Loading...
HomeMy WebLinkAbout2095 RESOLUTION 2095 A Resolution adopting financial policies and guidelines for the City of Bremerton WHEREAS, the City Council and the Mayor of Bremerton are committed to improving the City's financial management; and WHEREAS, establishing and adopting financial policies is an important step toward assuring that financial management is both consistent and rational; and WHEREAS, better financial management is needed to make more effective and efficient use of City resources; NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Bremerton: General financial goals for the City of Bremerton are the following, and financial policies in Attachment A to this Resolution are adopted to meet these goals. 1) To maintain an adequate financial base to sustain a sufficient level of municipal services, thereby helping to prevent social or physical deterioration of the City. 2) To have the ability to withstand local and regional economic trauma, to adjust to changes in the service requirements of our community, and to respond to changes in the service requirements of our community, and to respond to changes in State and Federal priorities and funding as they affect the City's residents. 3) To maintain a good credit rating in the financial community and assure City taxpayers that our City government is well managed by using prudent financial management practices and maintaining a sound fiscal condition. PASSED by the City Council of the City of Bremerton this 3rd day of October, 1985. MORRIE DAWKINS, Mayor City of Bremerton ATTEST: KATHLEEN L. MCCLUSKEY Director of Adrninistrative Services CITY OF BREMERTON FINANCIAL POLICY MANUAL Art Anderson, President Morrie Dawkins, Mayor City Council Kathleen McCluskey, City Clerk Leo Olney City Treasurer Russ Johnson, Chair Jim Adrian Council Budget & Fiscal Committee October 1985 DEBT MANAGEMENT POLICIES The following debt management policies should be used to provide the general framework for planning and reviewing debt proposals. The City Council recognizes that there are no absolute rules or easy formulas that can sub- stitute for a thorough review of all information affecting our debt position. Debt decisions should be the result of deliberative consideration of all factors involved. General Debt Policies 1. The City shall seek to maintain and, if possible, improve our current bond rating so our borrowins costs are minimized and our access to credit is preserved. 2. Every future bond issue proposal will be accompanied by an analysis provided by the proposing department and City Treasurer showing how it conforms with the debt policies adopted by the City Council. The Investment Comm4ttee will review and comment on each bond issue proposal especially in regard to conformance with existing debt and financial policies, and shall also review and comment on the specific aspects of the proposed financing package and their impacts on the City's credit worthiness. 3. The City will not use short-term borrowing to finance operatioml needs except, in the case of an extreme financial e~ergency which is beyond our control or reasonable ability to forecast. However, interim financing in anticipation of a definite fixed source of revenue such as an authorized, but unsold bond issue ~ grant or tax anticipation notes is acceptable. Such bdnd grant or tax anticipation notes and warrants should not: a. Have maturities greater than one year (except for LID interim financing); b. Be rolled over for a period greater than one year; or c. Be issued solely on the expectation that interest rates will decline from current levels. 4. Bond proceeds should be limited to financing the cost of planning, design, land, acquisition, buildings, permanent structures, attached fixtures or equipment, and moveable pieces of equipment such as fire engines. Utility revenue bond proceeds may be used to establish a debt service reserve as allowed by State law. Basically, acceptable uses of bond proceeds can be viewed as items which can be capitalized and depreciated. Consamable supplies will not be financed from bond proceeds. Refunding bond issues designed to restructure currently outstanding debt is an acceptable use of bond proceeds. 5. A significantly large proportion of Bremerton's property taxpayers and citizens should benefit from projects financed by general obligation bonds. This principle of taxpayer equity should be a primary consideration in determining the type of projects selected for financing by general obligation debt. -1- 6. Whenever the City is contemplating a ~ossible bond issue, information will be developed concerning the following four categories commonly used by rating agencies to assess credit worthiness. The subcategories are a necessary, but incomplete, list of the types of items to be considered. This information will be presented to the Investment Committee and the City Council for their respective reviews. a. Debt Analysis - Debt capacity analysis - Purposes for which debt is issued - Debt structure - Debt burden and magnitude indicators and ratios as compared to other communities; - Debt history and trends; - Adequacy of debt and capital planning; and - Obsolescence of capital plant b. Financial Analysis - Stability, diversity and growth rates of tax sources; - Trend in assessed valuation and collections; - Current budget trends Appraisal of past revenue and expenditure estimates; Evidences of financial planning; History and long-term trends of revenues and expenditures; Adherence to generally accepted accounting principles; - Audit results; Liquidity of portfolio and other current assets; - Fund balance status and trends; and - Financial monitoring systems and capabilities c. Governmental and Administrative Analysis - Government organization structure; - Location of financial responsiblities and degree of control; - Adequacy of basic service provision; - Intergovernmental cooperation/conflict and extent of duplication; - Overall City planning efforts d. Economic Analysis - Geographic and locational advantages; - Population and demographic characteristics; Wealth indicators; Housing characteristics; Level of new construction; Types of employment, industry and occupation; Evidences of indu.strial decline; and Trend of the economy. -2- Debt Planning Policies 7. Unlimited-tax general obligation bond borrowing must be planned and the details of the plan must be incorporated in the City's Capital Improvement Program. It is imperative ~hat the City demonstrates to the !at~ng agencies, investment bankers, our creditors, and Bremerton tax payers .that we,re following a prescribed financial plan. 8. Unlimited-tax general obligation bond issues should be submitted to the City Council at least six months prior to the election at which voter approval will be requested. The City Council should allow at least four months after its approval to allow sufficient time for adequate publicity and information to be disseminated so voters have complete information on which to make an informed choice. Communication and Disclosure Policies 9. The City will maintain good communications with bond rating agencies to inform them about the City's financial condition. The City will follow a policy of full disclosure. Significant financial reports affecting or- commenting on the City will be forwarded to the rating agencies. Each bond prospectus will follow the Governmental Finance Officers' Association disclosure guidelines. 10. The City should attempt to develop coordinated communication processes with all other Jurisdictions with which we share a common property tax base concerning our collective plans for future debt issues. Reciprocally shared information on debt plans including amounts, purposes, timing, and types of debt would aid each jurisdiction in its debt planning decisions. General Obligation Bond Policies 11. Every project proposed for financing through general obligation debt should be accompanied by a full analysis of the future operating and maintenance costs associated with the project. 12. Bonds cannot be issued for a longer maturity schedule than a conservative estimate of the useful life of the asset to be financed. The City should_- attempt to gradually shorten the averag~ maturity of outstanding general obligation debts. - 13. Whenever possible, the City will finance capital projects by using self- supporting revenue bonds. Revenue bonds assure the greatest degree of equity because those who benefit from a project and those who pay for a project are most closely matched. Limited Tax General Obligation Debt Policies 14. As a general policy limited tax general obligation bonds should be considered only if time constraints preclude the preferred practice of submitting an unlimited tax general obligation bond proposal for voter approval. 15. As a precondition to the issuance of limited tax general obligation bonds all alternative methods of financing should have been exhausted. 16. Consideration should be given to the question as to whether a pledge of the facilities' revenues should accompany the basic pledge of limited tax revenues. 17. Limited tax general obligation bonds should only be issued under certain restricted conditions: a. A project in progress requires monies not available from alternate sources, b. The project to be financed will generate positive net revenues (i.e., the additional tax revenues generated by the project will be greater than the debt service requirements). The net revenues should not simply be positive over the life of the bonds, but be positive each year within a reasonably short period (e.g., by the third year of debt service payments). These calculations will be made on a con- servative basis so that the potential for a long-term net decrease in general fund revenues is minimized. c. Matching fund monies are available which may be lost if not applied for in a timely manner. d. Catastrophic conditions. Utility Revenue Bond Policies 18. Each utility should establish a policy that future capital financing needs will be met by a combination of current operating revenues and revenue Oond financing. A specific ratio will be established by resolution when- ever a rate review is conducted; however, the City Council intends that a 1:1 ratio is desireable long term goal that each utility should seek to achieve. 19. Each utility should establish a policy on debt service coverage. A specific multiple will be established by resolution whenever a rate review is con- ducted. The City Council intends that projected revenues available for debt service requirements be at least 1.4 times the annual debt service costs. This would be a desireable long term goal that each utility should seek to achieve. -4- FINANCIAL POLICIES REVENUE AND EXPENDITURE POLICIES 1. Revenues and expenditures for the General Fund and all operating funds should be projected each year for at least the next two budget years. 2. Because revenues, especially those of the General Fund, are sensitive to local and regional economic activity, revenue estimates adopted by the City Council should be conservative. 3. All General Governmental current operating expenditures will be paid with current revenues. Current revenues and operating expenditures will be reviewed and presented at least twice during the budget year. The City will avoid budgetary procedures - such as, "accruing future years" revenues, or rolling over short-term debt - which balance the current budget at the expense of future budgets. All budgetary pro- cedures will conform with existing State and local laws. 4. All fee schedules and user charges shall be reviewed and adjusted, if necessary each even numbered year to ensure that rates are equitable and cover the total cost of service or that percentage of the total cost deemed appropriate by the City. A mandatory report will be made to Council addressing all fees and recommended changes during July of these years. 5. Licensing ordinances and regulations have broad impacts on the Cityls economy and, when exercising the City~s policy and taxing p~wers, the City will use the following guidelines: a. Existing and any proposed regulatory license fees should meet the following criteria: · Sufficiency - licenses fees should cover the full cost of issuance, administration, and enforcement of the regulatory license. · Efficiency - The fee should be designed for easy, inexpensive administration by the City and easy, inexpensive compliance by the licensee. · Simplicity - The fees should be easily understood by licensees and City officials, leaving as small a margin as possible for subjective interpretations. b. Revenue taxes from licensing should meet the following criteria: - 5- o Efficiency - A tax should be levied in a way which can be easily and inexpensively administered by the City and complied with the taxpayer. A minimum of the revenue raised through a tax should be consumed in the process of raising it. o Simplicity - Tax laws should be written so they can be readily understood by the taxpayer and the tax official. The amount of tax due should be easily computed and verified. o Equitability - No arbitrary distinctions should be made among taxpayers or classes of taxpayers. However, distinctions will be made when the City believes that such distinctions are appropriate and will not have a disproportionate impact on tax- payers or a class of taxpayers. A tax should be designed so that all taxpayers within a class of taxpayers are affected to the same extent. o Neutrality - A tax should avoid distorting the economic. signals which are received in the marketplace and which determine the relative amounts of the various goods and services produced. The effects of taxes levied by other jurisdictions should also be considered. o Growth - Tax rate should not be so high as to either discourage reasonable economic growth or to place Bremerton in a position of comparative disadvantage vis-a-vis other communities. 6. To maintain the City's physical assets, a current inventory of the City's , physical assets and their conditions will be developed and maintained. An amortization schedule should be established for physical assets to reflect the reasonable life of the asset. Annual budgets should provide for adequate maintenance and replacement of the City's capital plant and equipment. Interest, opera6ing and maintenance expenses for physical assets purchased through General Government funds will not be capitalized. 7. Operating funds to maintain capital improvement should be estimated and identified prior to making the decision to undertake capital improvements. Revenues to offset these operating costs should also be identified. 8. Whenever feasible and reasonable, activities related to growth and development (zoning, building inspection, utility extensions) should be funded on a self-sustaining basis. 9. Funds allocated to community programs will be considered start up funds and in part allocated based upon the demonstrated ability of the program to continue operations with annually decreasing City funds. Program self-sufficiency is a desired outcome of any funding decision. 10. Grant applications to fund new service programs, with State or Federal funds should be reviewed by the City, with significant consideration given to whether locally generated funds will be required to support these programs when original funding is no longer available. -6- RESERVE FUND AND FUND BALANCE POLICIES 1. The City will maintain capital reserve funds as provided for in Bremerton Municipal Code 3.36. Further, the City shall strive to maintain a balance in the reserve for "General Government Purposes" of at least 2.5% of the General Fund annual budget. 2. Cumulative Reserve Fund - City Ordinance authorizes the use of the Cumulative Reserve Fund for: o Public improvement of City buildings, streets, water and sewers; o Investigations and studies for public improvement; and o Acquisition of real property. 3. Working capital and reserves for the General Fund and operating funds should be maintained at a sufficient level to: a. Offset significant downturns in revenues in any general municipal purpose fund; b. Provide sufficient working capital; and c. Provide a sufficient cash float for daily financial needs. 4. Fund balances for the General Fund and Operating funds should be used only for one-time capital or emergency expenditures only if: a. They are surplus balances remaining after all reserve and fund allocations are made; or b.The City has made a rational analysis with justifying evidence that it has an adequate level or short and long term resources. If fund balances are used to support one-time capital and one-time non- operating expenditures, the funds will be especially appropriated by the City Council. If the Mayor or City Council propose to use fund balances to support existing City services, the funds must be specifically appropriated by the City Council. ACCOUNTING AND FINANCIAL REPORTING POLICIES 1. The City will establish and maintain an accounting and financial reporting system that conforms with generally accepted accounting principles and standards. 2. The City will continue to develop the Central Financial Management System to improve central accounting and reporting, and departmental financial management capabilities. Financial systems will be developed and maintained to monitor expenditures, revenues, and financial performance of all municipal programs on an ongoing basis, and should comply with GFOA's (Governmental Finance Officers' Association) guidelines. CASH MANAGEMENT Cash management and investment policies are being developed by the Investment Committee according to Ordinance 3955, and will be considered as part of these financial policies.