and make the best
use of available funding within those goals and priorities. While goals and priorities may
change from year to year, some basic tenets will apply to all budgets. Those tenets are
reflected below.
A. The General Fund budget will be balanced each year, without the use of reserves.
Current year revenues will support current year expenditures.
B. One-time revenue will be used to fund one-time expenditures or be placed in
reserves. One-time revenue will not be used to fund on-going operations.
C. Annual budgetary savings will be used to fund one-time expenditures or be placed
in reserves.
D. Funding for the Vehicle Replacement Fund shall be based upon annual
depreciation schedules for vehicles and amounts will be reflected in departmental
budgets.
E. Funding for the Other Post -Employment Benefits (OPEB) Fund shall be based
upon ill ono less than the Actuarial Required Contribution shown in the actuarial
report and charged to each fund based upon ratio of current full time positions.
All funds in the Benefits Fund in excess of 25% of estimated annual costs for
benefits in this fund shall he budgeted for investment in the City's OPEB trust
fund.
F. 1 u*iding for CaIPERS pension costs are as follows. !Funding far the -Pension
ted --fret iatl-assts
by-filitE171
F. Current year Normal Cost wilI be budgeted in each fund based on the estimated
cost for employees in that fund. Current year Unfunded Accrued Liability (UAL)
payments will be budgeted within each fund based on each fund's share of
Comment [AK1]: Covered by the Pension
Stabllization Policy.
employee's within each class (Safety or Miscellaneous). For purposes of
allocating UAL, employees funded by Measure L will be allocated to the General
Fund. The City will budget for the monthly payment of the UAL but will make
the annual UAL moment to recognize the approximately 3.6% savings offered by
Ca1PERS on this option. The Deputy City Manager will then use the UAL
savings to make Additional Discretionary Payments (ADP) to Ca1PERS to further
reduce the City's UAL.
€— Funding for the Information Technology (IT) Replacement Fund shall be based
upon the replacement cycle for equipment contained in the fund.
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at: 1"
14G. Budgetary allotments for OPEB, Pension Stabilization and IT
Replacement shall be reflected in the Non -Departmental Organization Unit for all
General Fund units.
a. Special Revenue, Enterprise and Internal Service funds will reflect
budgetary allotments for these items within their respective funds.
l H. Fixed Assets
a. Capital purchases of $10,000 or more, with a three year useful life, will be
capitalized.
b. Infrastructure additions or new construction of $10,000 or more will be
capitalized.
c. Vehicle purchases of any amount will be capitalized and useful lives will
be determined based upon the Government Finance Officers Association
Best Practices guidelines.
d. Straight Straight-line depreciation will be used for all depreciable assets.
J,1. Library
a. The Library is primarily funded through a transfer from the General Fund.
Council will set the level of funding each year based upon available
General Fund revenue.
IBJ. Parks, Recreation and Cultural Services (PRCS)
a. Recreation and Community Center Programs
i. The goal is to recover, on average, 40% of program costs from
participants. Individual programs may be fully self-supporting
while other programs may have a nominal cost recovery ratio.
b. General Fund Transfer
i. The General Fund Transfer shall be determined by Council each
year. The intent of the General Fund Transfer is to cover the costs
associated with Parks Maintenance, PRCS administration, Debt
Service and Hutchins Street Square Maintenance.
6K. Community Development
a. The Community Development Department should primarily be self-
supporting through fee revenue.
b. A General Fund Transfer, determined by Council each year, will be
designed to support the value of the general information function that the
department provides and support at least one-half of the costs associated
with a Youth Outreach function designed to divert youth involvement in
gang activities.
M L. Enterprise Funds
a. Enterprise funds will set fees and rates at levels that meet operating, debt
service, capital and reserve needs.
NM. Internal Service Funds
a. Internal Service funds will set rates and charges at levels that will ensure
full recovery of costs each year.
3. Budget Administration and Adjustment
The City Council is ultimately responsible to the public for the delivery and conduct of
City services and facilities. Accordingly, the Council appropriates funds to ensure the
delivery of services at the levels and in the priority established by Council. The legal
level of budgetary control is at the depart enl ie •elfund level.
A. City Manager
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The City Manager, as the chief administrative officer, provides staff with general
direction in the development and formulation of the City Manager's budget
recommendations to Council. This includes: evaluating and assessing current and
anticipated issues facing the City; determining the demand for services and
facilities; identifying the concerns of the citizenry; assessing the current and
projected financial condition of the City; and determining the final staffing
recommendations.
B. Deputy City Manager/Internal Services Director
The Deputy City Manager/Internal Services Director, as the chief financial
officer, is responsible for budget development and day-to-day administration of
adopted budgets. This includes: developing and issuing the budget instructions
and calendar; advising the City Manager on budget policies and issues, including
the recommended level of funding for each department within the General Fund;
reviewing budget requests to ensure they are complete and accurate; preparing the
preliminary budget recommendations for review by the City Manager; and
publishing the approved budget, Capital Improvement Plan, and Budget in Brief
documents.
C. Department Directors
Department directors are responsible for preparing their operating and capital
budget requests in accordance with the City's budget instructions and managing
their respective departments within their approved budget allotments.
D. Failure to Adopt a Budget
If the City fails to adopt the budget by July 1, the City Council may elect one of
the following courses of action until passage of a budget and appropriation of
funds: (1) Provide the City Manager with Continuing Resolution Authority to
allow continued services at expenditure levels not greater than those in the prior
year budget; or (2) Require staff to obtain prior approval for any expenditure
(payment) of City funds.
E. Public Record
The budget document will be available on-line at the City's website
(www.lodi.goy). Hard copies will be available for public review at the Lodi
Public Library, City Hall and the Carnegie Forum.
F. Budget Adjustments
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—a. City Council approval is required for any increase in total appropriations
within any individual fund. All budget adjustments that increase one fund's
total anvronriations, including net zero budget adjustments, must have City
Council approval.
b. The City Manager and Deputy City Manager have the authority to adjust
appropriations within a fund, so long as total appropriations within the fund do
not increase. This includes adjustments between departments within a fund.
c. Department directors have the authority to adjust appropriations within their
departmental fundi, so long as total appropriations within the department
within the fundal funds do not increase.
4. Appropriation Limit
The Council will annually adopt a resolution establishing its appropriation limit
calculated in accordance with Article XIIIB of the Constitution of the State of California,
Section 7900 of the State of California Government Code, and any other voter -approved
amendments or Sstate legislation that affect the City's appropriation limit.
5. Components of Fund Balance
A. Governmental Accounting Standards Board Statement Number 54 – Fund
Balance Reporting and Governmental Fund Type Definitions outlines the
requirements to report fund balance for governmental funds in specific
classifications which create a hierarchy primarily based upon the extent to which
a City is bound to constraints on the specific purposes for which the funds can be
spent. Fund Balance consists of the following five categories:
i. Non -spendable fund balance: amounts that cannot be spent because they
are either (a) not in a spendable form (e.g., inventories or pre-paids) or (b)
legally or contractually required to be maintained intact (e.g.,
endowment).
ii. Restricted fund balance: amounts that can only be spent for the specific
purposes stipulated by external resource providers either constitutionally
or through enabling legislation (e.g., grants, gas tax, impact fees).
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t-- Formatted: Indent: Left: 0", First line: 0" )
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iii. Committed fund balance: amounts that can be used for the specific
purposes determined by formal action of the government's highest level of
decision making authority. Committed fund balance can be changed only
by the government taking the same formal action that initially created the
commitment. (e.g., Council approved catastrophic or economic reserves).
iv. Assigned fund balance: amounts that are intended to be used by the
government for specific purposes. Intent can be established by either the
governing body or delegated to a City official. (c.g., amount of
un a intended to be used to pay For future- elany- d
bene creases)..
v. Unassigned fund balance: the remaining amount of fund balance after all
other fund balance classifications are accounted for and can be either
positive or negative. Positive unassigned fund balance is available for any
purpose.
6. Fund Balance Policies
A. Committing Fund Balance
i. The City Council is the City's highest level of decision making authority
and the formal action that is required to be taken to establish, modify, or
rescind a fund balance commitment is a resolution or ordinance approved
by the City Council at a City Council meeting. For reporting purposes, the
resolution or ordinance approving, modifying or rescinding a fund balance
commitment must be approved prior to the last day of the fiscal year for
which the commitment is to be reported. The amount of the commitment
may be determined in a subsequent period.
B. Assigning Fund Balance
i. The City Council retains the authority to assign fund balance.
C. Hierarchy of Fund Balance Use
i. When multiple categories of fund balance are available for expenditure,
the City will spend the most restrictive funds first before moving down to
the next category with available funds in the following order:
1. Restricted
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2. Committed
3. Assigned
4. Unassigned.
7. General Fund Reserves
Maintaining reserves in the General Fund is critical to the successful and stable short- and
long-term operations of the City. Adequate reserves in the General Fund ensure that the
City is able to respond to emergencies and continue providing services to the citizens of
Lodi. Adequate reserves also ensure that the City will have sufficient funds available to
meet its operating, capital and debt service obligations.
A. Catastrophic Reserve
i. A Catastrophic Reserve is established within the General Fund. This
reserve is established to maintain the ability of the City to meet
operational expenses during times of declared emergency or major
catastrophe.
I.. It is recognized that during a time of emergency, the City will need
to expend more resources than normal operations dictate to meet
the community's need. In addition to an increased level of
expenditure, the tax base of the City may be impaired after a major
catastrophic event.
ii. The amount of the Catastrophic Reserve shall be a minimum of 8% of
annual General Fund revenues, including Operating Transfers.
iii. The Catastrophic Reserve shall be exclusive of all other reserve amounts.
iv. Council may draw on the Catastrophic Reserve only upon declaration of
an emergency pursuant to the Lodi Municipal Code.
v. If the Catastrophic Reserve falls below 85% of annual General Fund
revenue, including Operating Transfers, the City Manager shall prepare a
plan within three months of Council approval of the Comprehensive
Annual Financial Report (CAFR) to restore the reserve balance to the 38%
level within 12 months and the 8% level within 2'1 rnonth.
vi. The Catastrophic Reserve is not intended for normal unanticipated
expenditures and shall be funded before all other committed General Fund
reserves.
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B. Economic Reserve
i. An Economic Reserve is established within the General Fund. This
reserve is established to maintain the City's economic viability and to
meet seasonal cash flow needs.
1. It is recognized that economic cycles can cause significant
fluctuations in the revenue streams of the City and the recovery
from down cycles can be prolonged and affect service levels to the
community dramatically. The Economic Reserve is intended to
assist the City in maintaining service levels while revenues recover
from a down economic cycle.
ii. The amount of the Economic Reserve shall be a minimum of 8% of annual
General Fund revenues, including Operating Transfers.
iii. The Economic Reserve shall be exclusive of all other reserve amounts.
iv. Council may draw on the Economic Reserve only upon adoption of a
resolution of the City Council.
v. If the Economic Reserve falls below 85% of annual General Fund
revenue, including Operating Transfers, the City Manager shall prepare a
plan within three months of Council approval of the Comprehensive
Annual Financial Report (CAFR) to restore the reserve balance to the 38%
level within 12 months
vi,The Economic Reserve is not intended to be used to encourage
development through the expansion of infrastructure to undeveloped areas
of the City and shall be funded once the General Fund Catastrophic
Reserve is fully funded.
virC. On December 6. 2017. the City Council approved a Pension Stabilization
Policy that effectively requires the City to budget at exactly 16% total fund
balance in the General fund, withall excess being contributed to the Pension
Stabilization Fund (PSF), Should there be a lower fund balance presented in the
proposed Budget, the City Manager shall first recommend use of Pension
Stabilization Funds to efIsetpay Unfunded Accrued Liability (UAL) costs in the
Fiscal Year, The Deputy City Manager shall first nay all UAL. costs with current
year resources and shall only draw on the PSF in the final month of the Fiscal
Year if in his/her opinion it is still estimated a draw is needed to meet the 16%
total fund balance requirement.
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L Formatted
8. Measure L Fund Reserves
"Ls a general purpose revenue. maintaining healthy reserves in the Measure L fund-•.__.
is critical for the same reasons as in the General Fund, Adequate reserves ensure that the
City will continue to be able to provide Lodi citizens the services funded by Measure L in
the long term. The Measure L Fund shall maintain the same 8% Catastrophic and 8 %
Economic Reserves as outlined under Section 7 A. and Section 7 B. above. Measure L
Funds shall not be subject to the City's Pension Stabilization Policy. By allocating 1JAL
in the method described in Section 1 F. above, the General Fund will cover any UJAI.
costs attributable to the employees funded by Measure L
As a new revenue stream beginning April 1, 2019. Measure 1: will take time to
build up a reserves to comply with this policy. initially, the fund balance will be built to
the full 16% combined fund balance over a three year timeframe beginning with the FY
2019/20 budget and ending with FY 2021/22. Budgets from FY 2019120 through FY
2021/22 shall include approximately 5.33% of revenue as a deliberate set aside to fund
these reserve categories,
8:9.Special Revenue Fund Reserves
Maintaining reserves in the City's Special Revenue Funds is also critical to the successful
and stable short- and long-term operations of the City. Adequate reserves in the Special
Revenue Funds, where appropriate, ensure that the City is able to carry out the purpose of
the special revenue fund and ensure compliance with underlying laws and contractual
provisions associated with the funds. Additionally, bond rating agencies often evaluate a
City's General Fund financial resilience by looking at reserves that may be drawn from
Special Revenue funds to help support General Fund activities.
A. Library
i. Since the Library is primarily funded by a General Fund transfer, there is
no need to duplicate reserves associated with the transfer amount within
the Library Fund.
ii. Reserves within the Library Fund should be maintained at a minimum
level of 16% of annual Non -General Fund Transfer revenue.
Gouneibl
B. Parks, Recreation and Cultural Services (PRCS)
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numbering
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Comment [AK2]: This is possible with the
budget resolution anyway.
i. Since a significant portion of PRCS revenue comes from a General Fund
transfer, there is no need to duplicate reserves associated with the transfer
amount within the PRCS fund.
ii. Reserves within the PRCS Fund should be maintained at a minimum level
of 16% of annual Non -General Fund Transfer revenue.
] . Any excess reserves not otherwise designated by Council may be
C. Community Development
i. The Community Development Fund is primarily self-supporting from fee
revenue associated with development activities. The activities and
financing of this fund are subject to wide fluctuations based upon the state
of the development economy. Many of the fees assessed are collected
ahead of services being provided. In the event of an economic downturn,
the fund will have collected fees for services that have not yet been
provided. As such, it is prudent to carry a large reserve to recognize that
the reserve represents services that have not yet been provided.
ii. Reserves within the Community Development Fund should be maintained
at a minimum level of 50% of annual operating expenses, including
transfers.
D. Vehicle Replacement
i. It is the City Council"s goal to maintain Rreserves in the Vehicle
Replacement equal to the accumulated
depreciation of the vehicles in the fund.
1. The City Manager's proposed budget will recommend fully
Funding vehicle replacement funds equal to the annual straight -fine
depreciation of all vehicles in the fund.
2. Should Council elect not to fund the straight-line annual
depreciation in the budget, the Deputy City Manager will report on
the short fall in the fund within the budget document.
O. It is recognized that a shortfall currently exists and fully funding
only one year of straight-line depreciation will result in a continued
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Comment [AK3]: This Is possible each year with
the budget resolution anyway.
Formatted
under funding of vehicle replacements until the current vehicle
stock is replaced. -
E. Information Technology Replacement
i. It is the City Council's goal to maintain rP eserves in the Information
Technology Replacement fund equal to the
accumulated depreciation of the equipment in the fund.
1. The City Manager's proposed budget will recommend fully
funding the Information Technology Replacement fund equal to
the annual straight-line depreciation of all equipment in the fund.
2. Should Council elect not to fund the straight-line annual
depreciation in the budget. the Deputy City Manager will report on
the short fall in the fund within the budget document.
3. It is recognized that a shortfall currently exists and fully funding
only one year of straight-line depreciation will result in a continued
under funding of Information Technology Equipment replacements
until the current equipment stock is replaced.
F. Other Special Revenue Funds
i. All reserve balances in the following fund categories are ;mod
restricted by the terms of the individual funds within the fund category.
Such restrictions may be from federal or state law, or City Council
designation through budget adoption:
1. Streets
2. Transportation Development Act
3. Community Development Block Grant
4. Debt Service
5. Public Safety Special Revenue
6. General Fund Capital Outlay
7. Parks Capital Outlay
&—Vehicle and Equipment Replacement
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Formatted
8.
9-.10. Enterprise Fund Reserves
Maintaining reserves in the City's Enterprise Funds is also critical to the successful and
stable short- and long-term operations of the City. Adequate reserves in the Enterprise
Funds ensures that the City is able to carry out the purpose of the fund and ensures
compliance with underlying laws and contractual provisions associated with the funds.
Among other metrics, bond rating agencies review compliance with reserve policies in
determining credit ratings.
A. Electric Utility
i. The City Council separately adopts a reserve policy for the Electric Utility
and reviews the components of the policy every three years. As part of the
annual budget process, Council is apprised of the level of reserves desired
under that policy.
B. Water Utility
i. The City Council has adopted a financial model for the Water Enterprise
that incorporates a reserve target of 25% of Operating Expenses (Charlie
is asking for increase to 50% now).
ii. Additionally, all funds collected in relation to PCE/TCE rates or
settlements are restricted to use solely for the mitigation and remediation
of those pollutants.
C. Wastewater Utility
i. The City Council has adopted a financial model for the Wastewater
Enterprise that incorporates a reserve target of 25% of Operating
Expenses.
D. Transit
i. All reserve funds in the Transit Enterprise are restricted as to use solely
for transit purposes.
10.11. Internal Service Fund Reserves
Maintaining reserves in the City's Internal Service Funds demonstrates fiscal
accountability and financial prudence. Adequate reserves in the Internal Service Funds
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at: 2"
ensure that the City has set aside sufficient funds to meet the future obligations it has
committed to provide to its employees. Additionally, bond rating agencies review these
funds and look favorably upon entities that are funding the long-term liabilities
represented in the City's Internal Service Funds.
A. Benefits Fund
i. Reserves equal to 25% of the estimated annual cost of all benefits paid for
by this fund.
i.ii Other Post Employment Benefits (OPEB)The Deputy City
Manager/Treasurer will invest (invest them where? OPER trust right?) all
reserves in the fund, as reported in the prior fiscal year's CAFR, in excess
of 25% of the estimated annual cost of all benefits paid in a current fiscal
year upon completion of the prior fiscal year's CAFR.
held in reserve locally.
H. Long Term Disability
Reserves equal to three times the annual expense should be held
locally.
I-Hi—Pension-Stabilize 'bon
Reserves-s#otik E e se
at most, it 30 year period.
2. Funds may be held locally or in a third party trust.
B. General Liability Insurance and Worker's Compensation Funds
i. Reserves, at a minimum, equal to the 90% confidence ievel shown in the
annual actuarial report Reserves equal to a minimum of three times the
Self Insared Retention level should be held locally and invested along
with the City's pooled cash portfolio.
ti. Funding at the 90% confidence level will be recommended in each annual
budget.
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•
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Comment [AK4]: Covered by Pension
Stabilization Policy
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C.
ii -iii. The Deputy City Manager will review the status of the funds as of
December 31 each year. If it is estimated that the full budget transfer is
not needed to maintain the 90% confidence level in that year, he/she may
reduce the budgeted transfer for that fiscal Year for each fund prorated to
each fund's budgeted contribution.
a =
Council discretion.
Workers Compensation Fund
-Rase 'es. at u mini -mum, equal to the 70% co• - -
annual actuarial report she• 'alrea
il. Funds above #
means of mitigating future -program cost increases, rebated to the paving
funds or transferred to other funds at Council discretion.
lC. Fleet Maintenance Fund
i. Reserves equal to a minimum of 16% of Operating Expenses shall be held
in the Fleet Maintenance Fund.
12. 4-1, Capital Improvement Plan
The City is committed to ensuring that all of its assets are operated, maintained and
replaced in a manner that is the most prudent method of maintaining the public
stewardship of those assets. To that end, the City will prepare and update annually a
Capital Improvement Plan (CIP) that encompasses those assets and looks out over a five--
year lifespan. The first year of the five-year plan will be the current budget year.
The Internal Services Department will be responsible for gathering the data for inclusion
in the plan.
A. /1. CIP Projects
i. Construction projects that are expected to cost $10,00025,000 or more
should be included in the CIP. Projects will be a combination of projects
that repair, replace or enhance existing facilities and; mor
infrastructure and projects that expand or add to the City's existing fixed
assets. Vehicles and equipment (rolling stock) are not to be included in
the CIP.
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Bold
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CIP Appropriations
i. Approval of the CIP estimates beyond the current year budget and the
.. • ' o not constitute appropriation of the
funds necessary or designation of the funds necessary to complete the
project. Annual appropriations for CIP costs will he included in the
auuakbildget:—Unspent current year budget allocations will automatically
carryforward until project completion with the exception of unencumbered
budgets in annual maintenance nroarams within the CIP. 1-Jnon
completion of a project, unspent budget is returned to the fund until
appropriated by future City Council action. Employee labor costs do. not
carry Forward. Department Heads may transfer budget from employee
labor costs from operations sources to CIP projects within the same fund
as necessary to ensure employee resources arc fully engaged throughout
the year. Carryforward : ow City
y at- end procedures.
C. ,Level of Budget Control
i. Budget control for CIP projects will be at both the general ledger account • .
level and the CIP project level. Budget allocated to one CIP project
cannot be moved to another project within the CW or to a non CIP use
without Council approval. Department Directors can transfer budget
between line items within a project and fund so long as the total
expenditure for the project or for the amount of the funding source specific
to that project does not increase_
D. -Elements of the CIP
—Each project listed in the CIP will address the following items:
• project description
u. project description,_
•
r
h. project timeline
•
anticipated funding sources
•
d. estimated expenditures
.. ■'•
16
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—e -revenues and expenditures will be reflected by fiscal year over
the five -year ---timespan of the CIP
•
costs
f. estimated annual on-going operating and maintenance
•
13. 42 -.Encumbrance Accounting
Encumbrances represent commitments to contracts not yet performed and orders not yet
filled. They are used to control expenditure commitments for the year and to enhance cash
management. Encumbrances do not represent expenditures for a period, only a commitment
to expend resources. As a contract is completed, the budgetary encumbrance control
accounts are liquidated or reduced and the actual expenditure is recorded.
A.
Lapsing Appropriations
i. All unencumbered funds lapse at the end of the Fiscal Year with the
exception of Capital Proiects funds. Funds encumbered on contracts will
roll into the next year. The Deputy City Manager shall review all
contracts to determine what encumbered funds shall lapse due to contract
completions
A. Lapsing Appropriations
asset-purchatir,e at the end of each Fiscal year-
ii. b Capital Projects – eneu, iranpropriated funds in the current
fiscal year do not lapse until project completion or abandonment, whether
encumbered or unencumbered.
ear.
encumbered funds-assoeiatad with -staff costs on construction -projects do
(Pension Stabilization Policy1
14.
This section replaces thepalicy adopted I y Resolution 2017-219 and amends language and
form for consistency with this policy. The policy is also updated and amended to factor in
UAL funding for UAL costs attributable to positions funded by Measure L.
A. Tension Stabilization Funding
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Comment [AK5]: Need to discuss with Steve.
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Comment [AK6]: Add mention in Resolution
that this replaces Reso 2017-219 adopted 12.6.17
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1. The Treasurer is authorizedlo ingest all fund balance in excess of 16% in •-•
the General Fund (Pension Stabilization Resources, or PSR). based on the
City.'s Comprehensive Annual Financial Report (CAFR) from the previous
year in the City's Interna! Revenue Code Section 115 Trust account with
Public Agency Retirement Solutions (PARS); and with Council consent
use PARS trust funds to make:
a. ADP to the Safety Plan of the City of Lodi held by CalPERS; or
b. ADP to the Miscellaneous Plan of the City of Lodi held by----
Ca1PERS;
until such time that the combined Market Value of Assets at the two—
CaIPERS Plans plus the Market Value of Assets in the PARS fund exceed
80% of the combined "Entry Age Normal Accrued Liability" for both
Safety and Miscellaneous or its most proximate equivalent as calculated
by Ca1PERS in the annual Actuarial Reports.
13. Allocation of Pension Stabilization Reserve Funding •
i. !SR investments made under this policy shall he accounted for by source
fund and be made from all source funds in equal proportions to the actual
allocation of Ca1PER'S combined normal cost plus UAL cost within the
Fiscal Year of the most recently approved CAFR.
1. The Measure L Fund shall not contribute to the Pension
Stabilization Fund,
ii. The base fund for determining the amount of pronortionaI PSR for other
funds shall be the City's General Fund (Fund 100).
1. Jf PSR for a particular fund is not adequate to cover the
proportional requirement for that fund. the Treasurer shall prepare
a report and recommendations to City Council to seek direction on
PSR for that Fiscal Year.
Nothing, in this policy shall allow the Treasurer to make PSR investments
of any fund to have a projected year end fund balance below thresholds
established in Section 7, 8, 9, 14. or 11 of thivolicy.
1. Lfproportional PSR investments would cause the projected year
end fund balance of any fund to fall below thresholds established
in the Fiscal Policies, the Treasurer shall prepare a report and
recommendations to City Council within the scope of this policy, __
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C. Budget Adjustments
i. The City Manager is authoriaed,to make any necessary budget adjustments
to execute this policy in each Fiscal Year based on the calculated PSR.
U. Pension Stabilization Reporting
1. The Treasurer shall,,prepare and present the,funded statuses of the City's
combined pension plans in the Annual Budget and the Mid -Year Budget t, ''
report.
15. Y3• Review and Update
These policies will be in place for the fiscal yearFY 2017/182019/2Q and 2020/2I
budgetheginning with the FY 2019/20 budget. These policies will be reviewed and updated
every two years in odd numbered years in conjunction with the approval of the annual
budget. The next review cycle will be in conjunction with the fiscal yearFY
2019/202021/22 budget.
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Budget and Fiscal Policies
Bi Annual Update
Presented By: Andrew Keys, Deputy City Manager
February 5, 2019
Background
• Last updated in October 2016
• Policy calls for bi annual review
• Current review would be effective July 1, 2019
for Fiscal Year 2019/20 and 2020/21
• Measure L fund is not in the existing policy
• Council adopted Pension Stabilization policy in
December 2017 needs to be incorporated
• Capital Improvement Plan and policy needs
consideration
• Desire to clearly define fund levels
Staff Proposed Changes
• Measure L
• Pensions
• Fund Balance Changes
• Fund Level Defined
• Replacement funds
• Capital Improvement Program
Measure L
• Will not pay pension UAL expenses (General
Fund will pick up pension cost for Measure L
employees)
• Exempt from Pension Stabilization Policy
(General Fund picks up)
• Reserves set at 8% catastrophic and 8%
economic (like General Fund)
• Funding of reserves over a three year period
beginning with FY 2019/20
Pensions
• Measure L will not pay UAL
• UAL will be budgeted monthly but paid
annually to recognize 3.6% savings
—Savings will be used to make ADP to PERS
• Normal Cost to UAL budget methodology
explained
• Stabilization fund policy incorporated —
Measure L does not fund PARS
Fund Balance/Reserves
• Simplified calculation to 25% of all costs
within the fund for budget year
— Excess goes to OPEB stabilization fund
• Increased GL and WC reserves to 90%
Confidence Level with provisions for
semiannual review to reduce transfers if
necessary
• Reporting required immediately if GF reserves
dip below policy
Fund Level Change
• Fund level defined as the Council designated
fund level (3 digit fund code)
• Prevents staff level movement of budget
appropriations between similar funds that
may have different objectives or restrictions
• Cannot increase the total appropriation level
within a fund without Council approval
Replacement Funds
• Requires reporting on the status of the funds
in each budget
• Requires City Manager to recommend funding
the annual straight line depreciation for
vehicles, equipment and IT infrastructure
Capital Improvement Program
• Increased project size from $10k to $25k
• Provides budget control at both the project and fund
level
— Money cannot be transferred from project to project
without Council approval
• Allows for automatic carryforward of all non labor
unspent budget allocations until project completion
— All unspent budget returns to the fund at project
completion
• Gives flexibility to move labor costs between operating
and capital as necessary
Next Steps
• Council comments/questions
• Staff revisions, if necessary
• Council adoption February 20 or March 6 for
incorporation into Fiscal Year 2019/20 Budget
DECLARATION OF POSTING
On Thursday, January 31, 2019 in the City of Lodi, San Joaquin County,
California, a copy of the February 5, 2019 Shirtsleeve Session Agenda and
February 6, 2019 Regular Meeting Agenda (attached and marked as Exhibit A)
was posted on the door 1311 Midvale Road, Lodi, California.
I declare under penalty of perjury that the foregoing is true and correct.
Executed on January 31, 2019 at Lodi, California.
ORDERED BY:
Posted by:
G
(Signatur,
/2
(E
JENNIFER M. FERRAIOLO
CITY CLERK
ate)
LODI CITY COUNCIL
Carnegie Forum
305 West Pine Street, Lodi
*and vra conference call:
1311 Midvale Road
Lodi, CA 95240
"SHIRTSLEEVE" SESSION
Date: February 5, 2019
Time: 7:00 a.m.
For information regarding this Agenda please contact:
Jennifer M. Ferraiolo
City Clerk
Telephone: (209) 333-6702
El BIT n
Informal Informational Meeting
A. Roll CaII by City Clerk
B. Topic(s)
B-1 Receive Presentation on Staff's Proposed Updates to Budget and Fiscal Policies (CM)
C. Comments by Public on Non -Agenda Items
D. Adjournment
Pursuant to Section 54954.2(a) of the Government Code of the State of California, this agenda was
posted at least 72 hours in advance of the scheduled meeting at a public place freely accessible to the
public 24 hours a day.
nifer M.4err-iolo
ity Clerk
All staff reports or other written documentation relating to each item of business referred to on the agenda are on file
in the Office of the City Clerk, located at 221 W. Pine Street, Lodi, and are available for public inspection. If
requested, the agenda shall be made available in appropriate altemative formats to persons with a disability, as
required by Section 202 of the Americans with Disabilities Act of 1990 (42 U. S. C. Sec. 12132), and the federal rules
and regulations adopted in implementation thereof. To make a request for disability -related modification or
accommodation contact the City Clerk's Office as soon as possible and at least 72 hours prior to the meeting date.
Language interpreter requests must be received of least 72 hours in advance of the meeting to help ensure
availability Contact Jennifer M Ferraiolo at (209) 333-6702. Solicitudes de interpretacidn de idiomas deben ser
recibidas por to menos con 72 horas de anticipacidn a la reunion para ayudar a asegurar la disponibilidad. Llame a
Jennifer M. Ferraiolo (209) 333-6702.
J:\CITYCLRK\AGENDA\S H I RTSLV\SHRTSLV.DOC