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HomeMy WebLinkAboutResolution No. 414 Resolution No. 414 Page 1 of 2 CITY OF MEDINA, WASHINGTON RESOLUTION NO. 414 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MEDINA, WASHINGTON, ADOPTING AN AMENDMENT TO FINANCIAL POLICIES TO ADD A NEW FUND (LEVY STABILIZATION FUND); RESTORE A FUND MINIMUM TARGET BALANCE TO THE CONTINGENCY FUND AND ESTABLISH A PRIORITY FUNDING ORDER OF RESERVES. WHEREAS, the voters approved Proposition 1 on November 5, 2019, to increase Medina’s regular property tax levy above the limit factor by $0.20/$1000 assessed value to a maximum rate of $0.83712/$1000 assessed valuation for collection in 2020, set a 5% limit factor for each year 2021-2025, use the 2025 levy amount as the base to compute subsequent levy limits, and exempt low income seniors and disabled; as set forth in Ordinance No. 970; and WHEREAS. A promise was made to the voters that these additional funds would be managed in such a way as to keep service levels in place for a minimum of 10-years; and WHEREAS, the City Council and the Finance Committee has determined a new fund would be required to be added to the City’s Financial Policies in order to transfer the excess amounts from the levy lid lift during 2021-2025 to supplement 2026-2029’s General Fund’s revenues; and WHEREAS, the Finance Committee has also recommended to Council to restore a minimum target balance to the Contingency Fund equal to 25% of the total of the General Fund budgeted expenditures; as well as clarifying the fund’s purpose; and WHEREAS, the Finance Committee is also recommending to Council a priority ordering of reserves funding; WHEREAS, Staff desires to make non-substantive changes for readability and clarity; NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF MEDINA, WASHINGTON, RESOLVES AS FOLLOWS: Section 1. Adopt Financial Management Policies as Amended, attached hereto as Exhibit A. Section 2. Effective Date. This Resolution shall be effective upon its adoption by the City Council. Resolution No. 414 Page 2 of 2 PASSED BY THE CITY COUNCIL OF THE CITY OF MEDINA ON DECEMBER 14, 2020 AND SIGNED IN AUTHENTICATION OF ITS PASSAGE ON DECEMBER 14, 2020. FILED WITH THE CITY CLERK: 12/15/2020 PASSED BY THE CITY COUNCIL: 12/14/2020 RESOLUTION NO. 414 1 EXHIBIT A City of Medina, Washington Financial Management Policies General Financial Goals: Ensure a financial base that is sufficient to sustain City of Medina Municipal Services, able to withstand local and regional economic challenges, able to adjust to changes in service requirements, and maintain sound fiscal policies in support of these goals. Financial Management Policies: The Financial Management Policies assemble all of the City’s financial policies in one document. They are the tools to ensure that the City is financially able to meet its immediate and long-term service objectives. The individual policies contained herein serve as guidelines for both the financial planning and the internal financial management operations of the City. The City of Medina is accountable to its citizens for the use of public dollars. Municipal resources must be used wisely to ensure adequate funding for the services, public facilities, and infrastructure necessary to meet the community’s present and future needs. These policies safeguard the fiscal stability required to achieve the City’s goals and objectives. The City of Medina’s Financial Management Policies, and any amendments thereto, shall be adopted by resolution of the City Council. Policy Objectives: The Financial Management Policies have the following objectives for the City’s fiscal performance: • Guide City Council and Management Policy decisions. • Establish operating principles that minimize the cost of government and financial risk. • Maintain revenue policies that ensure adequate funding for desired programs, currently, as well as in the future. • Promote sound financial management by providing accurate and timely reporting information on the financial condition of the City. • Protect the City’s credit rating and provide for adequate resources to meet the provision of any debt incurred by the City. • Ensure the legal use of financial resources through an effective system of internal controls. 2 • Promote cooperation and coordination with other governments and the private sector in the financing and delivery of services with the goal of obtaining the best value for the tax dollar. Budget Policies a. The annual budget will be designed in support of the Strategic Goals of the City and will focus on continual evaluation of the City’s success at achieving the goals and policies it has set for itself. The operating budget is the City’s comprehensive annual financial plan which provides for City services based on City priorities. b. The annual budget shall be developed consistent with state law and in a manner which encourages early involvement with the public and City Council. c. The City Council will establish municipal service levels and priorities for the ensuing year prior to and during the development of the preliminary budget. d. The City will maintain a balanced budget. The use of existing fund balances to achieve a balanced budget (while generally accepted as a practice in Washington Cities), is not sustainable for the long term. The City prefers to adopt an operating budget where current revenues meet or exceed current budgeted expenditures. e. The Finance Department will maintain a system for monitoring the City’s financial performance. The system will provide the City Council with monthly and/or quarterly information in a timely manner at the fund level, by revenue resources and department level expenditures. f. Under the provisions of state law and the City’s operating procedures, the budget is adopted at the fund level. Adjustments or reallocations of existing appropriations within the fund level, which do not change the bottom line of the fund, may be done administratively and do not require Council action. Additions to, or reductions of fund level appropriations, which change the bottom line of the fund, require an amendment of the budget and City Council action by Ordinance. g. Supplemental budget appropriations (appropriations requested after the original budget is adopted) will be submitted in the form of a Budget Amendment and will be considered as a result of the availability of new revenues. h. The annual budget will provide for the design, construction, maintenance and replacement of the City’s Capital, facilities and equipment consistent with the Capital Projects Plan/ Comprehensive Plan/ Capital Improvement Plan, including the associated costs for operating the facilities. i. The City will maintain all assets at such a level that it protects the City’s capital investment and minimizes future maintenance and replacement costs. j. The City will develop an equipment replacement and maintenance needs list by department for the life cycle of the equipment and will utilize this list during the annual budget development process. k. Fixed assets: inventories of larger physical fixed assets costing more than $5,000 and having a useful life of more than one year, will be maintained on a Fixed Asset Schedule and will be updated as the property is added, retired or sold. 3 Fund Policies Adequate fund levels are a necessary component of the City’s overall financial management strategy and a key factor in external agencies’ measurement of the City’s financial strength. General Fund Operating Balance: Minimum 25% Fund Balance The City will strive to maintain General Fund Operating Balances at a minimum level of 25% of the total General Fund Budgeted Expenditures. The General Fund Operating Balance shall be created and maintained to provide sufficient cash flow to meet the needs of daily financial operations. In general, the City shall endeavor to support ongoing operations with ongoing revenues, but may use General Fund Operations Balances on a limited basis to support City services pending the development of a longer-term financial solution. The General Fund Operating Balance shall not be used in a manner that puts the City in danger of being unable to sustain future operations. If the General Fund Operating Balance falls below the policy level stated above, it will be important for the City to create a long-term plan to replenish the fund balance level. Budget surpluses in the General Fund Operations Balance may be used on a limited basis to fund operations and to fund reserve accounts if: a) There are surplus balances remaining after all current expenditure obligations are met. b) The City has decided that revenues for the ensuing budget year are sufficient to support budgeted General Fund Operating needs. A surplus is defined as the difference between the actual beginning fund balance and budgeted beginning fund balance. It consists of “under-expenditures” and/or “excess revenues” over and above the amounts included in the following year’s annual budget. Reserve Account Policies The City maintains Reserve Accounts for a Levy Stabilization Fund Account, a Contingency Fund Account, a Capital Projects Fund Account, and an Equipment Replacement Account. The priority or sequence for allocating reserves to these accounts is: 1. The Levy Stabilization Fund account up to the annual targeted amount identified in the Levy. 2. The Contingency Fund account up to 25% of the annual general fund budgeted expenditures. 3. Any remaining reserves allocated to the Capital Projects Fund, the Equipment Replacement Account and/or the Levy Stabilization Fund as recommended by the City Manager and/or Finance Director. 4 Levy Stabilization Fund On the November 2019 ballot, Medina voters approved a 6-year increase to their City property tax levy, starting in 2020, in order to maintain then-existing levels of service for the next 10 years. A promise was made to the voters that these additional funds would be managed in such a way as to keep those service levels in place for at least 10 years. The purpose of the Levy Stabilization Fund is to hold excess amounts resulting from the levy increase during 2020-2025 and to draw from the Levy Stabilization Fun to cover General Fund and Street Operations funding gaps during 2026 to 2029 (or longer, if feasible). Contingency Fund The Contingency Fund may be used for the following: a) To sustain City services in the event of a catastrophic event such as a natural/manmade disaster (e.g. earthquake, windstorm, flood, terrorist attack) or a major downturn in the economy. b) To address temporary, short-term (less than one year) economic downturns and temporary gaps in cash flow. Conditions, such as expense reductions and/or restrictions may be imposed. c) Amounts held in the Contingency Fund in excess of its limit (25% of the annual general fund budgeted expenditures) may be used to fund the Capital Improvement Plan. d) To pay down debts expeditiously when financially advisable, consistent with expert recommendations and with consideration of the City’s overall financial status. All expenditures transferred into and out of the Continency Fund, must be authorized by the City Council. Capital Projects Fund The Capital Projects Fund may be used for Capital Improvement Plan projects. See Capital Investment Policies section for further details. Equipment Replacement Account: The City may elect to maintain an Equipment Replacement Account for the purpose of funding fleet maintenance (police and public works) or a capital equipment reserve for the purpose of capital asset replacement. Revenue Policies a. The City will strive to maintain a diversified and stable revenue system in order to maintain the City’s ability to handle fluctuations in individual revenue sources. 5 b. Revenue forecasts should be realistically estimated and based on the best information available. The City will take into consideration that revenues are subject to local and regional economic activities. c. If long-term (greater than one year) revenue downturns are expected, the City will review and as appropriate revise its revenue forecasts. The City will also consider reducing expenses or increasing revenue in order to respond to and help stabilize the long-term impacts. d. When evaluating potential grants, the City must consider and communicate to management and, where applicable, Council, the near- and long-term financial impact of the grant on the City, including any requirements for local matching funds or for continuation of program with local funds after grant funds are exhausted, as well as any future expenditure impacts (e.g., on-going repairs and maintenance). A grant may be rejected if its impacts on City finances cannot be justified. e. The City will strive to set fee schedules at levels sufficient to cover the entire cost of service delivery. The City will systematically review user fees and consider adjustments as necessary to consider the effects of additional service costs and inflation. f. With respect to revenue-generating contracts and leases to be entered into by the City, the City shall review and, as applicable, present to Council for approval, the contract or lease on a timely basis in order to help ensure prompt approval by Council (where applicable) and generation of the related revenue streams. The City must undertake due diligence for any possible real or apparent conflicts of interest and recommend how to manage them. Any contracts or leases with real or apparent conflicts of interest must be approved by City Council, and the conflict and conflict-management information must be fully disclosed to the City Council prior to the presentation of the contract or lease to City Council for approval. Expenditure Policies a. The City budget will provide for sustainable levels of service. b. The City will propose only those operating expenditures that can be supported from on- going operating revenues. c. The City’s operating budget will not rely on one-time revenues to fund ongoing expenditures. Before the City undertakes any agreements that would create fixed on-going expenses, the cost implications of such agreements will be fully determined for current and future years. Capital expenditures may be funded from one-time revenues, but the operating budget expenditure impacts of capital expenditures will be reviewed for compliance with this policy provision. d. Department heads are responsible for managing their budgets within the total appropriation for their department. 6 e. The City will maintain expenditure categories according to state statute and administrative regulation. f. All compensation planning and collective bargaining will focus on the total cost of compensation, which includes direct salary, health care benefits, pension contributions, education, training allowance, and other benefits of a non-salary nature, which are a cost to the City. Purchasing Policies a. The City will follow state laws, adopted resolutions, ordinances and policies regarding procurement. b. The Director of Finance shall develop detailed procedures for purchasing, credit card usage, petty cash, expenditure authorization and/or contract management activities. c. Federal Funds or Grants: When procurement involves the expenditure of federal, state or county government, or private, funds or grants, the purchase shall be conducted in accordance with any applicable federal/grant laws or regulations, and must be approved by the Director of Finance and the City Manager or their designee. When purchasing items to be funded by others or reimbursed by a grant, the purchaser will perform the due diligence required to ensure that the purchase meets the criteria of the specific grant prior to initiating the purchase and requesting a release of City funds for the purchase. d. Emergency Procurement: The City Manager or designee may make or authorize others to make emergency procurements of materials, supplies or equipment or services when a threat to public health, welfare or safety exists. State laws relating to emergency declaration and emergency purchases will be followed. Capital Investment Policies a. The City will make capital improvements in accordance with an adopted Capital Improvement Plan. b. It is the policy of the City to maintain a Capital Projects Fund to provide funding for future projects including debt repayment. The use of any funds within the Capital Projects Fund must be recommended by the City Manager or their designee and approved by City Council. c. The Capital Improvement Plan and the base budget will be reviewed at the same time to ensure that the City’s capital and operating needs are funded and that the Capital Improvement Plan is aligned with the City’s other long-range plans. d. The City will identify the estimated costs and potential funding sources for each capital project proposal before it is submitted to Council for approval. e. The City will comply with state and local laws regarding use of Real Estate Excise Tax (REET) Revenue. 7 Accounting, Auditing and Financial Reporting The City will maintain a system of financial monitoring, control, and reporting for all operations and funds in order to provide effective means of ensuring that overall City goals and objectives are met. Accounting Records and Reporting: The City will maintain its accounting records in accordance with state and federal regulations. Budgeting, accounting and reporting will conform to Budgeting, Accounting and Reporting System (BARS) for Governments as prescribed by the Washington State Auditor’s Office. Regular monthly and annual financial reports will present a summary of financial activity by fund type and will be provided to the City Council. Auditing: The City shall prepare and submit in a timely manner, the Annual Financial Report to the Washington State Auditor’s Office in accordance with the standards established for the Annual Financial Report. The Washington State Auditor’s Office will perform the City’s financial and compliance audits on an annual basis. Results of the audit will be provided to the City Council in a timely manner. The Finance Department will develop, maintain, and consistently seek to improve cash management systems and processes which will ensure the accurate and timely accounting, investment and security of all cash assets. Cash received will be deposited in a timely manner and monies will be safeguarded (e.g. kept in a safe) until they are deposited. The City will establish a Petty Cash Fund in the amount of $200. The Petty Cash Fund is to be used solely for the purpose of making payment and/or small reimbursements for City related purchases. Investment Policy 1.0 Policy: It is the policy of the City of Medina to invest public funds in a manner which will provide the maximum security of the principal; meet the daily cash flow demands of the City; provide the City with the highest investment return and conform to all Washington statutes governing the investment of public funds. 2.0 Objective: The City's investments will follow all statutes governing the eligible investments for public funds in the State of Washington, in accordance with the Revised Code of Washington (RCW) 35A.40.050. The primary objectives, in priority order, of the City’s investment activities shall be: a) Safety: Safety of principal is the foremost objective of the City of Medina. Investments of the City shall be undertaken in such a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order 8 that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. b) Liquidity: The City's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements, which might be reasonably anticipated. c) Return on Investment: The City's investment portfolio shall be designed with the objective of attaining a market rate of return considering the City's risk constraints and the cash flow requirements. The Finance Director shall be responsible for all transactions undertaken and shall establish a system of controls to regulate all investment activities, and report promptly to the Council any adverse development with any investment. 3.0 Ethics and Conflicts of Interest: Anyone involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and Council Member officials shall disclose to the City Manager and the City Council any material financial interests in financial institutions that conduct business with the City, and she/he shall further disclose any personal financial/investment positions that could be related to the performance of the City's portfolio. Employees and Council Member officials shall subordinate their personal investment transactions to those of the City, particularly with regard to the time of purchases and sales. 4.0 Authorized Financial Dealers/Institutions: Authorized broker/dealers and financial institutions will be limited to those that are approved by the Finance Committee and meet one or more of the following: a) Financial institutions approved by the Washington Public Deposit Protection Commission (RCW 39.58); or, b) Primary dealers recognized by the Federal Reserve Bank; or, c) Non-primary dealers qualified under the U.S. Securities and Exchange Commission Rule 15c3-1, the Uniform Net Capital Rule, and a certified member of the National Association of Securities Dealers. At the request of the City, financial institutions, brokers and dealers performing investment services for the City shall provide their most recent financial statements or Consolidated Report of Condition (“call report”) for review. 5.0 Authorized Investments: The City may invest in any of the securities identified as eligible investments as defined by RCW 35A.40.050. In general, these consist of: 9 a) Investment deposits (certificates of deposits) with qualified public depositories as defined in Chapter 39.58 RCW. b) Certificates, notes or bonds of the United States, or other obligations of the United States or its agencies, or of any corporation wholly owned by the government of the United States (such as the Government National Mortgage Association). c) Obligations of government-sponsored corporations which are eligible as collateral for advances to member banks as determined by the Board of Governors of the Federal Reserve System. (These include but are not limited to, Federal Home Loan Bank notes and bonds; Federal Farm Credit Bank consolidated notes and bonds, and Federal National Mortgage Association notes, bonds and guaranteed certificates of participation.) d) Bankers' acceptances purchased on the secondary market. e) Bonds of the State of Washington and any local government in the State of Washington which have, at the time of investment, one of the three highest credit ratings of a nationally recognized rating agency. f) Repurchase agreements for securities listed in 2, 3 and 4 above, provided that the transaction is structured so that the City of Medina obtains control over the underlying securities and a Master Repurchase Agreement has been signed with the bank or dealer. g) The State of Washington Local Government Investment Pool. h) For a complete list of eligible investments for public funds in the state of Washington, visit: http://www.tre.wa.gov/documents/inv_elig.pdf 6.0 Safekeeping and C ustody All securities transactions entered into by the City of Medina shall be conducted on a delivery versus-payment (DVP) basis. Securities will be held by a third-party financial institution designated by the Finance Director as custodian on the City’s behalf. All securities purchased by the City of Medina shall be properly designated as an asset of the City and no withdrawal of such securities, in whole or in part, shall be made from safekeeping except by the Finance Director as authorized herein, or by the Director’s designee. 7.0 Reporting: The Finance Director will determine what investment information will be included in the monthly financial report. Debt Policy The City will maintain adequate available debt capacity for specific priority projects. 10 The objectives of the City’s Debt Management Policy will be to minimize the need for debt by maintaining strong revenue sources which meet or exceed expenditures. Debt may be utilized to address short-term cash flow needs and/or to finance significant capital or other obligations. Debt will not be used to fund long-term revenue shortages. City Council approval is required to approve the issuance of debt. Current Operations will not be financed with long term debt. In the event that the need for long term debt arises, the term of the long-term debt will not exceed the life of the projects financed. When evaluating the use of non-voted Councilmanic Debt and the associated debt service obligations, an analysis shall be performed to determine the City’s ability to make debt service payments, considering revenue fluctuations associated with periodic economic cycles. Debt may be considered where the Director of Finance can demonstrate that there is sufficient projected discretionary revenue to service the debt without disrupting the City’s existing service delivery or programs. Voted and non-voted Councilmanic Debt will be used prudently in a manner to avoid an adverse impact on the City’s credit rating or ability to issue subsequent or additional debt. Upon the issuance of any debt, the Director of Finance will establish the appropriate procedures to assure compliance with bond/debt covenants and applicable federal, state and local laws, policies and regulations. In the event that the use of debt is required, the City will raise capital at the lowest cost, consistent with the need to borrow. This will be accomplished by keeping a high credit rating, and maintaining a good reputation in the credit markets by managing the annual budget responsibly. Small and Attractive Asset Policy It is the policy of the City to maintain accountability over all tangible items that may have the likelihood of disappearing without being noticed. A small and attractive item is an item that is easily concealed and carried off, priced between $500 - $4999, and has a life expectancy of more than one year. This item also is not likely to be missed immediately upon disappearance. Examples include without limitation laptops, cellphones, cameras, projectors, shop tools, guns, etc. Each department head, or their designee, will prepare an Inventory List annually of their small and attractive items. If an item from the previous year is deleted, the department head will note the reason and/or means of disposal. This inventory list will be provided to the Finance Director by June 30th each year for monitoring. The Finance Director or designee will do a physical inventory based on random selection representing approximately 10-25% of items not previously selected in the prior 2 years. The asset list will contain the serial number, model or other identifying information. Whenever feasible, each piece of property will be engraved or marked with the city’s name. Such markings will 11 be removed or obliterated only when the item is sold, scrapped, cannibalized, or otherwise disposed of. The City may acquire property via purchase, construction, donation, or lease. Regardless of how it is acquired, when the property is received, the department head or their designee will add it to their Small & Attractive Assets Inventory List and mark the item with the City’s name. Items missing without adequate or feasible explanation may require additional reports to the Police Department, City Manager and/or Insurance Company. Deletions brought about as a result of natural disasters or theft would require reporting to the insurance provider for an eventual reimbursement claim.