HomeMy WebLinkAboutAgenda Report - January 15, 2003 I-04CITY OF LODI
COIJNCIL COMMUNICATION
AGENDA TITLEReview and Adopt by Resolution the Fiscal Policies and Budget
Format for the 2003-05 Financial Plan and Budget
MEETING DATE: January 15, 2003
PREPARED BY: Deputy City Manager and Finance Director
RECOMMENDED ACTION: That the City Council review and adopt the fiscal policies and budget
format for the 2003405 Financial Plan and Budget.
BACKGROUND INFORMATION' In 1994-96 the City adopted their first two-year budget format. This
two-year format includes a section containing format statements of financial policies. Staff will present an
overview of the current award winning financial policies and budget format. A more detailed discussion of
the history and evolution of the budget format were presented to Council at the November 19, 2002
shirtsleeve session.
The format to be used for the budget document and the City's formal fiscal policies are the vital foundation
on which the 2003-05 Financial Plan and Budget will be built. As such, the City Manager is recommending
formal adoption of the policies and format to provide for effective planning in the preparation and
management of the City's overall budget.
FUNDING: None required at this time,
APPROVED-,
Jane;teeter, Deputy City Manager
Vicky McAthle7, —Finance Director
Flynn -- 'sty i1
2003-2005 FINANCIAL IAL PLA AND BUDGET
OVERVIEW R BUDGETPOLICIES AND GOALS
OVERVIEW
The overall goal of the City's Financial Plan and Budget is to establish and maintain effective
management of the City's resources. Formal statements of budget policy and major goals provide the
foundation for effective planning. accordingly, this section describes the basic budget policies used in
guiding the preparation and management of the City's overall budget. This section is composed of the
following Major units:
Budget Management ent and C€antrol. Policies
Major City Goals
Some of the benefits to establishing financial policy include:
1. Publicly adopted policy stalerxrenis contribute greatly to the credibility of and public confidence
in the City. For the credit rating industry and prospective investors, such statements show the
City's commitment to sound financial management and fiscal integrity.
_ Established policy sa..ves time and energy. Once decisions are made at the policy level, the issues
do not need to be discussed each time a decision has to be made.
3. The process of developing overall policy directs the attention of staff and Council to the City's
total financial condition rather than single -issue areas. Moreover, this process requires staff and
Council to think about linking long-term financial planning with day -today operations.
4. as overall policies are developed, the process of trying to tie: issues together can bring new
irnforrnation to the surface and reveal further issues that need to be addressed.
5, Developing financial policies reinforces the Council's policy role in maintaining goad financial
condition.
Cie Setting financial policies can improve the City's fiscal stability by setting a forward-looking
approach to planning,
7. Explicit policies contribute to continuity in handling the City's financial affairs.
BUDG&T MANAGEMENT ANT) CONTROL POLICIES
The following policies guide the preparation and execration of the 2003-2005 Financial Plan and Budget:
Fi a dal Ptah Organization
R
Budget Administration
General Revenue, Management
Recreation and Community Center Fees
Enterprise, Fund Fees and Rates
Other Fees and Rates
Revenue
Appropriation Limitation
Fend Balance Designations and Reserves
Investments
Capital Financing and Debt Management
x CapitalImprovement Bridget
Human Resource anagement
Productivity Reviews
Contracting For Services
Allocating Cost of Services
* Carryover Policy
Fleet policy
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2003-2005 FINANCIAL PLAN AND BUDGET
OVERVIEW- G -FT POLICIES AND GOALS
MAJOR CITY OAS
The in.volvement of the City Council in setting major City goals is essential to the budget process, These
goals provide short terra and hong term direction to staff, determine the allocation of resources and
establish priorities. " hese goals will provide focus to the organization -vide efforts of staff and ensure
that the most important, highest priority objectives are accomplished and, that these priorities are
communicated to the public.
The major City goals w.,e provided in this part of the 2003-2005 Financial Plan and Budget.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGETPOLICIES
FINANCIAL PLAN ORGANIZATION
A. Through its financial plan., the City will.
I . Identify community needs for essential services
0rgaanize the activities required to provide these services.
3. Establish policies and goals that define the nature and level of services required.
4. Identify activities performed in delivering services.
5. propose objectives for improving the delivery of services.
ti. Identify and appropriate resources required to perform set -vices and accomplish objectives.
7. Set standards to measure and evaluate. the-,
a. Output of activities
b. Accomplishment of objectives
c, Expenditure of appropriations
J1 The City will use a two --year financial plan and budget concept to emphasize long-range planning and
effective management of services. The benefits of a two-year financial plan and budget are:
1 e reinforceslong-range planning
2. Concentrates on the development and budgeting for significant objectives
3. Establishes realistic schedules for completing objectives
, Provides far orderly and structured operations
Prornotes orderly spe ding patters
C. 'rhe two --yeas financial plan and budget will establish measurable objectives and allow reasonable
time to accomplish those objectives.
D, The status of major prograrn objectives will be reported to the Council semi-annually.
E. 'rhe City council will review and, amend appropriations, if necessary, seini--annually.
BUDGE T ADMINISTRATION
A. City council
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 the Council.
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2€ 03-2005 FINANCIAL PLAN AND BUDGET
BUDGET DG ( IC E
B. City'Manager
'The City Manager as the chief administrative officer provides the City Council and Staff with
general direction in the development and formulation of the staff's budget recommendation. This
includes evaluating and assessing current and projected issues confronted by the City; determining
the demand for services and facilities; identifying the concerns of the voters; assessing the current
and proJected financial condition of the City; and determining the final staff recommendation,
C. Finance, Director/Treasurer
The Finance Director as the chief financial officer is responsible for budget development and
administration. This includes: developing and issuing the budget instructions and calendar; advising
the City Manager on budget policies, including recommended annual target funding levels for fleet
fends; reviewing budget requests to ensure they are complete and accurate; preparing the preliminary
budgetrecommendation for review by the City Manager; and, publication of the approved budget.
Dlie Works Director
The Public Works Director is responsible for preparing the City's capital improvement budget (CIB)
and the City's Equipment. Replacement Schedule (ERS). In this capacity, the Public Works Director
works closely with the, Electric Utility Director to prepare an integrated CIB and ERS in recognition
of the unique responsibilities and scop: of services offered by the Electric Department,
E. Department Directors
Department Directors are responsible for preparing their operating budget requests and capital budget
requests in accordance with the City's budget instructions.
F. Fleet Committees
Fleet committees were established to sere the City Manager in all vehicle -related matters to include
budgeting, acquisition, disposition, assignments, vehicle operations, maintenance and insurance.
CI. Failure to Adopt Budget
If the City Council rails to adopt ilze budget by July 1, the City Council may elect one. of the
following courses of action until passage of a budget and the appropriation of funds. (1) Provide the
City tanager with Continuing Resolution Authority to allow continued services at expenditure
levels not. greater than those levels approved in the prior year budget; or (2) Require staff to obtain
prior approval for the expenditure (disbursement) of City funds.
I f . Public Record
Copies of the. adapted City budget shall be public records available to the public upon request.
GENERAL A L I.W MANAGEMENT
r 'lie City will seep to maintain a diversified and stable revenue, base to protect it from short-term.
fluctuations in any one revenue source.
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2003-2005 FINANCIAL LAN AND BUDGET
BUDGET POLICIES
emphasize and facilitate long-range planning, the City will project operating revenues for the
succeeding Cive years.
C, 'The City will iia e all current expenditures with current reveriues, avoiding procedures that balance
cut erat budgets by accruing feature revenues, rolling over short term debt or borrowing reserves of one
fund to another,
C MEATION AND COMMUNITY CENTER FEES
A, Recreation service cast recovery goals are addressed as an integral component of the City's annual.
comprehensive user fee analysis process. It is the City's goal that a minimum of 30% of the total cast
of the City's recreation and community center programs should be recovered through fees and charges
for recreation activities and the use of City facilities and equipment. In achieving this overall cast
recovery goal, the following guidelines will be used.
L Cost recovery for activities directed to adults should be relatively high.
2. Cost recovery for activities for youth should be relatively low,
Although ability to pay may not be a concern for all youth and senior participants, these are
desired program activities, and the cost of deter -pining need may be greater than the cast of
providing a uniform service fee structure to all participants. Further, there is a community
wide benefit to encourage high --levels of participation in youth recreation activities regardless
of financial status.
3. For cost recovery activities of Tess than 100%, there should be a differential in rates between
residents and cion -residents.
4, These policy guidelines are sufficient in themselves in providing direction for setting the
recreation and community unity ceutea fees. Although these targets may be internally a fu in
administering recreation fees, the City's management should have a;, much flexibility as
possible in setting specific activity fees as long as they meet the objectives and criteria
provided above, However, the Recreation Department and Community ity Center will prepare
and submit a summary of internal cost recovery targets to the City Manager for various
activity categories at least annually.
B. Charges will be assessed for use of rooms, pools gymnasiums, hail fields, special use areas and
recreation equipment for activities not sponsored or co-sponsored by the City. Such charges will
generally conform to the fee support categories listed above,
C. The Recreation Department and Community Center may waive tees with the approval of the City
Manager when it is determiaaed that an undue hardship exists or when in the best interests of the City,
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2003-2005 FINANCIAL PLT AND BUDGET
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BUDGET POLICIES
ENT EPWRISE FUND FEES AND RATES
A. The City will sot fees and rates at levels which fully cover the total direct and indirect costs
...—Inclu.d.ing Operations, capital outlay and debt servic:e..... of the following enterprise programs:
electfical, water, sewer, and transit.
B. The, City will annually review and adjust enterprise fund fees and rates as required to ensure that they
remain appropriate Errnd equitable; and to stern large rate increases.
o,rHER FEESAND RATES
X Ongoing Review
Fees and rates will be reviewed and updated on an ongoing basis to ensnare that they are correct and
appropriate teased on the changing needs of the community, i.e. economic concerns, social issues,
public safety.
B. General Concepts Regarding the Use of Service Fees and Mates
The use of tees rand rates should be subject to the following general concepts:
I. Revenues normally will not exceed the reasonable cost of providing the service.
. Cost recovery goals should be based on the total cost of delivering the service, including
direct costs, departmental administration costs, and organization wide cost such as
accounting, personnel, date processing, vehicle maintenance and insurance.
The method of assessing and collecting fees should be as simple as possible in order to
reduce the administrative coast of colt tion.
- rate structures should be sensitive to the "market" for similar services as well as to smaller,
infrequent users of the service and the influence rates and fees have on economic
development.
5, A unified approach should be used in determining cost recovery levels for various programs
based on the factors discussed above,
C. Low Cost. Recovery Services
Based on the criteria discussed above, the following types of services should have very low cost
recovery goals. In selected circumstances, there may be specific activities within the broad scope, of
services provided that should have user charges associated with them. However, the primary source
of funding for the operation as a whole should be general purpose revenues, not user fees.
I . l aMmining and developing public facilities that are provided on a uniform, community wide
basis such as streets, parks and general purpose buildings.
2. Delivery of social service programs and economic development activities.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
D. Comparability with Other Communities
1, Fee surveys should never be the sale or primary criteria in setting City fees. There are many
factors that affect how and why other communities have set their fees at their levels, For
ex ample
11.What level of cast recovery is their fee intended to achieve ccarnpared with Lodi's cast
recovery ot-sjec,tives?
b, What costs have been considered in computing the fees?
C, When was the last time that their fees were comprehensively evaluated?
d. ghat level of service do they provide compared with Lodi's service or performance
standards'?
e. Is their rate structure significantly different than Lodi's and what is it intended to achieve?
2. Surveys compaanng the City's fees to other communities is useful background information in
setting fees for several reasons:
a. They reflect the "market" for these fees and can assist in assessing the reasonableness of
the City's fees.
K If prudently analyzed, they can serve as a benchmark for .how cost effective the City
provides services.
These are difficult questions to address in fairly evaluating fees amore different cities.
f1MISAr
The Council recognizes that generally accepted accounting principles for local government discourage the
"earmarking" of Geno-ral Fund revenues, and accordingly, the practice of earmarking general fund
revenues for specific programs should be minimized. Approval of the following Revenue Distribution
policies for 2001-2003 does not prevent future Councils from directing General Fund resources to other
funds and activities as necessary.
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2003-2005 FINANCIAL PLAN AND B..UDGEI
BLOC . T POLtC IE
A. Property,rax Allocation
1. The City's property tax serves to provide for general municipal services as well as for debt
service, retirement obligations, public improvements and library purposes. The passage of
Pmpos.ition 1.3 on June 6, 1978, drastically clanged the, method of establishing and allocating
property tax revenues for all local agencies in California. In addition to limiting annual
increase-, in market value, placing a ceiling on voter approved indebtedness and redefining
assessod valuations, Proposition 13 established a maximum County wide levy for general
revenue purposes of VX, of market value. Ander subsequent state legislation which adapted
formulas for the distribution of this countywide, levy, the City now receives a percentage of total
property tax revenues.
2. As discussed above, the City no longer controls the amount or distribution of its pro empty tax. In
distributing property tax revenues between funds since the passage of Proposition 13, the
following minimum ratios for special purposes have traditionally been used based on the tax
rates that were in affect prier to the passage of Proposition 13.
Fiscal Year 1978-79 Tax date Per $100 Percent
Special TV.1unici:pal Purposes
Library $ .30 IT86%
General'Municipal Purposes 1.38 82.14%
TOTAL 1.68 1.00.00%
3. For 2001-2003 property tax revenues will be distributed proportionately to the following Bands as
follows:
General Fund
Capital Outlay Fund - General Fund
Library Fund
TOTAL
2002-03 2003-4
50%
50%
30%
30%
20%
2(I%
10010
100%
, The distribution of property tax received on land annexed to the City will be, in accordance to the
agreement with Sari Joaquin County,
B. All Gasoline Tax revenues will be used for street maintenance and constntction activities.
Pursuant to the San Joaquin County's local Transportation Sales Tax (Measure K), the City must
meet the "Maintenance of effort" (l O) requirement which is based on the annual average of the
City's street and road expenditures funded by the General Fund fixed on a three year period.
C, Al.] Transportation Development Act (IDA) revenues will be allocated to alternative
transportation programs, including regional and municipal transit systems, bikeway improvements
and ether programs or proljects designed to reduce automobile triage. It. is expected that
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGETPOLICIES
alternative transportation programs - in conjunction with other state and federal grants for this
purpose- will be self-supporting from'['ISA revenues, As available, TDA funds will also be used
for street maintenance projects.
D, Enterl)rise Fund Al.lc}cations to the General Fund
1. The goal of Proposition 4 is to limit growth in appropriations of both state and local
government to changes in the cost of living and population in order to control spending levels.
Proposition 4 further describes the difference between "tax proceeds" and fees. Tax proceeds
are the revenue from regulatory licenses, user charges and user fees to the extent the revenue
exceeds the cost of providing the regulation, product or service. (This includes transfers from
an enterprise fund to the extent those funds exceeded the cost of providing the services).
2. As discussed above, the funds transferred from the City�s enterprise funds to the City's general
fund are "In -Lieu of Taxes" to the extent they exceed the cost. of services provided by general
services (accounting, personnel, legal, insurance, etc,). These taxes will be levied based on
prior year revenues as follows:
2002-03 2003-04
In -lieu of Tax - Electric; 12% 12%
Ire -lieu of Tax - Water 12%r; 1_2%Q
In -lieu of Tax -- Sewer 12% 1.2%
F. Special Revenue Allocations to the General Fund
Revenues the City receives for specific services (i.e. vehicle tow charges) will not be designated
for use, by an individual department unless required by statute or approved by the City Council,
When required by statute (i.e. asset seizure), these Bands will be first allocated to the purchase of
necessary and essential equipment and/or services prior to purchase with General Fund resources.
F. Clrarits and Donations
Council must approve applications for grants or acceptance of donations containing restrictions
that may have an impact on the budges.
GI3SF OF COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) FUNDS
Each year, the U.S. Department of Housing and. Urban Development (HUD) awards cities
grants to carry out a number of community development activities in an effort to revitalize
neighborhoods, foster economic development and improve community facilities and services.
Uracil receives those grant funds in a formula -lased allocation to use to address identified
community development needs.
CD.BG funds may be used for activities that include, but are not limited to:
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03-2005 FINANCIAL AN AND BUDGE T
BUDGETPOLICIES
Ems. w
Acquisition of real property; 0 Public Services, within certain limits;
Relocation or demolition a Activities relating to energy conservation and
Rehabilitation of residential and non-residential renewable energy resources; and
3
structures; * providing assistance to profit -motivated
Construction of new public facilities and businesses to carry out economic development
i} improvements, such as water and sewer and job creating/retention activities. �--
facilities, streets, neighborhood centers, and the
conversion of school buildings for eligible
purposes;
CDBG funds must also be used to meet one of the fallowing national objectives:
Provide benefit to low- and moderate -income persons, which includes the handicapped and
elderly;
* prevent or eliminate slums or blights or
* meet a specific urgent meed because of existing conditions, which pose a serious and immediate
threat to the health or welfare of the community where other financial resources are not
available,.
The following local ol?jectives are identified for the allocation of C DDG funds:
I With the exception of certain administrative casts, each proposed use of C DBG funds is
categorized as either a public service or a capital irraprovementfbricks and mortar. project. It
is the, intent of this Budget Policy to give priority in funding to eligible capital improvement
projects over public service -related funding requests.
. HUD has established guidelines that require that funds be allocated and expended in a
timely manner. It is the intent of this Budget Policy to require that any proposed funding
request meet a readiness criterion to ensure that the funds will be Used in the program year
that they are awarded, thereby allowing the City to remain in compliance with IUD
regulations,
APPROPRIATION LIMITATION
A. The Council will annually adopt a resolution establishing its appropriation limit calculated in
accordance with Article XII:LB of the Constitution of the State of California, Section. 7900 of the
,State of California Government Code., and any other voter approved amendments or state
legislation th at affect the City's appropriation limit,
B. The City will sta�vc to develop revenue sources, loth new and existing, which are considered non -
tax proceeds in calculating its appropriations subject to limitation.
C. The City will annually review user fees and charges and report to the Council the amount of
program subsidy, if any, that is being pi-ovided by the General Fuad or Enterprise Funds,
2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
FUND BALANCE DESIGNATIONS AND RESERVES
A. The; City should maintain fund balances of at bast 1.5% of operating expenditures in the General
Fund as well as the Electric. Sewer. and Water Funds. This is considered the minimum level
necessary to maintain the City's credit worthiness and to adequately provide for;
1. Economic uncertainties, local disasters, and other finarzc;ial hardships or downturns in the
local economy,
2. Contingencies for unforeseen operation or capital needs.
3. Cash flow requirements.
& The Cite will establish and maintain an Equipment Fund to provide for the tirnely replacement of
vehicles and capital equipment. This includes items with an individual replacement cost of
3,000 or more. The minimurn fund balance in the Equipment Fund should allow for annual
fluctuations in expenditures while maintaining a level anneal transfer and allow for emergency
replacement purchases. The annual contribution to the Fund will generally be based on the annual
use allowance" which is determined based on the estimated life of the vehicle or equipment and
its original purchase cost. Interest earnings and sales of surplus equipment as well as any related
darnage and insurance recoveries will be credited to the Equipment Fund.
C" The Council may designate specific fund balance levels for future development of capital projects
which it has determined to be in the best long-term interests of the City.
D. In addition to the designations noted above, fund balance levels will be sufficient to meet funding
requiroments for projects approved in prior years which are carried forward into the neve year,
debt service reserve requirements', reserves for encumbrances; and other reserves or designations
required by contractual obligations, state law, or generally accepted accounting principles.
INVESTMENTS
A. Investments and cash management will be the responsibility of the City Finance
Director/Treasurer or designee.
B� The City's pil ary investment objective is to achieve a reasonable rate of return while minimizing
the potential for capital losses arising from. market changes or issuer default. Accordingly, the
following factors will be considered in priority order in determining individual investment.
Placements:
1. Safety
2. Liquidity.
I. Yield
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2003-2005 FINANCIAL PLAN ANISDGET
tDGll T POLICIES
C. The City will strive to keep idle cash balances fully invested through daily projections of cash
flow requirements. To avoid forced liquidations and losses of investment earnings, cash flow and
future re uirernents will be the primary consideration when selecting maturities.
D. As the market and the, City's investment portfolio change, care will be taken to maintain a healthy
balance of investment types and rnatuddes.
E. The City will invest only in these instruments authorized by the California Government Code
Section 3601, The City will not invest in stock, will not speculate, and will not deal in futures or
options. The investment market is highly volatile and continually offers new and creative
opportunities for enhancing interest earnings, Accordingly, the City will thoroughly investigate
any new investment vehicles prior to committing City funds to thews.
F. Current financial statements will be maintained for each institution in which cash is invested.
bivestsnents will be limited to 20 percent of the total net worth of any institution and may be
reduced further or refused altogether if an institutions financial situation becomes unhealthy.
C. In order- to rr a it-ize yields from its overall portfolio, the City will consolidate cash balancess from
all funds for investmentpurposes, and will allocate investment earnings to each fused in
accordance with generally accepted accounting principles.
R Ownership of the city's investment securities will be protected through third -party custodial
safekeeping.
I. The City Finance Director/Treasurer will develop and maintain a cornprehensivQ, well
documented investment reporting system which complies with Government Code Section 53607.
This system will provide the City Council with appropriate investment performance information.
The City Finance Direetorrrreasurer will develop and maintain ars. Investment Manage=nt plan
which addresses the City's administration of its portfolio, including investment strategies,
practices, and procedures.
CA11TAL FINANCING AND DEBT AG N'
Capital Financing
Ane City will consider the use of debt financing only for one-time capital projects and only ander
the: following circumstances:
1_. lett the project's useful life will exceed the term of the financing.
2, When project revenues or specific resources will be sufficient to service the long-term dent.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
K Debt finaricing will not be considered appropriate for any recurring purpose such as current
operating and maintenance, expenditures. The issuance of short-term instruments such as revenue,
tax, or bond anticipation nates is excluded from this limitation.
G Capital improvements will be financed primarily through user fees, service charges, assessments,
special taxes, or developer agreements when benefits can be specifically attributed to users of the
faQibly.
D, The City will use the following criteria to evaluate pay-as-you-go versus long-term financing in
funding capital improvements'
f. When current revenues and adequate fund balances are available or when project phasing can be
accomplished.
2. When debt levels adversely affect the City's credit rating,
3. `when market conditions are unstable or present difficulties in marketing.
Long -Term Financing
1. When revenues available for debt service are deemed to be sufficient and reliable so that long-
term financing can be marketed with investment grade credit ratings.
2. When the project securing the financing is of the type which will support an investment grade
credit. rating.
3. When market conditions present favorable interest rates and demand for City financing.
4. When a project is mandated by State or Federal requirements and current revenues and available
fund balances are insufficicm.
5. When the project is required to meet or relieve service requirements.
6, When the life of the project or Asset financed is 10 years or longer.
Debt Management
F, The City will riot obligate the General Fund to secure long-term financing except when the
marketability can be significantly enhanced.
F. No more than 60% of all capital projects other than Enterprise Fuad projects will be funded from
long-term financing; and direct debt will not exceed 2% of the City's assessed valuation.
G. A feasibility analysis will be prepared for each long-term financing to assess debt service on
current and Future operations, This will also include an analysis on the reliability of revenues to
support a debt service.
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2003-2005 FINANCIAL PLAN AND BUDGET
UDE T OLI ;IES
The City° will generally conduct debt financing on a competitive basis. However, negotiated
financing may be used due to market volatility or the crse of an unusual or complex financing or
security structure.
1. The City will seek investment grade ratings (Baa/BBB or greater) on any direct debt and will seek_
credit en4ancements such as letters of credit or insurance when necessary for !marketing purposes,
availability and cast -effectiveness,
J1 The City will monitor all forms of debt annually coincident with the budget process.
K. The City will diligently !monitor its compliance with band covenants and ensure its adherence to
federal arbitrage regulations.
Ln 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 band
prospectus (Official Statement),
CAPITAL IMPROVEMENT GET
A. Construction projects and capital purchases (ether than vehicles, equipment and !major computer
software acquired through the Equipment Fund and projects funded by an Enterprise Fund) which
cost more, than $10,000 will be included in the Capital h-nproverraent Budget (CIB); minor capital
outlays of $10,000 or less will be included with the operating activity budgets. Enterprise Fund
projects and !major equipment purchases will be based on the capitalization practices of the
Enterprise,
B, The purpose of the CIB is to systematically plan., schedule, and finance capital. acquisitions to
ensure cost-effectiveness as well as conformance with established policies. The C113 will be a
four-year plata organized into the same functional groupings used for the operating budget. The
CIB will reflect a balance between capital replacement projects which repair, replace, or enhance
existing facilities, equipment or infrastructure; and capital facility projects which significantly
expand or add to the City`s existing fixed assets.
C, Every capital pr€ject will have a project manager who will prepare the project proposal, erasure
that required phases are completed on schedule, authorize all project expenditures, ensure that all
regulations and laws are observed, and periodically report project status.
D, A CIB Coordinating Committee, chaired by the Directors of Public Warks and the Electric utility
Department, will review project proposals, determine project phasing, recommend project
!managers, review and evaluate the draft capital budget plan, and report project status at least
annually to Council, The Committee should be made up of representative of each Department.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
The Capital Improvement Budget will emphasize p€-oject planning, with projects progressing
thtoaigh at leasttwo and up to sig of the following phases:
DESIGNATED - Set aside funding for facture project development carder "pay-as-you-go"
finking,
* STUDY - Includes concept design, site selection, feasibility analysis, schematic design,
environmental determination, property appraisals, scheduling, grant application, grant approval,
Lind specification preparation for equipment purchases.
ACQUISITION ITION - Includes equipment purchases and property acquisition for projects, if
nec€:ssary.
* DESIGN - Includes ficial design, plan and specification preparation, and construction cost
estimation.
CONSTRUCTION 'I`RUC TION - Includes bid administration, construction, project inspection and
maanagernent, and closeout.
DEBT SERVICE - Installment payments of principal and interest :for completed projects funded
through debt financing.
Generally, it will become more difficult for a project to move frorn one phase to the next. As such, more
projects will be studied than wilt be designed, and more projects will be designed than will be constricted
or purchased.
Funding and related appropriation to a project account will only be made upon approval of each
phase by the City Council. Accordingly, project appropriations for acquisition and construction
will generally be approved when contracts are awarded,
G. Project phases will be listed as objectives in the program narratives of the Activity responsible for
the proiect.
IT Funding set aside for designated projects will lapse after three years if the project has not made
significant movement through the phases, or if the project has not been revalidated. This will
€ nsure funds are not tied cap and are available for the timely completion of active projects. The
projects where funding set aside has lapsed will have to be resubmitted for consideration in the
next hudget cycle.
HUNIAN RESOURCEMANAGEMENT
A. Regular authorized staffing will be. fully budgeted and funded.
B, Staffing and contract service budget ceilings will limit totat expenditures for regular employees,
temporary; employees, overtime and independent contractors hired to provide operating and
maintenance serviCQS.
B -I5
2003-2005 HNAN(IJAL PLAN AND BUDGET
BUDGETPOLICIES
C. Regular employees will be the core work force and the preferred means to staff ongoing, year-round
activities rather than independent contractors. The city will strive to provide fair compensation and
benefit schedules for its authorized regular work force. Each regular employee Mlle
i - Fill an authorized regular position.
2, Be assigned to an appropriate bargaining unit or representative group.
3, Receive salary and benefits consistent with labor agreements or other compensation plans
D. To manage the growth of the regular work force and overall staffing coasts, the City will follow these
procedures:
The City Council will authorize all regular positions except in the case of the Library which is
governed by the Library Board.
. 'rhe Hunian Resources Department will coordinate the Firing of all employees and evaluate the
reallocation of existing positions.
I All requests for additional regular positions will include an evaluation of:
a, The necessity, term, and expected results of the proposed position.
b. Staffing and material costs including salary, benefits, equipment, uniforms, clerical support,
and facilities.
c:. The ability of private industry to provide the proposed service.
d. Additional revenues or coast savings which may be realized.
4, periodically, and prior to any request for additional regular positions, programs will be evaluated
to cicter mine if they can be accomplished with fewer regular employees under a "productivity
re view's.
Teanporary emplosye�,s are eniployt-es other than regular employees, elected officials, and
Volunteers budgeted in hours. Temporary employees will augment regular City staffing only as
limited term ernpl€tyces, seasonal employees, emergency, intermittent, contract emloyees, and
inters, `1`e Citi. Manager will encourage the use of temporary employees to meet peak workload
requirements, fill interim vacancies, and accomplish tasks where less than regular, year-round
staffing is required.
F. Contract employees will be defined as temporary employees with written contracts approved by
the City :Manager who may receive approved benefits depending can hourly requirements and the
length of their contract. Contract employees will generally be used for r edium-terra. (generally
between six months and two years) projects, programs, or activities requiring specialized or
tauganented levels of staffing for a specific period of time. The services of contract employees will
be discontinued upon completion of the assigned project, program or activity. Accordingly,
contact employees will not be used for services that are anticipated to be delivered oar ars ongoing
bwsis.
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2003-2005 FINANCIAL PLAN AND BUDGET
BTA)GET POLICIES
G. Independent contractors will not be considered City employees. Independent contractors may be
used in L,vo situations:
I. Short term, peak workload assignments to be accomplished through the use of personnel
contrac.te, through an outside- employment agency. All placements through an outside
employment agency will be coordinated through the Duman Resources Department and
subl ject to the approval of the Human Resources Director.
2. Construction of public works projects and the provision of operating, maintenance, or
specialized professional services not routinely performed by City employees. Such services
will be provided without close supervision by City staff, and the rewired methods, skills, and
equipment will generally be determined and provided by the contractor.
ISI? CTIVITY REVIEW
The City will constantly monitor and review its methods of operation to ensure that services continue to
be delivered in the most cost-effective manner possible. This review process encompasses a wide range
of issues, including,
A. Maintaining a decentralized approach in managing the City's services. Although some level of
centralization is necessary for review and control purposes, decentralization supports productivity
by:
o Encouraging accountability by delegating authority to the lowest possible level.
o Stimulating creativity, innovation, and individual initiative.
o Reduc..ing. the administrative cost of operation by eliminating unnecessary review procedures.
o Improving the organization's ability to respond to changing needs and to identify and
implement cost saving programs.
o Assigning responsibility :for effective operations and citizen responsiveness to the department.
B. Analyzing systems and procedures to identify and remove unnecessary review requirements.
C. Evaluating the ability of new technologies and related capital investments to improve
productivity.
D. Investing in the C:ity;s most valuable asset - personnel staff - by developing the skills and abilities
of all City employees, with special emphasis on first-line, supervisors.
E. Implement annual performance reviews and appropriate methods of recognizing and rewarding
exc eptior3al employee: performance,
lf. evaluating local market se=rvice providers and ether government agencies to deter -nine whether
the service is available at a lower c=ost than provided by City staff.
G. Periodic formal review of operations on a systematic, ongoing basis.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUIDGET POLICIES
CON'rRACTING FOR SERVICES
A� General policy Guidelines
Contracting with the private sector and other government agencies for the delivery of
services provides the City with the opportunity for cast containment and productivity
enhancement. As such, the City is committed to using private sector resources in
delivering municipal services as a key element in our continuing efforts to provide cast
effective services.
1 private sector contracting approaches under this policy include construction projects,
professional services, outside employmeDt agencies, and ongoing operation. and
maintenance services.
1 In evaluating the casts of private sector contracts compared with in-house performance of
the service, indirect, direct and contract administration costs of the City will be identified
and considered)
4. Whenever private sector providers are available and can meet established service levels,
they will be seriously considered as viable service delivery alternatives using the
evaluation criteria outlined below,
5. For programs and activities currently provided by City employees, conversions to contract
services will generally be made through attrition, reassignment or absorption by the
contractor.
B, Evaluation Criteria
Within the general policy guidelines stated above, the cast -effectiveness of contract services in
meeting established service levels will be determined on a case-by-case basis using the following
c6teria:
I . Is a sufficient private sector market available= to deliver this service`?
2. Can the contract be effectively and efficiently administered?
What are the; consequences if the contz°actor fails to perform, and can the contract
reasonably be written to compensate the City for any such damages?
4. Can a private sector contractor better respond to expansions, contractions, or special
requirements of the service'?
5: Can the work scope be sufficiently defined to ensure that competing proposals can be
fairly and fully evaluated, as well as the contractor's performance after bid award?
Does the use of contract services provide the City with an opportunity to redefine service
level s'?
7. Wit] the contract limit the City's ability to deliver emergency or other high priority
services?
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET OLIC. S
, Overall, can the City successfully delegate the performance of the service but still retain
accountability and responsibility for its delivery?
ALLOCATING THE COST OF SERVICES
A. General Policy Guidelines
I. The City is committed to achieving efficiency by centralizing general administrative
servlc(. s to the extent they serve the needs of the City as a whole and provide fo.r greater
cost efficicnacy. Accordingly. general and administrative services will be charged to those
activities not financed by the General Fund by use of a cost allocation plan.
2. 'The City will develop a cost allocation plana for general government services provided the
City's enterprise fund and special revenue fund activities in accordance with accepted cost
allocation methodology.
3. The cost of general government services will be financed by operating transfers
established in the cost allocation plans and transferred to the general fund, annually at the
time the City budget is adopted.
4€ The Finance Director will perform periodic reviews of the City's dost allocation plan, to
ensnare the distribution of costs are made in accordance with accepted practices of the City,
The results will be used to pr ject annual operating transfers.
5, The City will develop a cost allocation plan iD accordance with Federal and Striate policies
to ensure the maximum allowable return to the City of indirectloverhead costs.
B. Cast Allocation Criteria
I, Costs will be allocated considering the following criteria:
Cause and effect - the identification of output in proportion to the service
provided.
Benefits received - the allocation of cost in relation to the benefits received.
Fairness and equity - the allocation must be mutually satisfactory to the parties
affected.
Ability to bear - the allocations of cost r nest consider the ability to pay and the
impact on the services provided..
1 Casts will be allocated to activities when the overall service benefits the City as a whole
but a particular cost benefit can not be shown.
1 'The criteria for allocating costs will be included in the City budget to allow for evaluation
of the coast distribution crited a.
13-1
20 03-2005 FINANCIAL PLAN AND BUDGET
BUDGETPOLICIES
CARRYOVER POIACY
The Two year Finaywial plan and Budget used by the City provided the City Council and staff with the
opportunity to commit operating funds to services over a two-year time frame rather than the traditional
orae -year period. Under a one-year budget, appropriations lapse at the end of the fiscal year, and favorable
budget ba anc es are no longer available for operating expenditures except when encumbered under
contractual agreements. The two year financial plan and budget allows for The unexpended operating
budget balances to be canted forward to the second year of the .Financial Flan. To ensure fund balance
projections reg-na.in on target, any unexpended operating balances will be reduced if the actual revenue
received is materially less than the estimated revenue projected in the Financial flan.
The use of carryover funds from the first year into the second year of the Financial plan recognizes that
the delivery of new or enhanced services often require more time to staff, equipment, organize and
implement than may be possible in a one year time period. Carryover funding for operating programs into
the second year provides staff with the opportunity and flexibility to improve service and maintain current
operations without significant dislocation or disruptions in service delivery systems. Under this concept,
the following carryover policy will be followed:
A. All operating budget appropriations lapse at the end of the second year of the two-year financial plan
and budget except for Rinds encumbered under contractual agreement (which includes commitments
nide. through purchase order) for goods and services which are essential to the operation of the City
in the year for which they are encumbered.
B_ Operating budgets may be encumbered to ensure adequate funding for goods and services required to
conduct City operations in the year in which they are encumbered, Encumbrances must be evidenced
by a binding Contractual agreement (including purchase orders) between the City and the party
required to deliver the goods and services. Under special conditions, requests for carryover may be
made by rnernorandurn detailing the need for carryover of funds., and such a request may be
considered as an encumbrance at the discretion of the Finance Director. For ca'ryover into the
subsequent year, all Such contracts, purchase orders, or special request must be submitted by :lune 15
of "ch fiscal year,
C. The City Manager is authorized to carry, forward the unexpended and unencumbered operating
budget balances from the first year to the second year of the City's Financial plan and Budget and to
program these balances for re --appropriation under the following conditions:
I. The budget balances were: unexpended for reasons beyond the control of the operating
department.
2, Re -appropriation of budget balances is required to ensure full funding of programs and services
approved by the City Council.
3. The expenditure of these funds will promote innovation, efficiency, and effectiveness in the
delivery of City services and programs.
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2003-2005 FINANCIAL, PLAN AND BUDGE T
BUIDGET POLICIES
D. The total of all favorable variances regardless of type (personnel, utilities, supplies, services, or minor
capital) are. available for carryover with the approval of the City Manager, and will be aggregated at
the fund level by department. Under this approach, program overages within the department may be
offset by program shortfalls. However, in no case may departmental averages in one fund be offset
by departmental savings in another.
E, The budget carryover will be accounted for in a non -departmental control account established by the
Finance Department,
F, The Finance Department will provide Department Heads with a formal balance of operating funds
available for carryover by the end of the second quarter of the second fiscal year. Departments will
be able to determine a tentative balance of their carryover funds prior to that date by reviewing the
June 30 Financial Reports. However, these are unaudited numbers which are subject to change and,
as such, the carryover balances are not official until published by the Finance Department,
G. Department Heads may request through a Special Allocation Request that the unexpended budget
balances of their first year operating budget be reapprop-iated into the second year of the two-year
financial plan. All requests must justify the meed for the funds in the second year and explain why the
funds were not expended or encumbered in the year they were budgeted.
I, When carryover requests are approved by the City Manager, the Finance Department will transfer the
funding to the designated lime item(s) of the Department Budget as provided on the Special
Allocation Request form.
FLEET POLICY
In 1997 Council adopted the Fleet Policies and procedures which are to govern the management,
operation, acquisition and disposition of vehicles and equipment owned and ]eased by the City of Lodi.
Under these adopted policy guidelines, the City organized City vehicles into two fleets; General Fund
and Enterprise Fund. Fleet committees were established to serve the City Manager in all vehicle -related
matters to include budgeting, acquisition, disposition, assignments, vehicle operation, maintenance and
insurance.
ilnder the budget process, replacement vehicles are generally budgeted and funded in the General Fleet
Fund or Enterprise Fleet Funds. Based on projected replacement needs, the City Manager and Finance
Director recommend an annual target funding level as part of the budget process. This target funding
level helps to establish a minimurn fund balance in theappropriate Fleet Funds.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
The recommended `?003-05 target funding is:
General Fund based on historical replacement needs
Water Fund lased on replacement requests
Wastewater Fund based on replacement requests
Electric.Fund based on histotical replacement. needs
The, target funding does not autborize specific replacements, Vehicles will be replaced based on target
ffinding if the replacement: is justified arra approved by the appropriate Fleet .Management Committee,
The recommendation of the Fleet Management Committee to replace existing vehicles costing $50,000
or less per vehicle is contingent on the approval of the CM. All replacement vehicles costing more
than $ Q,000 require budgetary and subsequent procurement approval by the City Council.
In addition, requests to increase the size of the City fleet will be included in the regular Capital
Improvement Budget not the Capital Improvement Budget for Replacement Vehicles.
B-22
..=Ill law"1412 Lie] a:] wAl RAYj12w=" 21'.
WHEREAS, the City adopted its first two-year budget format with the adoption of the
1994-96 Budget; and
WHEREAS, this two-year format includes a section containing formal statements of
financial policies; and
WHEREAS, the format to be used for the budget document and the City's formal fiscal
policies are the vital foundation on which the 2003-05 Financial Plan and Budget will be built;
and
WHEREAS, as such, the City Manager hereby recommends formal adoption of the
policies and format to provide for effective planning in the preparation and management of the
City's overall budget,
NOW, THEREFORE, BE IT RESOLVED, that the Lodi City Council does hereby review
and adopt the attached fiscal policies and budget format (marked Exhibit A) for the 2003-05
Financial Plan and Budget.
Date& January 15, 2003
I hereby certify that Resolution No. 2003-08 was passed and adopted by the City
Council of the City of Lodi in a regular meeting held January 15, 2003, by the following vote,
NOES: COUNCIL MEMBERS — Mayor Hitchcock
ABSTAIN: COUNCIL MEMBERS ®- None
SUSAN J, BLACKSTON
City Clerk
2003-2005 FINANCIAL PLAN AND BUDGET
OVERVIEW - BUDGET POLICIES ALS
OVERVIEW
The overall goal of the City's Financial plan and Budget is to establish and maintain effective
management of the City's resources. Formal statements of budget policy and major goals provide the
foundation for ffective planning, Accordingly, this section describes the basic budget policies used i
Braiding the preparation and management of the City's overall budget. This section is composed of the
following Major units:
* Budget Management and Control Policies
* major City Goals
Some of the benefits to establishing financial policy include:
I. l az licly r ted bitty stateii' �nt €gra zbu a ly to tic r t a" it ty of d public co ide ce
in the City. For the credit rating industry and prospective investors, such statements show the
City's c:orraaritment to sound financial management and fiscal integrity.
2. Established policy saves time and enemy. Once decisions are made at the policy level, the issues
do not meed to be discussed each time a decision has to be made.
3. The process of developing overall policy directs the attention of staff and Council to the City's
total financial condition rather than sing -issue masa Moreover, this proeess requires staff and
Council to think about linking long-term financial planning with day-to-day operations.
As overall policies am developed, the process of trying to tie issues together can bring new
infon ation to the surface and reveal further issues that need to be addressed.
5. Developing financial policies reinforces the Council's policy rale in maintaining gonad financial
condition.
6. Setting financial policies can improve the City's fiscal stability by setting a forward-looking
approach to planning.
7. explicit policies contribute to continuity in handling the City's financial affairs.
BUDGET1,1AANAGEMENT AND CONTROL POLICWS
.
The following policies snide the preparation and execution of the 2003-2005 Financial Plan and Budget:
Financial Plan Organization
Budget Administration
General Revenue Mana ernent
Recreation and Community Center Fees
Enterprise Fund Fees and pates
Other- Fees and Rates
Revenue
Appropriation Limitation
* Fuad Balance Designations and Reserves
Investments
Capital. Financing and Debt Management
ement
Capital Improvement Budget
Human Resource Management
Productivity Reviews
* Contracting For Services
Allocating Cost of Services
Carryover policy
* Fleet policy
B-1
200
OVERVIEW - BUDGET POLICIES AND GOALS
MAJOR CITY GOALS
The, involvement of the City Council in setting major City goals is essential to the budget process. These
goals provide short term and long term direction to staff, determine the allocation of resources and
establish priorities, These goals will provide focus to the organization -wide efforts of staff and ensure
that the most important, highest priority objoctives are accomplished and, that these priorities are
communicated to the public.
The, major City goals are provided in this part of the 2003-2005 Financial Plan and Budget,
ME
2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
FINANCIAL PLAN ORGANIZATION
A. Through its financial plan, the City will:
I. Identify community needs for essential services
2. Organize the activities required to provide these services.
3. Establish policies and goals that define the nature and level of services mquired.
4. Identify activities performed in delivering services.
5. Propose objectives foo- improving the delivery of services.
6Identify and appropriate resources required to perform services and accomplish objectives,
I. Set standards to measure and evaluate the,
a. Output of activities
bAcicbrh W Objectives
c. Expenditure of appropriations
B. The City will use a two-year financial plan and budget concept to emphasize long-range. planning and
effective management ofservices. The benefits of a two-year financial plan and budget am-,
L Reinforces long-range planning
2, Concentrates on the development and budgeting for significant objectives
3. Establishes realistic schedules for completing objectives
4. Provides for orderly and structured operations
5. Promotes orderly spending patterns
C, 'The two-year financial plan and budget will establish measurable objectives and allow reasonable
time to accomplish those objectives,
DThe status of major program objectives, will be reported to the Councitser-m-annually,
E. The City Council will review and an -tend appropriations, if necessary, serni-annually.
BUDGET ADMINUSTRATION
A. City Council
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 the Council.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGE T POlaic IES
B. City Manager
The City Manager as the chief administrative officer provides the City Council and Staff with
general direction in the development and formulation of the staffs budget recommendation. This
includes', evaluating and assessing current and projected issues confronted by the City; determining
the demand for services and facilities; identifying the concerns of the voters; assessing the current
and projected firiancial condition of the City; and determining the final staff recommendation.
C, Finance Director/Treasurer
The Finance. Director as the chief financial officer is responsible for budget development and
administration. This includes: developing and issuing the budget instructions and calendar; advising
the City Manager on budget policies, including recommended annual target funding levels for fleet
funds., reviewing budget requests to ensure they are complete and accurate; preparing the preliminary
budget recommendation for review by the City Manager; and, publication of the approved budget,
D, Public or Director
The Public Works Director is responsible for preparing the City's capital improvement budget (CIB)
and the CjtyEquipment Replacement Schedule (ERS). In this capacity, the Public Works Director
works closely with the Electric Utility Director to prepare an integrated Ci B and ERS in recognition
of the unique responsibilities and scope of services offered by the Electric Department.
E. Department Directors
Department Directors are responsible for preparing their operating budget requests and capital budget
requests in accordance with the City's budget instructions.
F, ]Fleet conwaittees
Fleet committees were established to serve the City Manager in all vehicle -related matters to include
budgeting, acquisition, disposition, assignments, vehicle operations, maintenance and insurance.
Ge Failure to Adopt -Budget
If the City Council 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 the appropriation of (ands: (1) Provide the
City Manager with Continuing Resolution Authority to allow cominued services at expenditure
levels not greater than those levels approved in the prior year budget; or (2) Require staff to obtain
piior approval for the expenditure (disbursement) of City funds.
11, Public Record
Copies of the adopted City budget shall be public records available to the public upon request.
GENERAL REVENUE MANAGEMIENT
A, The City will seek to maintain a diversified and stable revenue base to protect it from short-term
fluctuations in any one revenue source.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
& 'To emphasize and facilitate long-range planning, the City will project operating revenues for the
succeeding five years.
C, The City will make all current expenditures with current revenues, avoiding procedures that balance
current budgets by accruing future revenues, rolling over short term debt or borrowing reserves of one
fund to an then
RECREATION AND COMMUNITY CENTER FEES
A. Recreation service cost recovery goals are addressed as an integral component of the City's annual
comprehensive user fee analysis process. It is the City's goal that a minimum of 30% of the tPW cost
of the City's recreation and community center programs should be recovered through fees orad charges
for recreation activities and the use of City facilities and eqbipmenL In achieving this overall cost
recovery goal, the following guidelines will be used -
i
1, Cost recovery for activities directed to adults should be relatively high,
Z Cost recovery for activities for youth should be relatively low.
Altbough ability to pay may not be a concern for all youth and senior participants, these are
desired program activities, and the cost of determining need may be greater than tb.e cost of
providing a uniform service fee structure to all participants. Further, there is a co unity
wide, benefit to encourage high -levels of participation in youth recreation activities regardless
cif financial status.
-3 For cost recovery activities of less than 100%, them should be a difffrential in rates between
residents and non-residents,
4e These policy guidelines am sufficient in themselves in providing direction for setting the
recreation and community center fees. Although these targets may be internally useful in
administering recreation fee,-,, the City's management should have as much flexibility as
possible in setting specific activity fees as long as they meet the objectives and criteria
provided above. However, the Recreation Department and Community Centel- will prepare
and ,yubynit a surnmary of internal cost recovery targets to the City Manager for various
activity categories at least annually.
B, Charges will be assessed for use of rooms, pools, gymnasiums, ball fields, special use areas, and
recreation equipment for activities not sponsored or co-sponsored by the City. Such charges will
generally conform to the fee support categories listed above.
C. The Recreation Department and Cora munity Center may waive foes with the approval of the City
Manager when it is deter n-.dned that an undue hardship exists or when in the best interests of the City,
2003-2005 PINANCIAL PLAN AND BUDGET
BUDGET POLICIES
EN,m"Riw ii'mD FEES AND RATES
Aa The, City will set fees and rates at !evels which fully cover the total direct and indirect costs
,...,,including operations, capital outlay and debt service..- - of the following enterprise programs.
f,-lectrical, water, sewer, and transit.
B, The City will anflually review and adjust enterprise fund fees and rates as required to ensure that they
remain appropriate and equitable; and to stem large rate increases.
OTHER FERS AND RATES
A. Ongoing Review
Fees and rates will be reviewed and updated on an ongoing basis to ensure that they are correct and
appropriate based on the changing fi6eds of the community, i.e. economic concerns, social issues,
public safety,
B. General Concepts Regarding the Use of Service Fees and Rates
The use of fees and rates should be subject to the following general concepts -
1. Revenues normally will not exceed the reasonable cost of providing the service.
1 Cost recovery goals should be based on the total cost of delivering the service, including
direct costs, departmental administration costs, and organization wide cost such as
accounting, personnel, date processing, vehicle maintenance and insurance,
3. The, method of assessing and collecting fees should be as simple as possible in order to
reduce the adrninistratiye cost of collection.
4, Rate structures should be sensitive to the "market" for similar, services as well as to smaller,
infrequent users of the service and the influence rates and -fees have on economic
development,
5, A unified approach should be used in determining cost recovery levels for various programs
based on the factors discussed above,
C, Low Cost Recovery Services
Based on the cterja discussed above, the following types of services should have very low cost
=Dvery goals. In selected circumstances, there may be specific activities within the broad scope of
services provided that should have user charges associated with them. However, the primary source
of funding for the operation as a whole should be general purpose revenues, not user fees.
Maintaining and developing public facilities that are provided on a uniform, community wide
basis such as streets, parks and general purpose buildings.
1 Delivery of social service programs and economic development activities,
j
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
D. Comparability with Other Communities
I. Fee surveys should never be the sole or primary criteria in setting City fees. There are many
factors that affect how and why other communities have set their fees at their levels- For
exampl-,
a. What level of cost recovery is their fee intended to achieve compared with Lodi's cost
recovely objectives?
at costs have been considered in computing the fees?
c, When was the last time that their fees were comprehensively evaluated?
d. What level of service do they provide compared with di's service or performance
standards?
e. Is their rate structure significantly different than Lodi's and what is it intended to achieve?
2. Surveys comparing the City's fees to other communities is useful background information in
setting fees for several reasons,
a. They reflect the "market" for these fees and can assist in assessing the reasonableness of
the City's fees.
b. If prudently analyzed, they can serve as a benchmark for how cost effective the City
-provides services,
These are difficult questions to address in fairly, qyalu4ting fees amqng differ nt cities.;
RENTNUE
The Council recognizes that generally accepted accounting pnnciples for local government discourage the
"earmarking" of General Fund revenues, and accordingly, the practice of earmarking general fund
revenues for specific programs should be minimized. Approval of the following Re -venue Distribution
Policies for 2001-2003 does not prevent future, Councils from, directing General Fund resources to other
funds and activities as necessary.
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® FINANCIAL PLAN AND 13UDGET
BUDGET POLICIES
A. Property Tax Allocation
I The City's property tax serves to provide for general municipal services as well as for debt
service, retiremposes. The passag ent obligations, public improvements and library urp e of
Proposition 13 on June 6, 1978, drastically changed the method of establishing and allocating
property tax revenues for all local. agencies in California. In addition to linfiting annual
increases in market value., placing a ceiling on voter approved indebtedness and redefining
assessed valuations, Proposition 13 established a maximum County wide levy for general
revenue purposes of i% of market value. Under subsequent state legislation which adopted
formulas for the distribution of this countywide levy, the City now receives a percentage of total
property tax revenues.
As discussed above, the City no longer controls the amount or distribution of its propeAy tax. in
distributing property tax revenues between funds since the passage of Proposition 13, the
following minimum ratios for special purposes have traditionally been used based on the tax
rates that were in effect prior to the passage of Proposition 13:
Fiscal Year 1978-79 Tax Rate Per $100 Percent
Special Municipal Purposes
Ubrary $ .30 17.86%
General Municipal Purposes 1,3$ e14%
TOTAL $ 1.68 loomeyo
1 For 2001-2003 property tax revenues will be distributed proportionately to the following funds as
follows,
General Fund
Capital Outlay Fund - General Fund
Library Fund
,rOTAL
4, The distribution of property tax received on land annexed to the City will be in accordance to the
agreement with San Joaquin County.
B All Gasoline Tax revenues will be used for street maintenance and construction activities.
Pursuant to the San Joaquin County's local Transportation Sales Tax (Measure K), the City must
meet the, "Maintenance of Effort" (MOE) requirement which is based on the annual average of the
City's street and road expf--nditures funded by the General Fund fixed on a three year period,
C. All TransportaUan Deve)opmcnt Act (TDA) revenues will be allocated to alternative
transportation programs, including regional and municipal transit systems, bikeway improvements
and other programs or projects designed to reduce automobile usage. It is expected that
M
50%
30%
30%
20%
20T%
100%
100%
4, The distribution of property tax received on land annexed to the City will be in accordance to the
agreement with San Joaquin County.
B All Gasoline Tax revenues will be used for street maintenance and construction activities.
Pursuant to the San Joaquin County's local Transportation Sales Tax (Measure K), the City must
meet the, "Maintenance of Effort" (MOE) requirement which is based on the annual average of the
City's street and road expf--nditures funded by the General Fund fixed on a three year period,
C. All TransportaUan Deve)opmcnt Act (TDA) revenues will be allocated to alternative
transportation programs, including regional and municipal transit systems, bikeway improvements
and other programs or projects designed to reduce automobile usage. It is expected that
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2003-2005 FINANCIAL PLAN AND BUDGET
alternative transportation programs - in conjunction with other state and federal grants. for this
purpose= will be self-supporting from TDA revenues. As available, TDA funds will also be used
for street maintenance projects.
D. Enterprise Fund Allocations to the General Fund
1, The goal of Proposition 4 is to limit growth in appropriations of both state and local
government to changes in the cost of living and population in order to control spending levels.
Proposition 4 further describes the difference between "tax proceeds" and fees. Tax proceeds
are the revenue from regulatory licenses, user charges and user fees to the extent the revenue
exceeds the cost of providing the regulation, product or service. (-rhis includes transfers from
an enterprise fund to the extent those funds exceeded the cost of providing the services).
2. As discussed above, the funds transfer ed from the City's enterprise funds to the City's general
fund are "In -Lieu of Taxes" to the extent they exceed the cost of services provided by general
services (accounting, personnel, legal, insurance, etc.). These taxes will be levied based on
prior year revenues as follows:
2002-03 20Q.04
In -lieu of Tax - Electric 12% 12010
In -lieu of Tax - Water 12% 12%
In -lieu of Tax - Sewer 12% 12%
Special Revenue Allocations to the General Fund
Revenues the City receives for specific services (ie, vehicle tow charges) will not be designated
for use by an individual department unless required by statute or approved by the City Council.
When rNuired by statute (i,e-o asset seizure), these funds will be first allocated to the purc base of
.necessary and essential equipment and/or services prior to purchase with General Fund resources,.:,.
F Gi-ants and Donations
Council m. ust approve applications for grants or acceptance of donations containing restrictions
that may have an impact on the budget.
G. USE OF COMMUNITY DEVELOPMENT BLOCK GRANT (CDBO) FUNDS
Each year, the T.S. Department of Housing and Urban Development (ITM) awards cities
grants to carry out a number of community development activities in an effort to revitalize
neighborhoods, foster econornic development and improve community facilities and services.
Lodi receives those grant funds in a formula -based allocation to use to address identified
community development needs.
CDBG funds -may be used for activities that include, but are not limited to:
2003-2005 FINANCIALPLAN AND BUDGET
l GET POLICIES
Acquisition of real property;
* Public Services, within certain limits;
Relocation or demolition
i Activities relating to energy conservation and
Rehabilitation of residential and non --.residential
renewable energy resources, and
stz aures,
* Providing assistance to profit -motivated
orrstr actitazr of new public facilities and
businesses to carry out economic development
improvements, such as water and sewer
and,job creating/retention activities.
facilities, streets, neighborhood centers, and the
conversion of school buildings for eligible
purposes;
CDBG funds must also be used to meet one of the following national objectives-
* Provide benefit "to low- and moderate®incom persons, which includes the handicapped ars
elderly,
* Prevent or elinunate slurs or blights or
Meet a specific urgent need because of existing conditions, which pose a serious and immediate
threat to the health or welfare of the community where other financial resoles are not
available.
The following local objectives are identified for the allocation of CDBG funds:
1. With the exception of certain administrative casts, each proposed use of CDBG funds is
categorized as either a public service or a capital improvement/bricks and mortax project, It
is the intent of this Budget Policy to give priority in funding to eligible: capital improvement
projects over public service -related funding requests,
HM has established guidelines that require that funds be allocated and expended in a
timely rnartmzm It is the intent of this Bridget Policy to require that any proposed funding
_ request -meet a readiness crit; .rion to ensure that the funds will be used .in the program year
that they are awarded, thereby allowing the City to remain in compliance with HM
regulations,
APPROPRIATION LI TI N
A, The Council will annually adapt a resolution establishing its appropriation limit calculated in
accordance with Article XMB of the Constitution of the State of California, Section 7900 of the
State of Californiaaovernirrent Code, and any other voter approved amendments or state
legislation that affect the City's appropriation limit.
The City will strive to develop revenue sources, bath now and existing, which are considered non -
tax proceeds in calculating its appropriations subject to lirziitation,
C" The City will annually review user fees and charges and report to the Council the amount of
program subsidy, if any, that is being provided by the General Fund or Enterprise Funds.
'r
A, Me City should maintain fund balances of at least 15% of operating expenditures in the. General
Fund as well as the Electric, Sewer, and Water Funds. This is considered the minimum level'
necessary to maintain the City's credit worthiness and to adequately provide for:
1. Economic uncertainties, local disasters, and other financial hardships or downturns in the
local economy.
1-1
,-1. Contingencies for untoreseen operation or capitai needs.
3. Cash flow requirements.
The City will establish and maintain an Equipment and to provide for the timely replacement of
Thil--
vehicles and capitalV-,quipment, S in6udes items with an individual replaftntefit cost of
$3,M) or more. The minimum fund balance in the Equipment Fund should allow for annual
fluctuations in expenditures while maintaining a level annual transfer and allow for emergency
replacement purchase& The annual contribution to the Fund will generally be based on the annual
"use allowance" which is determined based on the estimated life of the vehicle or equipment and
its original purchase cost. Interest earnings and sales of surplus equipment as well as any related
damage and insurance, recoveries will be credited to the Equipment Fund,
C. The Council may designate specific fund balance levels for future development of capital projects
which it has determined to be in the best long-term interests of the City.
D. In addition to the designations Doted above, fund balance levels will be sufficient to meet funding
requirements for projects approved in prior years which are carried forward into the new year;
&,bt service reserve requirements; reserves for encumbrances; and.other reserves or designations
required by contractual obligations, state law, or generally accepted accounting principles.
INVESTMENTS
A. investments and cash management will be the responsibility of the City Finance
Director/Treasurer or designee.
B. "Phe City's primary investment objective is to achieve a reasonable rate of return while minimizing
the potential for capital losses arising from market changes or issuer default. Accordingly, the
following factors will 'be considered in priority order in deterraining individual investment
Placements:
1, S afety
2. Liquidity
I Yield
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-BUDGET POLICIES
CThe City will strive to keep idle cash balances fully invested through daily projections of cash
flow requirements. To avoid forced liquidations and losses of investment earnings, cash flow and
future requirements will be the primary consideration when selecting maturities.
D, As the market and the City's investment portfolio change, cam will be taken to maintain a healthy
balance of investment types and maturities,
E The City will invest only in those instruments authorized by the California Government Code
Section 53601. The City will not invest in stock, will not speculate, and will not deal in futures or
options. The investment market is highly volatile and continually offers new and. --reative
opportunities for enhancing interest earnings. Accordingly, the City will thoroughly investigate
aijy new investment vehicles prior to committing City funds to them.
F. Current financial statements will be maintained for each institution in which cash is invested.
investments will be finiited to 20 percent of the total net worth of any institution and may be
reduced further or refused altogether if an institution's financial situation becomes unhealthy.
J, in order to maximize yields from its overall portfolio, the City will consolidate cash balanm from
all funds for investment purposes, and will allocate investment eamings to each fund in
accordance with generally accepted accounting principles.
H, ownership of the city's investment securities will be protected through third -party custodial
safekeeping.
1. The City Finance Director/Treasurer will develop and maintain a comprehensive, well
documented investment reporting system which complies with Government Code Section 53607.,
This system will provide the City -. Council with appropriate investmentperformance. information,
T.The City Finance DirectoffTreasurer will develop and maintain an Investment Management Plan
which addresses the Citys adnfinistration of its portfolio, including investment strategies,
practices, and procedures.
CAPITAL FINANCING AND DEBT MANAGEMENT
Capital Financing
A, 'The City will consider the use of debt financing only for case -time capital projects and only under
the following circumstances,
J, When the project's useful life, will exceed the term of the financing.
2, When project revenues or specific resources will be sufficient to service the long-term debt.
B-12
200342005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
B. Debt financing will not be considered appropriate for any recurring purpose such as current
operating and maintenance expenditures. The issuance of short-term instruments such as revenue,
tax, or bond anticipation notes is excluded from this limitation.
Capital improvements will be financed primarily through user fees, service charges, assessments,
s specifically special taxes, or developer agreements when benefits can be attributed to users of the
facility.
D, The City will use the following criteria to evaluate pay-as-you-go versus long -ten n financing in
funding capital improvements:
Py -.sera®
1, When current revenues and adNuaw fund balances are available or when project phasing can be
accomplished.
I
When debt levels adversely affect the City's credit rating.
3. When market conditions are unstable or present difficulties in marketing.
Long -Term Financing
1, When revenues available for debt service are deemed to be sufficient and reliable so that long-
term financing can be marketed with investment grade credit ratings.
2. When the project securing the financing is of the type which will support an investment grade
credit rating.
When market conditions present favorable interest rates and demand for City financing.
4. When a project is mandated by State or Federal requirements and current revenues and available
fund balances are insufficient.
5. When the project -is roquired to meet orreli�vo -service, requiremie nts,
6. When the life of the project or asset financed is 10 years or longer,
Debt Management
The City will not obligate the General Fund to secure long-term financing except when the
marketability can be significantly enhanced,
F. No more than 60% of all capital projects other than Enterprise Fund projects will be funded from
long-term financing; and direct debt will not exceed 2% of the City's assessed valuation.
A feasibility analysis will be prepared for each long-term financing to assess debt service on
current and future operations. This will also include an analysis on the reliability of revenues to
support a debt service.
B-13
2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
H. The City will generally conduct debt financing on a competitive basis. However, negotiated
financing may be used due to market volatility or the, use of an unusual or complex financing or
security structure.
The Citv will seek investment grade ratings (BaalBBB or greater) on any direct debt and will seek
credit enhancements such as letters of credit or insurance when necessary for marketing purposes,
availability and cost-effectiveness,
'rhe City will monitor all forms of debt annually coincident with the budget process,
K. 1,h� City will diligently monitor its compliance with bond covenants and ensure its adherence to
federal arbitrage regulations.
L. 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 (Official Statement),
CAYITAL IMPROVEMWNT BUDGET
A. Construction projects and capital purchases (other than vehicles, equipment and major computer
software acquired through the Equipment Fund and projects funded by an Enterprise Fund) which
cost more than $10,000 will be included in the Capital. Improvement Budget (C }s minor capital
outlays of $10,000 or less will be included with the operating activity budgets. Enterprise Fund
projects and major equipment purchases will be based on the capitalization practices of the
Enterprise.
B. The purpose of the ClB is to systematically plan, schedule, and -finance capital acquisitions to
s. fe,[ --onformance with established policies. , e C ,,wily -be a
'Msure cost�effe'Ctiveness-�Us�,� I aac g Th 1Bj I! ��
four-year plan organized into the same functional groupings used for the operating budget. The
CfB will reflect a balance between capital replacement projects which repair, replace, or enhance
existing facilities, equipment or infrastructure; and capital facility projects which sig ificantly
expand or add to the City's existing fixed assets.
C, Fvery capital project will have a project manager who will prepare the project proposal, ensure
that required phases are completed on schedule, authorize all project expenditures, ensure that all
regulations and laws are observed, and periodically report project status.
D. A CIB Coordinating Committee, chaired by the Directors of Public Works and the Electric Utility
Department, will review project proposals, determine project phasing, recommend project
managers, review and evaluate the draft capital budget plan, and report project status at least
annually to Council, The Committee should be made up of representative of each Department.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
E. The Capital Improvement Budget will emphasize project planning, with projects progressing
through at least two and up to six of the following phases:
* DESIGNATED - Set aside funding for future project development under "pay-as-you-go"
financing.
* STLTDY - Includes concept design, site selection, feasibility analysis, schematic design,
environmental determination, property appraisals, scheduling, grant application, grant approval,
and specification preparation for equipment purchases.
* ACQUISITION - Includes equipment purchases and property acquisition for projects, if
necessary,
* DESIGN - Includes final design, plan and specification preparation, and construction cost
estimation,
* CONSTRUCTION - Includes bid administration, construction, project inspection and
management, and closeout.
* DEBT SERVICE - installment payments of principal and interest for completed projects funded
through debt financing.
Generally, it will become more difficult for a project to move from one phase to the next. As such, more
projects will be studied than will be designed, and more projects will be designed than will be constructed
or purchased.
F. Funding and related appropriation to a project account will only be made upon approval of each
phase by the City Council. Accordingly, project appropriations for acquisition and construction
will generally be approved when contracts are awarded.
G. Project phases will be listed as objectives in the program narratives of the Activity responsible for
the project.
H. Funding set aside for designated projects will lapse after three years if the project has not made,
significant movement through the phases, or if the project has not been revalidated. This will
ensure funds are not tied up and are available for the timely completion of active projects. The
projects where funding set aside has lapsed will have to be resubmitted for consideration in the
next budget cycle.
1JUMAN RESOURCE NAGE NT
A. Regular authorized staffing will be fully budgeted and funded.
B. Staffing and contract service budget ceilings will limit total expenditures for regular employees,
temporary employees, overtime and independent contractors hired to provide operating and
maintenance services.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
C. Regular employees will be the core work force and the preferred means to staff ongoing, year-round
activities rather than independent contractors. The city will strive to provide fair compensation and
benefit schedules for its authorized regular work force. Each regular employee will:
1. Fill an authorized regular position.
2. Be assigned to an appropriate bargaining unit or representative group.
3. Receive salary and benefits consistent with labor agreements or other compensation plans
D. To manage the growth of the regular work force and overall staffing costs, the City will follow these
procedures:
The City Council will authorize all regular positions except in the case of the Library which is
governed by the Library Board.
2. The Hu an Resources Department will coordinate the hiring of all employees and evaluate the
reallocation of existing positions.
3. All requests for additional regular positions will include an evaluation of:
a, The necessity, terra, and expected results of the proposed position.
b. Staffing and material costs including salary, benefits, equipment, uniforms, clerical support,
and facilities.
c, The ability of private industry to provide the proposed service.
d. Additional revenues or cost savings which may be realized.
4, periodically, and prior to any request for additional regular positions, programs will be evaluated
to determine if they can be accomplished with fewer regular employees under a "productivity
review".
F, Temporary employees are employees other than regular employees, elected officials, and
volunteers budgeted in hours. Temporary employees will augment regular City staffing only as
limited terra employees, seasonal employees, emergency, intermittent, contract employees, and
interns. The City Manager will encourage the use of temporary employees to meet peak workload
requirements, fill interim vacancies, and accomplish tasks where less than regular, year-round
staffing is required.
F. Contract employees will be defined as temporary employees with written contracts approved by
the City Manager who may receive approved benefits depending on hourly requirements and the
length of their contract. Contract employees will generally be used for medium-term (generally
between six months and two years) projects, programs, or activities requiring specialized or
augmented levels of staffing for a specific period of time. The services of contract employees will
be discontinued upon completion of the assigned project, program or activity, Accordingly,
contact employees will not be used for services that are anticipated to be delivered on an ongoing
basis.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
C. Independent contractors will not be considered City employees, independent contractors may be
used in two situations:
1. Short term, peak workload assignments to be accomplished through the use of personnel
contracted through an outside employment agency. All placements through an outside
employment agency will be coordinated through the Human Resources Department and
subject to the approval of the Human Resources Director,
2, Construction of public works projects and the provision of operating, maintenance, or
specialized professional services not routinely performed by City employees. Such services
will be provided without close supervision by City staff, and the required methods, skills, and
equipment will generally be determined and provided by the contractor.
PRODUCTTVITY REVIEW
The City will constantly monitor and review its methods of operation to ensure that services continue to
be delivered in the most cost-effective manner possible. This review process encompasses a wide range
of issues, including:
A. Maintaining a decentralized approach in managing the City's services. Although some level of
centralization is necessary for review and control purposes, decentralization supports productivity
by:
o Encouraging accountability by delegating authority to the lowest possible level,
o Stimulating creativity, innovation, and individual initiative.
o Reducing the administrative cost of operation by eliminating unnecessary review procedures,
o improving the organization's ability to respond to changing needs and to identify and
implement cost saving programs.
o Assigning responsibility for effective operations and citizen responsiveness to the department.
B. Analyzing systems and procedures to identify and remove unnecessary review requirements.
C. Evaluating the ability of new technologies and related capital investments to improve
productivity.
D. Investing in the City's most valuable asset - personnel staff - by developing the skills and abilities
of all City employees, with special emphasis on first-line supervisors,
E. Implement annual performance reviews and appropriate methods of recognizing and rewarding
exceptional employee performance.
R Evaluating local market service providers and other government agencies to determine whether
the service is available at a lower cost than provided by City staff,
periodic forrnal review of operations on a systematic, ongoing basis.
B-17
2003-2005 FINANCIAL PLAN AND BUDGET
13€1DGET POLICIES
A. General Policy Guidelines
P. Contracting with the private sector and other government agencies for the delivery of
services provides the City with the opportunity for cost containment and productivity
enhancement. As such, the City is committed to using private sector resources in
delivering municipal services as a key element in our continuing efforts to provide cost
effective services.
2. Private sector contracting approaches under this policy include construction projects,
professional services, outside employment agencies, and ongoing operation and
maintenance services.
3. In evaluating the costs of private sector contracts compared with in-house performance of
the service, indirect, direct and contract administration costs of the City will be identified
and considered.
4, Whenever private sector providers are available and can meet established service levels,
they will be seriously considered as viable service delivery alternatives using the
evaluation criteria outlined below.
5. For programs and activities currently provided by City employees, conversions to contract
services will generally be made through attrition, reassignment or absorption by the
contractor.
E. Evaluation C=riteria
Within the general policy guidelines, stated- above, the cost-effectiveness of contract services in -
meeting established service levels will be determined on a case-by-case basis using the following
criteria;
1. is a sufficient private sector market available to deliver this service?
1 Can the contract be effectively and efficiently administered?
3. What are the consequences if the contractor fails to perform, and can the contract
reasonably be written to compensate the City for any such damages?
4. Can a private sector contractor better respond to expansions, contractions,, or special
requirements of the service?
5, Can the work scope be sufficiently defined to ensure that competing proposals can be
fairly and fully evaluated, as well as the contractor's performance after bid award?
6. hoes the use of contract services provide the City with an opportunity to redefine service
levels?
7. Will the contract limit the City's ability to deliver emergency or other high priority
services?
HM
2003-ZO05 MANCIAL PLAN AND BUDGET
BUDGET POLICIES
8.
Overall, can the City successfully delegate the performance of the service but still retain
accountability and responsibility for its delivery?
ALLOCATING THE COST OF SERVICES
A. General Policy Guidelines
1. The City is committed to achieving efficiency by centralizing general administrative
services to the extent they serve the needs of the City as a whole and provide for greater
cost efficiency. Accordingly, general and administrative services will be charged to those
activities not financed by the General Fund by use of a cost allocation plan.
2, The City will develop a cost allocation plan for general government services provided the
City's enterprise fund and special revenue fund activities in accordance with accepted cost
allocation methodology.
3. The cost of general government services will be financed by operating transfers
established in the cost allocation plan and transferred to the general fund annually at the
time the City budget is adopted.
4. The Finance Director will perform periodic reviews of the City's cost allocation plan to
ensure the distribution of costs are made in accordance with accepted practices of the City.
The results will be used to project annual operating transfers.
5. The City will develop a cost allocation plan in accordance with Federal and State policies
to ensure the maximum allowable return to the City of indirect/overhead costs.
F. Cost Allocation Criteria
1. ' Costs will be allocated considering the following criteria:
Cause and effect - the identification of output in proportion to the service
provided.
* Benefits received - the allocation of cost in relation to the benefits received.
* Fairness and equity - the allocation must be mutually satisfactory to the parties
affected.
* Ability to bear - the allocation of cost must consider the ability to pay and the
impact on the services provided.
2, Costs will be allocated to activities when the overall service benefits the City as a whole
but a particular cost benefit can not be shown.
3, The criteria for allocating costs will be included in the City budget to allow for evaluation
of the cost distribution criteria.
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2003-2005 FINANCIAL PLAN AND BUDGET
BUDGET POLICIES
CARRYOVER POLICY
The Two year Financial Plan and Budget used by the City provided the City Council and staff with the
opportunity to Contour operating funds to services over a two-year time fraine rather than the traditional
one-year period. Under a one-year budget, appropriations lapse at the end of the fiscal year, and favorable
budget balances are no longer available for operating expenditures except when encumbered under
contractual agreements. The two year financial plan and budget allows for the unexpended operating
budget balances to be carried forward to the second year of the Financial Plan. To ensure fund balance
projections remain on target, any unexpended operating balances will be reduced if the actual revenue
received is materially less than the estimated revenue projected in the Financial Plan.
The use of carryover funds from the first year into the second year of the Financial Plan recognizes that
the delivery of new or enhanced services often require more time to staff, equipment, organize and
implement than may be possible in a one year time period. Carryover funding for operating programs into
the second year provides staff with the opportunity and flexibility to improve service and maintain current
operations without significant dislocation or disruptions in service delivery systems. Under this concept,
the following carryover policy will be followed:
A. All operating budget appropriations lapse at the end of the second year of the two-year financial plan
and budget except for funds encumbered under contractual agreement (which includes commitments
made through purchase order) for goods and services which are essential to the operation of the City
in the year for which they are encumbered.
F. Operating budgets may be encumbered to ensure adequate funding for goods and services required to
conduct City operations in the year in which they are encumbered. Encumbrances must be evidenced
by a binding contractual agreement (including purchase orders) between the City and the party
required to deliver the goods and services. Under special conditions, requests for carryover may be
made by memorandum detailing the need for carryover of funds, and such a request may be
considered as an encumbrance at the discretion of the Finance Director, Fcr carryover,,mto the
subsequent year, all such contracts, purchase orders, or special request must be submitted by June 15
of each fiscal year,
C. The City Manager is authorized to carry forward the unexpended and unencumbered operating
budget balances from the first year to the second year of the City's Financial Plan and Budget and to
program these balances for re -appropriation under the following conditions:
L The budget balances were unexpended for reasons beyond the control of the operating
department.
2. Re -appropriation of budget balances is required to ensure full funding of programs and services
approved by the City Council.
3, The expenditure of these funds will promote innovation, efficiency, and effectiveness in the
delivery of City services and programs.
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2003-2005 N AND BUDGET
BUDGET POLICIES
D. The total of all favorable variances regardless of type (personnel, utilities, supplies, services, or minor
capital) are available for carryover with the approval of the City Manager, and will be aggregated at
the fund level by department. Under this approach, program overages within the department may be
offset by program shortfalls. However, in no case may departmental overages, in one fund be offset
by departmental savings in another.
K The budget carryover will be accounted for in a non -departmental control account established by the
Finance Department.
R The Finance Department will provide Department Heads with a formal balance of operating funds
available for carryover by the end of the second quarter of the second fiscal year. Departments will
be able to determine a tentative, balance of their carryover funds prior to that date by reviewing the
June 30 Financial Reports. However, these are unaudited numbers which are subject to change and,
as such, the carryover balances are not official until published by the Finance Department.
G. Department Heads may request through a Special Allocation Request that the unexpended budget
balances of their first year operating budget be reappropriated into the second year of the two-year
financial pian. All requests must justify the need for the funds in the second year and explain why the
funds were not expended or encumbered in the year they were budgeted.
H. When carryover requests are approved by the City Manager, the Finance Department will transfer the
funding to the designated line item(s) of the Department Budget as provided on the Special
Allocation Request form.
FLEET POLICY
In 1997 Council adopted the Fleet Policies and procedures which are to govern the management,
operation, acquisition and disposifionofvahicles and equipment owned and--leased-by the City of Lodi.
Under these adopted policy guidelines, the City organized City vehicles into two fleets: General Fund
and Enterprise Fund. Fleet committees were established to serve the City Manager in all vehicle -related
matters to include budgeting, acquisition, disposition, assignments, vehicle operation, maintenance and
insurance.
Under the budget process, replacement vehicles are, generally budgeted and funded in the General Fleet
Fund or Enterprise Fleet Funds. Based on projected replacement needs, the City Manager and Finance
Director recornmend an annual target funding level as part of the budget process, This target funding
level helps to establish a minimum fund balance in the appropriate Fleet Funds.
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2003-2005 FINANCIAL PLAN AND BUDGET
BLA)GET POLICIES
The recommended 2003-05 target funding is:
General Fund
based on historical replacement needs
Water Fund
based on replacement requests
Wastewater Fund
based on replacement requests
Electric Fund
based on historical replacement needs
The target funding does not authorize specific replacentertm Vehicles will be replaced based on target
funding if the replacement is justified and approved by the appropriate Fleet Management Committee.
The recornmendation of the Fleet Management Committee to replace existing vehicles costing $50,000
or less per vehicle is contingent on the approval of the CM. All replacement vehicles costing more
than $50,000 require budgetary and subsequent procurement approval by the City Council,
In addition, requests to increase the size of the City fleet will be included in the regular Capital
Improvement Budget not the Capital Improvement Budget for Replacement Vehicles.
IM
ISI'
2003-05 Financial Ptah and B!d et Instructions
MAJOR BUDGET PREPARATION MILESTONES
PUBLIC
STAFF MEETINGS
Review of Fiscal Policies and Presentation on Bond Rating 11/19/02
Review 2001-02 Budget vs. Actual 11/26/02
Discuss Budget Calendar and Proposed Financial Strategy 1/02/03
Issue Budget Instructions to Departments 1/6/03
Adoption of Fiscal Policies and Budget Format 1/15/03
Discussion on City Council Coals — Special Council Meeting 1/22103
Discussion on Status of Highest Priority Projects 2/5/03
City Manager Revenue Review 2/10/03
Departments Submit Budget Requests to Finance Department 2/17/03
City Council Review of Revenue Assumptions 2/19/03
City Manager Review of Budget Requests 3/03/03
City Council Review of Revenue Assumptions 3/05/03
Discuss Significant Expenditure & Staffing Requests 3/19f03
Discuss Significant F'xpenditure & Staffing Requests 4/02//03
update on State Budget 4/15/03
Discuss Fund Balarnc- W 5/07/03
City Council Review of 2003-05 Financial Plan & Budget 6/04/03
City Council Review of 2003-05 Financial Plan & Budget— Special meeting am
Adopt Financial Plan & Budget 6/18/03