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HomeMy WebLinkAboutORD 2015-26 - Fiscal & Budgetary PolicyORDINANCE NUMBER KI -1 I X UY c- I lHAM r*41 i I Li I I W&M 1. W -i1' -'M' WHEREAS, the City Council developed a Fiscal and Budgetary Policy and wol adopted by City Council action in 2001; and WHEREAS, the Fiscal and Budgetary Policy has been reviewed and adopted each year since 2001 by such Council action; and !III 111 11 1 0.0191KII WHEREAS, the City Council has reviewed and approved the amended FiscL9I and Budgetary Policy for 2015/16; and I III IIII 111 111111 N IIIIIIIIIIIIIIII �ililill 11 111111111 111 111 " ��11111 NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF GEORGETOWN, TEXAS, THAT: SECTION 1. The facts and recitations contained in the preamble of th'M ordinance are hereby found and declared to be true and correct, and are incorporat M y reference herein and expressly made a part hereof, as if copied verbatim. The C1, i Council hereby finds that this ordinance complies with the Vision Statement of the Ci of Georgetown 2030 Comprehensive Plan. 1i SECTION 2. The City Council approves the Fiscal and Budgetary Policy as illustrated in Exhibit A. I SECTION 3. In the event any section, paragraph, subdivision, clause, phrase, provision sentence or part of this ordinance or the application of same to any person or circumstance shall for any reason be adjudged invalid or held unconstitutional, by a court of competent jurisdiction, it shall not affect, impair, or invalidate the remainder of this ordinance which shall be given full force and effect. SECTION 4: The Mayor is hereby authorized to sign this Ordinance and the City Secretary to attest. Ordinance Number: Page I of 1 Fiscal and Budgetary Policy Amendment Date Approved: kill 11 �ill�l i 111111 THE CITY OF GEORGETOWN: Je s" a Breftle By: Dale Ross CiS, ecretary Mayor APPROVED AS TO FORM: ridget Ch , City Attorney Ordinance Number: 62ol 5-7,p (0 I. PURPOSE The City of Georgetown is committed to financial management through integrity, prudent stewardship, planning, accountability, full disclosure and communication. The broad purpose of the Fiscal and Budgetary Policies is to enable the City and its related component units, including the Georgetown Transportation Enhancement Corporation {ETEC) and the Georgetown Economic Development Corporation (GEDCO) to achieve and maintain a long-term stable and positive financial condition, and provide guidelines for the day-to-day planning and operations of the City's financial affairs. Policy scope generally spans areas of accounting and financial reporting, internal controls, both operating and capital budgeting, revenue management, investment and asset management, debt management and forecasting. This is done in order to: A. Demonstrate to the citizens of Georgetown, the investment community, and the bond rating agencies that the City is committed to a strong fiscal operation; B. Provide precedents for future policy -makers and financial managers on common financial goals and strategies; C. Fairly present and fully disclose the financial position of the City in conformity to generally accepted accounting principles (GAAP); and D. Demonstrate compliance with finance -related legal and contractual issues in accordance with the Texas Local Government Code and other legal mandates. These policies will be reviewed and updated annually as part of the budget preparation process. II. FUND STRUCTURE AND BASIS OF BUDGETING The budgeted funds for the City of Georgetown include: Governmental Funds- General Fund which accounts for all financial resources except those required to be accounted for in another fund, and include basic governmental services, such as treet Maintenance, Planning and Development, Police, Fire and Parks, as well as, solid waste management. Special Revenue Funds (SRF) account for specific revenues that are legally restricted for specified purposes. The City Parkland Dedication, Library Donations, Animal Services Donations, and Street Maintenance Sales Tax. Debt Service Fund is used to account for the payment of general long-term debt principal and interest. Capital Project Funds are used to account for the acquison or construction of major capital facilities other than those financed by enterprise activities. Proprietary Funds: Intemal Service Funds account for good or services provided by one internal department to another. The City uses this system to recognize cost for fleet replacement and maintenance, facility maintenance, computer replacement and maintenance and employee health insurance costs. The City's accounts and budgets for all Governmental Funds using the modified accrual basis of account6qg. This basis means that revenue is recognized in the accounting period in which it becomes available and measurable, while expenditures are recognized in the accounting period in which they are in curred. Because the appropriated budget is used as the basis for control and comparison of budgeted and actual amounts, the basis for preparing the budget is the same as the basis of accounting. Exceptions to the modified accrual basis of accounting include: * Encumbrances, which are treated as expenditures in the year they are encumbered, not when expended. * Grants, which are considered revenue when awarded, not received. * Principal and interest on long-term debt, which are recognized when paid. General government funds include the general fund, special revenue funds, debt service fund and general capital project funds. Proprietary Funds, which include the enterprise and internal service funds are accounted and budgeted using the full -accrual basis of accounting. Under this method, revenues are recognized when they are earned and measurable, while expenses are recognized when they are incurred regardless of timing or related cash flows. The basis for preparing the budget is the same as the basis of accounting except for principal • a ptions include: EZLW-=-II (GASB) Statement Number 54. A. Non -spendable Fund Balance — includes inherently non -spendable assets that will never convert to cash, as well as, assets that will not convert to cash soon enough to affect the current financial period .Assets included in this category are prepaid items, inventory and non-financial assets held for resale. B. Restricted Fund Balance — represents the portion of fund balance that is subject to Fegal restrictions, such as grants or •: •: tax and bond proceeds. C. Committed Fund Balance — describes the portion of fund balance that is constrained by limitations that the City Council has imposed upon itself, and remains binding unless the City Council removes the limitation. D. Assigned Fund Balance — is that portion of fund balance that reflects the City's intended use of the resource and is established in a, less formal method by the City for that designated purpose. E. Unassigned Fund Balance — represents funds that cannot be property classified in one • the other four categories. VA MIAMIIHO III -til, Budgeting is an essential element of the financial planning, control and evaluation process of municipal government. The "operating budget" is the City's annual financial operating plan. The annual budget includes all of the operating departments of the general fund, proprietary funds, debt service funds, special revenue funds, and capital improvement funds of the City. A. Comprehensive Plan — The 2030 Plan is written from a perspective of some twenty years into the future. It expresses what we envision and desire our community to be in the year 2030, and it reflects on all that we have accomplished since we launched the revision of our Comprehensive Plan in 2006. The Plan utilizes a Vision Statement to guide the desired outcomes for the community. Council Vision The Council has further defined the City's Comprehensive Plan by defining its vision to become the City of Excellence. This vision is to be accomplished through five (5) focus areas. These focus areas become the City's strategic goals through development and implementation of defined Business Plans for each focus area. 1 Economic Development 2. Signature Destination 3. Public Safety 4. Transportation 5. Utility Services C. Five -Year City of Excellence Business Plan — A "dashboard" plan will be developed that links the 2030 Plan with the City Council's City of Excellence vision and five focus areas (strategic goals) that further the implementation of the Vision. From those strategic goals an implementation plan for each of the 5 focus areas will be created. 1. A Five -Year Financial Forecast will be created and updated annually that will identify potential tax impacts, rate adjustments and other factors that will impede the implementation of the City of Excellence Business Plan. 2. Year -One of this Business Plan is the basis for the Annual Buddet. D. Preparation - — The Charter (Section 6.02) requires "a proposed budget prepared by the City Manager and submitted to the City Council at least thirty days prior to the end of the fiscal year. The budget shall be adopted not later than the twenty-seventh day of the last month of the fiscal year. No budget will be adopted or appropriations made unless the total estimated revenues, income and funds available shall be equal to or in excess of such budget or appropriations, except otherwise provided". Therefore, the budget will be presented to the City Council no later than the 1st day of August to provide the City Council time to adopt the budget in the required time frame. 1. Proposed Budget — A proposed budget shall be prepared by the City Managa with participation of all of the City's Division Directors within the provision of t Charter and the 2030 Plan and the City of Excellence Vision. I * Revenues * Personnel Costs * Operations and Maintenance * Capital and other non -project costs b. The budget review process will include City Council participation in the development of each segment and allow for citizen participation in the process, and will allow for sufficient time to address policy and fiscal issues by the City Council. c. A copy of the proposed budget will be filed with the City Secretary when it is submitted to the City Council. A copy Will also be available at the Georgetown Public Library for citizen review. 11*00' 0 1 oil The Annual Budget document will be submitted annually to the Governmen) Finance Officers Association (GFOA) for evaluation and consideration for the Distinguished Budget Presentation Award. E. Balanced gyg_qet - The goal of the City is to adopt and maintain a balanced operating budget using sustainable funding sources that are expected to continue to be available in subsequent fiscal years. Excess balances in operating funds from previous fiscal years shall remain in the fund in which they were appropriated until either such excess balances are proposed and adopted pursuant to Section IV. D. of this policy; until they are used to reduce outstanding debt obligations of the City; or both. - 0 L 11 ll 11- '11, , 11 G. Reporting - Summary financial reports will be presented to the City Council quarterly. These reports will be in a format appropriate to enable the City Council to understand the overall budget and financial status. H. Control and Accountabili!y - Each Division Director, appointed by the City Manager, will be responsible for the adrriinistration of his/her departmental budget. This includes accomplishing the Goals and Objectives adopted as part of the budget and monitoring each department budget for compliance with spending limitations' Division Directors may transfer funds up to $20,000 within the operations and maintenance or capital line items within a departmental budget category without additional approval. All transfers Within the Personnel line items require approval of the Chief Financial Officer and City Manager. All other transfers of appropriation or budget amendments require either City Council or City Manager approval as outlined in Section IVJ and Section VILBA. Budget Amendments - The Charter (Section 6.04) provides a method to amend for budget amendments and emergency appropriations, The City Council may authorize with a majority plus one vote, an emergency expenditure as an amendment to the original budget. This may be done in cases of grave public necessity to meet an unusual and unforeseen condition that was not known at the time the budget was adopted. In practice, this has been interpreted to include revenue -related expenses within the enterprise funds and timing differences on capital improvement projects. The following criteria will be used in evaluation of budget amendments- * Is the request necessary? * Why was the item not budgeted in the normal budget process? mom emme any =H !1111 T=n7t-rTI1T=*7rY1ceF MY& c 11mmak-1111 LT-0�1&yeflvl g sovrces prior to adoption. The City will amend the budget at year end, if needed, for revenue based expenditures that exceeded budgeted amounts due to increased revenue and recognize any grant funded expenditures for grants received after the budget was adopted or last amended. The City will also amend the budget if necessary for any capital project timing adjustments from prior year, as well as, any other known adjustments needed and approved at that time. J. Continaency Appropriations - The budget may include contingency appropriations within designated operating department budgets, These funds are used to offset expenditures for unexpected maintenance or other unanticipated expenses that might occur during the year. Currently, the City maintains contingency appropriations for insurance deductibles, unexpected legal expenses and equipment repairs. I&I'M ALOJ"r�t;� 7 'X L. Use of Unanticipated and Unappropriated General Fund Balances - Within 90 days after fiscal year end, staff will report the projected general fund balance to Council. In the event that unexpected, unbudgeted amounts are determined to be available in the General Fund after year end, these funds may be used for any of following purposes, as approved by the City Council - 1 . to fund capital projects; 2. to fund equipment purchases in lieu of issuing debt; 3. to reduce outstanding city debt, including bonded indebtedness and unfunded pension liabilities; 4. to fund contingent liabilities such as the benefit payout reserve, cemetery trust fund, and similar obligations of the city; 5. to take other steps to reduce property tax rates or mitigate any future increases; 6. to hold those funds in reserve for future commitments or contingencies that may 7. to fund an economic uncertainty reserve of up to three (3) percent of annual General Fund operating expenditures. A. Characteristics - The City will strive for the following optimum characteristics in its revenue system: 1. Simplicity - The City, where possible and without sacrificing accuracy, will strivz� to keep the revenue system simple in order to reduce compliance costs for th-. taxpayer or service recipient. 2. Certainty — A knowledge and understanding of revenue sources increases the reliability of the revenue system. The City will understand its revenue sources and enact consistent collection policies to provide assurances that the revenue base will materialize according to budget, 3. E_quity — The City shall make every effort to maintain equity in its revenut system; i.e., the City should seek to minimize or eliminate all forms oi subsidization between entities, funds, services, utilities, and customer classes, and ensure an on-going return on investment for the City. a. The City will make every effort to recognize the benefit that City tax payers contribute to City programs and services. b. The annual Parks and Recreation residential membership rates are established at 75% of non-residential rates plus or minus 10% at the discretion of the Parks and Recreation Director in keeping with the targeted market cost recovery. 4. Revenue Adeguacy The City should require there be a balance in the revenu,; system; i.e., the revenue base will have the characteristics of fairness ant' neutrality as it applies to cost of service, willingness to pay, and ability to pay - Overall Operational Cost Recovery for Parks and Recreation for the Recreation and Tennis Centers is targeted to be between 50 — 60%, with some variance in individualprograms, 5. Realistic and Conservative Estimates - Revenues will be estimated realistically, and conservatively, taking into account the volatile nature of various revenue streams. ,i,. Administration — The benefits of a revenue source should exceed the cost levying and collecting that revenue. i 7. Diversification and Stabifty — A diversified revenue system with a stable sourQ of income shall be maintained. This will help avoid instabilities in two particul revenue sources duo to factors such as fluctuations in the economy a variations in the weather. I B. Other Considerations — The following considerations and issues \A(Ill guide the City in its revenue policies concerning specific sources of funds: 1. Cost/Benefit of Incentives for Economic Development — The City will use due caution in the analysis of any incentives that are used to encourage development. A cost/benefit (fiscal impact) analysis will be performed as part of the evaluation. 2. Non-Recurrin J .q Revenues — One-time or non-recurring revenues should not M- �_sedto finance current ongoing operations. 3. Sustainable Revenues — "Sustainable" means revenue that is consistently available year after year, and includes revenues realized subsequent to adopted projections. MUM 1116M �11 Z Conservative budgeted revenue estimates result in a projected ninety-eight percent (98%) budgeted collection rate for current ad valorem taxes. Two percent (2%) of the current ad valorem taxes will be projected as the budget for delinquent ad valorem tax collection. For budgeting purposes, the City will forecast the proposed property tax rate using the effective maintenance & operations (WO) rate plus, the interest,& sinking (I&S) rate needed -to supported debt service. Increases to the M&O rate will be deliberated and determined by the City Council. Proposed tax revenue will be budgeted at a 98% collection rate. 5. Interest Income — Interest earned from investments will be distributed to the funds in accordance with the equity balance of the fund from which the monies were provided to be invested, 6. User -Based Fees and Service Cha[ges — For services associated with a user fee or charge, the direct or indirect costs of that service will be offset by a fee Where possible. The City will review fees and charges no less than once every two years to ensure that fees provide adequate coverage for the cost of services. The City Council will determine how much of the cost of a service should be recovered by fees and charges. 7. Enterprise Fund Rates — The City will review and adopt utility rates as needed M generate revenues required to fully cover operating expenses, meet the leg requirements of all applicable bond covenants, and provide for an adequate lev of working capital, Utility rates will be reviewed annually as part of the budg process. A rate study will be conducted every 3 years to review ra methodology and ensure revenues will meet future needs. All utility rates Will I] based on standardized "cost of service" methodologies, Water Rates will recognize the at least 75% of the "fixed" cost of service, including debt payments and ROI costs, within the monthly "base charge" determined by meter size. "Volumetric charge" will recognize the balance of fixed costs not included in the base rate, plus all variable costs associated with procuring and treating water. M-1 T Electric Rates include 100% of fixed costs within the base rate, with all variable costs included in the kWh rate. Stormwater Drainage Fees are based a mathematical calculation based on impervious cover and applied in compliance with State Law. A restricted Power. Contract Credit Reserve has been established to provide financial assurances to the City's wholesale power contract providers as fiscal surety against any potential risk on the City's behalf and will be maintained as it restricted" fund balance on the City's financial statements. A Rx ' f< bifizaffon Reserve (RSR) Account has been established in the Electric Fund to offset and mitigate potential impacts to customer rates due to increased fuel costs or other external factors that may negatively impact Electric Rates. The Rate Stabilization Reserve (RSR) may provide funding for: * Deferrinc q or minimizing the rate impact of future cost increases * Costs associated with providing additional power supply * Fillinq contractual obligations * Balancing of annual power costs RSR funds will be monitored monthly to ensure the electric rate is being managed per the Policy. Increases to RSR are made through the Power Cost Adjustment rate as determined by the fund, at the recommendation of the General Manager for Utilities. Internal Cost Recovery Fees -Additionally, enterprise activity rates will include transfers to and receive credits from other funds as follows: a. General and Administrative Charges — Administrative costs should be charged to all funds for services of general overhead, such as administration, finance, customer billing, legal and other costs as appropriate. These charges will be determined through an indirect cost allocation following accepted practices and procedures and reviewed annually by the City's external auditors, b. Payment for Return on Investment — The intent of this transfer is to provide --a benefit to the citizens for the ownership of the various utility operations they own. For all utilities except for Electric* In -Lieu -of -Franchise -Fee. This transfer, currently 3% of operating revenues generated inside the City, is consistent with the franchise rates charged to investor owned utilities franchised to operate within the City. Return on Investment. The return on investment (ROI) transfer for In - City utility customers is currently calculated at 7% of operating revenues for all utilities. ROI for water and sewer customers outside the City is 10% of operating revenues. . There is no ROI calculated on solid waste revenues. be included in the cost. The City of Georgetown recognizes certain long-term unfunded commitments and contingencies that will require substantial funding at some point in the future. The City Is committed to addressing these commitments in a fiscally prudent method by acknowledging their future financial impacts and developing strategies and designated reserve funds to mitigate those future impacts. A. Cemetery Reserve will be established for the purpose of funding continued maintenance for City owned cemetery properties A. Ap - iet control is at the department level budget for all funds. The Charter (Section 6.03) provides that any transfer of appropriation between funds must be approved by the City Council and that the City Manager, without City Council approval, is authorized to transfer appropriations among departments, within the same operational division and fund. The City Manager may also authorize transfer of salary adjustment monies between funds that are budgeted in a citywide account. B. Personnel Costs — Costs related to salaries and benefits are budgeted at 100% total costs, assuming open positions are filled throughout the fiscal year. New positions that are added during the budget process may have staggered hire dates with appropriate costs reflected in the budget. Vacancy Factor — General Fund appropriations will include a vacancy factor equal to 1% of total General Fund salaries and related benefits to o et salary savings within the budget. The vacancy factor will be budgeted as a negative expense Within the General Government Department of the General Fund. For 2015/16 the Vacancy Factor equals $ � . This factor will be reduced throughout the year as vacant positions are recognized within the department 2. Benefit Payout Reserve - The City will establish a benefit payout reserve equal to 15% of the accrued benefit liability for employees who are currently meet eligible to retirement. Only terminating employee benefit expenses may be paid from this reserve. This reserve shall be funded as an offset to the vacancy factor, For 2015/16$ is budqeted for this reserve. 10 3. Position Control — The annual budget includes a set number of positions within departments when approved and adopted by City Council. Additional positions cannot be added without approval of the City Council. The City Manager may approve the transfer of authorized positions between departments if funds are available within the department. 4. Use of Excess SalanLapvLings — Departmental savings generated due to open positions or other salary line item savings cannot be spent by the department unless previously approved by the City Manager and validated by Finance as 11 excess.funds'. 1. Strategic Partnerships for Community Services. — The City of Georgetown valu partnerships with organizations that are committed to addressing o communities greatest public challenges and has identified key priorities in thl following areas- • Public Safety • Transportation * Housing * Parks & Recreation * Veteran Services� an* * Safety Net The funding level for 2015/16 is $400,049 for these type of initiatives and is the same as in the previous year. 2. Public Art Funding - The City will annually allocate funding for Public Art on a year to year basis depending on the availability of funds in an amount to be determined at the discretion of the City Manager. Funding priority will be given to projects that include a matching donation, including contributions from local organizations and sponsors. Any unspent funds will accumulate and be reallocated in the following budget year. Disbursement of these funds will be determined by the City Council at the recommendation of the City's Arts & Culture Advisory Board. 11 Every effort will be made to include public art funding in future City facilities whose primary purpose is for public use. These projects will include a -,F 'il 2KtS ?, S S so long that it does not negatively impact the project cost beyond the original budget. In the event there is cost savings in the construction of City Facilities, the City Council may consider utilizing that savings on the purchase of public art for the facility. D. Purchasina — The City will maintain and regularly review a written Purchasing Policy. All City -purchases .. of,�go-o-ds--or-,s.ervices,,will,,be-.made,in,,accordance wili City's current Purchasing Policy and With State law. Dollar Limits: Procureme■ nts: Requirements: Under Under the small purchase No competitive bidlN s and City credit $3,000 limit cards may be used. $3,000 Within informal bid limit A minimum of three informal up to competitive bids required unless $50,000 exempted' HUB requirements apply in accordance with state law. $50,000 In excess of the informal bid Formal solicitations, which includes and above 1 limit public notices, required unless exempted. Advisory board review and recommendation may be required. Council approval required. In addition to the above, all purchases must be approved according to preapprov-- e w - original contracts. F, Prompt PayMment — All invoices approved for payment by the proper City authorities shall be paid within thirty (30) calendar days of receipt of goods or services or invoice date, whichever is later in accordance with State law, The City will take advantage of all purchase discounts, when possible. G. Risk Mananement — The City Will pursue every opportunity to provide for the Public's and City employees' safety and to manage its risks. The goal shall be to minimize the risk of loss of resources through liability claims with an emphasis on safety programs. H. Betirement Benefits — Proposals to revise benefits administered and provided by the Texas Municipal Retirement System shall include a written description, and, detailed and summary numerical assessments of the changes that would result from the proposed benefit revision. IN a. The estimated change to the TMRS contribution rate that would result from the proposed change in benefits, expressed as a percentage of employee pay and as an annual dollar amount to the General Fund and to each City fund. b. The estimated change to the City's unfunded pension liability, expressed as a dollar amount. c. The estimated change to the City's actuarial funding ratio. 2. The description and numerical assessments must be provided to t e ity ouncil at least 72 hours prior to consideration and approval, and must be read aloud to the Council prior to Council consideration. 3. The estimated changes to the City's contribution rate and the unfunded pension liability presented pursuant to the section must be based on information provided by the TIVIRS actuary or by professional actuary authorized by the TMRS to provide such information. 4Proposals to revise TIVIRS benefits must be voted on individually as part of the City Council's legislative agenda. 5. The City has established 80% as the minimum funding goal for the City's unfunded pension liability. The City's funded pension liability is 81.3% as of December 31, 2013, as disclosed by TMRS. The City's ultimate goal is 100%, but will be achieved reasonably overtime. 6. The City may elect to make an annual I -time payment prior to further fund the City's unfunded pension liability. Such payment will be approved and authorized by the City Council prior to December 31 in order to be recognized in the following year's TIVIRS employer contribution rate calculation. �,4141C-a 11rulLo"IM0101UT ism 2. Consistent with state statutes governing the Texas Municipal Retirement System, the city may provide an automatic COLA for members of the TIVIRS who are retired from the City of Georgetown and receiving a monthly retirement benefit from the TMRS. in When the funding level of the city's pension plan is The COLA should be Less than 70.0% Zero 70.0% to 79.9% 0.3% of CPI 80.0% to 39.9% 0.5% of CPl 90.0% and greater 0.7% of CPI MIM4101 i1al-g-IR121011 01111411 Ionia', W11CIAE011901111111110c, UZI This policy is designed to establish general guidelines for managing revenue shortfalls resulting from local and national economic downturns that adversely affect the City's revenue streams. A. Immediate Action - Once a budgetary shortfall is projected, the City Manager will take the necessary actions to offset any revenue shortfall With a reduction in current expenses. The City Manager may - 0 Delay all "non-essential" spending or equipment replacement purchases. The City Manager shall report in a timely manner to the City Council the projected shortfall and the actions taken to resolve B. Further Action -. If the actions identified in subsection A are insufficient to offset the projected revenue deficit for the current fiscal year, the City Council may approve the following actions, in the order listed: 1. Apply unspent, unobliii gated surplus funds from prior fiscal years to fund one-time costs in the current fiscal year budget. 2. Notwithstanding Section XV.A.2.b. of this policy, authorize a reduction in the unobligated fund balance in the General Fund, pursuant to Section XV.A.2.is. of this policy, from 90 to •: 3. Direct other reductions in services, including workforce reductions. lul A. EE2pAration — The City annually updates and adopts a five-year Capital Improvement Program (CIP) schedule as part of the operating budget adoption process. The plan is reviewed and adjusted annually as needed, and year one is adopted as the current year capital budget. The capital budget will include all capital projects, capital resources, and estimated operational impacts. Needed capital improvements are identified through system models, repair and maintenance records and growth demands. Economic development projects that have capital infrastructure needs must b-. reviewed and approved for fun ' ding by the City no later than March 1 to b;-� included in the annual CIP process, Any economic development projecl approved for funding after March 1 will be included in the following year CIP process unless otherwise authorized by City Council. A team approach will be used to prioritize CIP projects, whereby City staff from all operational areas provide input and ideas relating to each project and its effect on operations. iWiffull 1110110 Igo INEID161,161 HM lionilizi2lirl yt-mno I ILS Well 21,74 stsig In Capital infrastructure necessary to meet the requirements of the City'T Annexation Plan will be identified separately within the CIP plan, so that fundl alternatives can be developed if needed. I Prior to Council adoption, the following Advisory Boards will review the Capital Projects budget: Georgetown Georgetown General Government Utility Systems Transportation and Finance Parks Advisory Board Advisory Board Advisory Board Advisory (GUS) (GTAB) (GGA F) Board Electric Streets Facilities Parks and Water Stormwater Drainage Other General Recreation Wastewater Airport Government Capital IR B. Control — All capital project expenditures must be appropriated in the capital budget. Availability of resources must be identified and then reviewed by the Finance sion before any CIP contract is presented to the City Council for approval. Georgetown Utility Georgetown General Government ---.----and- Flnance__.__.__I Advisory Board Advisory Board Advisory Board (GUS) (GTAB) (GGAF) All utility contracts and All Transportation, Ail General Government other utility expenses -a-Drainage and non -routine contracts an greater than $50,000 Airport expendtures and expenditures greater tha contracts greater than $50,000 $50�000 Where applicable, assessments, impact fees, pro rata Finan2igg Programs charges, or other fees should be used to fund capital projects which have a primary benefit to specific identifiable property owners. Recognizing that long-term debt is usually a more expensive financing method, alternative -financing sources will be explored before debt is issued. When debt is issued, it will be used to acquire major assets with expected lives equal or exceeding the average life of the debt issue. Short-term financing including Capital Leasing and other tax -supported obligatiora o can be used to fund vehicles, computers and other operating equipment provided t impact to the tax rate is minimal., I Caution should be used in replacing assets with short-term, tax -supported obligations due to the repetitive nature of the replacements. The total amount of I & S (interest and sinking) portion of the tax rate dedicated to fund short-term debt for equipment replacement will not exceed $0.04. KXI 0 KCITI-11IVIR All fi KIPWI T - The City recognizes that deferred maintenance increases future capital costs. Therefore, a portion of all individual funds with infrastructure should be budgeted each year to maintain the quality within each system. A. infrastructure Maintenance - On-going maintenance and major repair costs are included as capital expense within the departmental operating budgets. These costs are generally considered system repairs and are not capitalized for accounting purposes. They include such items as park and recreation facility repairs, street seal coat, water line repairs and other general system maintenance. W., Bi Modified Approach - Pavement Condition Inde&JECI I - Governmental Accounting Standards Board Statement # 34 provides for an alternative approach to depreciation for measuring the value of infrastructure assets and the related costs incurred to maintain their service life at a locally established minimum standard. The City has elected to implement this modified approach in maintaining their non -enterprise fund infrastructure assets. In order to adopt this alternative method, the City has implemented an asset management system that determines if the minimum standards are being maintained. This measurement system will be updated at least every 3 years. The City has elected to use this alternative method for reporting its street infrastructure assets. 0 Type of Distress a Amount of Distrese * Severity of Distress * Deduct Values (function of first three) The Pavement Condition Index (PCI) is a measurement scale is based upon a condition index ranging from zero for a failed pavement to 100 for pavement with perfect condition. The condition index is used to classify pavement in the following cotoifiols The City's administrative policy is to achieve an average PCI level of 85. An 85 P is considered maintaining the streets in a "good" condition. Staff will prepare a stre maintenance budget that meets this target for Council's consideration during t budget process. The PCI level as of 2014 was 87.30. 1 C. Internal Service Funds Capital Maintenance & Replacement — The City currently utilizes internal service funds to maintain and replace existing assets. Assessments are made to the using funds for the use of equipment currently in use and to be purchased during the year. In this way, suitable funds are available for the purchase of operational assets without the issuance of debt. Fleet Maintenance and Replacement - The City has a major investment in its fleet of cars, trucks, tractors, and other equipment. The City will anticipate replacing existing equipment, as necessary and will establish charges that are assigned to the using departments to account for the cost of that replacement. Vehicle maintenance is also allocated in this manner. 17 2. Technology — It is the policy of the City to plan and fund the maintenance anM replacement of its comY uter network and other -technology systems, The Ci currently uses a four-year replacement cycle for all desktop computers. reserve will be established within the ISF for replacement of major systems a will be funded over time through excess revenues within the Fund. Funding major systems assumes that 50% of the replacement cost will be debt funded. 3. Facilities Maintenance — The City has established an on-going maintenance program, which includes major repairs, equipment, as well as contracts' for -,maintainingCity facilities. The City has anticipated a useful life of such equipment and established a means of charging those costs to the various departments in order to recognize the City's continuing costs of maintaining its facilities. Determination for facility repairs is based on useful life of the various elements of each facility. A proportional cost for each element is expensed within the budget for capital replacement. An additional unscheduled repair reserve equal to 10% value of annual internal service funding is also budgeted. The estimate reserve for 2015/16 equals $1_. D. Departmental Capital Maintenance & ReRlacement — The City also utilizes department capital maintenance and replacement schedules for specialized assets and equipment necessary to provide services. 1 . Parks and Recreation - As part of the City's on-going maintenance program, the City also recognizes the need to regularly maintain and replace grounds, equipment and facilities that are part of the City's Parks and Recreation system. Separate replacement and maintenance schedules will be maintained for these items including, but not limited to, playground equipment, buildings, sport courts, trees and grounds, and restroorn facilities. The City's goal is to provide level on- going funding to ensure safe, well-maintained facilities for its citizens. 2. Public Safety Eguipment — As part of the City's on-going maintenance program, the City also recognizes the need to regularly maintain and replace specialized equipment in Police and Fire. Separate replacement and maintenance schedules will be maintained for these items including but not limited to for Fire: SCBA's and other firefighting equipment and protective gear; and 'for Police: bullet proof vests, armaments and other tactical equipment, The City's goal is to provide level on-going funding to ensure proper protection for employees and citizens. 1. From time to time it is necessary to dispose of certain vehicles or equipment than have been procured with City funds and used in City services. Individual surpl property items with expected sales value in excess of $10,000 must be approv by the City Council prior to disposition. I 2. City staff will maintain reports and records of all surplus property dispositions I accordance with good internal controls. A report of all disposed items in exce of $1,000 will be included with the quarterly financial reports provided to City Council. I 18 I LW ii:mmmwAT#T(O-TOGIIJN-TtimroWA-litillilI 11111111MM, K2"All 111 �§�i A. 82g9unfing – The City is solely responsible for the recording and reporting of its financial affairs, both internally and externally. The Chief Financial Officer (CFO) is responsible for establishing the structure for the City's Chart of Accounts and for assuring that procedures are in place to properly record financial transactions and report the City's financial position. that may meet monthly to provide additional oversight to the City's Finan -"- operations. This subcommittee will also review general government items that a c not reviewed by another City advisory board before being presented to City Coun The City's CFO will be the liaison for this subcommittee. C. Audit of Accounts – In accordance with the Charter, an independent audit of the City accounts will be performed every year. The auditor is retained by and is accountable directly to the City Council. The auditing firm will serve for up to 5 years, at which time, the City will re -bid these services and changing firms if deemed necessary by GGAF and City Council. D. External Reporting – Upon completion and acceptance of the annual audit by the City's auditors, the City shall prepare a, written Comprehensive Annual Financial Report (CAFR) which shall be presented to the City Council within 180 calendar days of the City's fiscal year end. The CAFR shall be prepared in accordance with Generally Accepted Accounting Principles (GAAP) and shall be presented annually to the Government Finance Officer Association (GFOA) for evaluation and consideration for the Certificate of Achievement in Financial Reporting. A. Cash Manaciernent and Investments – The City Council has formally approved a separate Investment Policy for the City of Georgetown that meets the requirements of the Public Funds Investment Act (PFIA), Section 2256 of the Texas Local Government Code. This policy is reviewed annually by the City Council and applies to all financial assets held by the City and applies to all entities (component units) included in the City's Comprehensive Annual Financial Report (CAFR) and/or managed by the City 1 . Statement of Cash Management Philosophy - The City shall maintain a comprehensive cash management program to include the effective collection of all accounts receivable, the prompt deposit of receipts to the City's depository, the payment of obligations, and the prudent investment of idle funds in accordance with this policy. 2. Obiectives – The City's investment program will be conducted as to accompli -O the following listed in priority order: I 1 1111yr—=0 ig MT -TIM -411 M11, 3. Safekeeping and Custody — Investments may only be purchased throu brokers/dealers who meet the criteria detailed in the investment policy, whi also addresses internal controls related to investments. I 4. Standard of Care and Reporting — Investment will be made with judgment an.,#,' care, always considering the safety of principal to be invested and the probable income to be derived. The Chief Financial Officer is responsible for the overall management of the City's investment program and ensures all investments are made in compliance with the investment policy. An investment report, providing both summary and detailed information, will be presented to the City Council quarterly. * Certificates of Deposit * U.S. Treasury and Agency securities * Investment Pools that meet the requirements of the PFIA * No-load Money Market Mutual Funds * Fully collateralized Repurchase Agreements ® Obligations of Municipal Issuers in Texas rated not less than A or its equivalent. * Other investments as approved by City Council and not prohibited by law B. fixed Assets — These assets will be reasonably safeguarded and properly accounted for, and prudently insured. 1. Capitalization Criteria - For purposes of budgeting and accounting classification, the following criteria must be capitalized: * The asset owned by the City. * The expected useful life of the asset must be longer than one year, or extent the life of an identifiable existing asset by more than one year. * The original cost.of the asset must be at least $5,000. * The asset must be tangible. * On-going repairs and general maintenance are not capitalized. 2. flew Purchases — All costs associated with bringing the asset into working order will be capitalized as part of the asset cost. This will include startup costs, engineering or consultant type fees as part of the asset cost once the decision or commitment to purchase the asset is made. The cost of land acquired should include all related costs associated with its purchase. go 3. Improvements and Replacement — Improvements will be capitalized when they extend the original life of an asset or when they make the asset more valuable than it was originally. The replacement of assets components will normally be expensed unless they are a significant nature and meet all the capitalization criteri,-#,. 4. Contributed Capital - Infrastructure assets received from developers or as a is result of annexation will be recorded as equity contributions when they are received. 5. Distributions Systems - All costs associated with public domain assets, such as streets and utility distribution lines will be capitalized in accordance with the capitalization policy. Costs should include engineering, construction and other related costs including right of way acquisition. e qm, & Reporting and Inventory 7 The Finance Division will maintain the perman l records of the City's fixed assets, including description, cost, department responsibility, date of acquisition, depreciation and expected useful lif Periodically, random sampling at the department level will be performed inventory fixed assets assigned to that department. Responsibility f safeguarding the City's fixed assets lies with the department supervisor manager whose department has been assigned the asset. The City of Georgetown recognizes the primary purpose of capital facilities is to provide services to the community. Using debt financing to meet the capital needs of the community must be evaluated according to efficiency and equity, Efficiency must be evaluated to determine the highest rate of return for a given investment Of resources. Equity is resolved by determining who should pay for the cost of capital improvements. In meetinq demand for additional services, the City will strive to balance the needs between debt financing and "pay as you go" methods. The City realizes that failure to meet the demands of growth may inhibit its continued economic viability, but also realizes that too much debt may have detrimental effects on the City's long-range financialcondition. The City will issue debt only for the purpose of acquiring or constructing capital assets for the general benefit of its citizens and to allow it to fulfill its various purposes as a city. A Debt Condition Update report will be provided annually. A. Usage of Debt -- Long-term debt financing will be considered for non -continuous capital improvements of which future citizens will be benefited. Alternatives for financing will be explored prior to debt issuance and include, but not limited to: * Grants * Use of Reserve Funds * Use of Current Revenues * Contributions from developers and others * Leases * Impact Fees RE When the City utilizes long-term financing, it will ensure that the debt is soundly financed by conservatively projecting revenue sources that will be used to pay the debt. It will not finance the improvement over a period greater than the useful life of the improvement and it will determine that the cost benefit of the improvement, including interest costs, is positive to the community. The City may utilize the benefits of short-term debt financing to purchasing operating equipment provided the debt doesn't extend is the useful life of the asset and the potential impact to the tax rate is within policy guidelines. The I & S (interest and sinking) portion of the tax "rate cannot exceed -,$,O.0,4, for short-term debt (3-1101 years). General Obligation Bonds (GO's) — General authorized by a vote of the citizens of Georgetown capital assets of the general government and , operating needs of the City. The City's ad va� general obligation bonds. Conditions for issuan,-4 include - obligation bonds must bc They are used only to fund re not to be used to fund !.,rem taxing authority backs -- of general obligation debt When the project falls outside the normal bounds of projects the City has typically done. I" Ito :Tual ti at it JU it [buieuvil ()I tile k -,11J ka0•arlull, triv, �,ILJ Irlay a"Iuwitaacca the Voters to manage future property tax rate impacts. The Contract wifth the Voters will be included in educational information for all applicable GO Bond elections, and will include a maximum annual tax rate increase and a cumulative total per bond authorization maximum tax rate increase. The City will include these impacts in its annual Debt Condition report. The City Council will carefully manage t GO Bond authorization through annual review of related projects to ensure full disclosure on future timing of projects included in the bond package. Timing of authorized projects and related bond issuance will be included in the Annual Budget and published on the City's website. Any changes to this schedule require specific Council authorization. 2. Revenue Bonds — Revenue bonds will be issued to provide for the capital needs of any activities where the capital requirements are necessary or the continuation or expansion of a service. The improved activity shall produce a revenue stream to fund the debt service requirements of the necessary improvement to provide service expansion. The average life of the obligation should not exceed the useful life of the asset(s) to be funded by the bond issue, and will generally be limited to no more than twenty (20) years, An exception can be made for plant expansions or related system expansions whose useful life is in excess of 30 years. A cost benefit analysis will be done to fully disclose the impacts of extending debt beyond 20 years. MI 3. Certificates of Obligation, Contract Obliciations (CO's) — Certificates of obligation or contract obligations may be used to fund capital requirements that are not otherwise funded by general obligation or revenue bonds. Debt service for CO's may be either from general revenues (tax -supported) or supported by a specific revenue stream(s) or a combination of both. Typically, the City may issue CO's when the following conditions are met - When the proposed debt will have minimal impact on future effective property tax rates; requirements, such as for roads, parks, various infrastructure and City facilities and equipment; and When the average life of the obligation does not exceed the useful life of tha asset(s) to be funded by the issue. _05 9 a 9 a M41- 4. Self-supporting General Obligation Debt — Refers to certificates of obligatiAm- issued for a specific purpose and repaid through dedicated revenues other th ad valorem taxes. The annual debt requirements are not included in the prope tax calculation. Both the Airport and Stormwater Drainage funds will issue th type of debt, In addition, the Electric and Water Services Funds can utilize th method of funding non -system capital assets. The City also issues debt on beh of the Georgetown Transportation Enhancement Corporation (GTEC) whom th pledges 4B sales tax revenue for the repayment of that debt. I 5. Internal borrowing between City funds — The City can authorize use of existin,,t long-term reserves as "loans" between funds. The borrowing fund will repay th,; loan at a rate consistent with current market conditions, The loan will be repaif w ithin ten (10) years. The loan will be considered an investment of working I capitol reserves by the lending fund. 6. Other Short-term borrowing - The City may authorize the issuance of Publ Property Finance Contractual Obligations (PPFCO) which is short -ter obligations for the acquisition of personal public property, such as equipme PPFCOs are payable from either ad valorem taxes or another dedicated reven stream, Each issuance will be assessed to ensure cost effectiveness and t repayment schedule will not exceed the useful life of the asset. Multip equipment acquisitions can be grouped in a single PPFCO issue in order develop economies of scale. I CMethod of Sale — The City will use a competitive bidding process in the sale of bonds unless conditions in the bond market or the nature of the issue warrant a negotiated bid. In such situations, the City will publicly present the reasons for the negotiated sale. The City will rely on the recommendation of the financial advisor in the selection of the underwriter or direct purchaser. The financial advisor must meet all licensing requirements and comply with all MSRB regulations. The City's financial advisor will not act as the underwriter on any City bond issue. M] revenue bonds must be issued within 18 months after an eligible bond funded project is begun. The total outstanding bond reimbursements may not exceed the total amount of th City's reserve funds. When at all possible, the I City will research alternative funding opportunities Prior to issuing debt or increasing user -related fees. A. Grants - All potential grants will be examined for any matching requirements and the source of those requirements identified. A grant funding worksheet, reviewed by Finance, that clearly identifies funding sources, outcomes and other relevant information will be presented and approved by the City Council prior to any grant application being submitted. It must be clearly understood that any resulting operation requirements of the grant could be discontinued once the term and conditions of the project have been terminated. The City Council must authorize acceptance of any grant funding. B. .41 se of Reserve Funds - The City may authorize the use of reserve funds to potentially delay or eliminate a proposed bond issue. This may occur due to higher than anticipated fund balances in prior years, thus eliminating or reducing the need for debt proceeds, or postpone a bond issue until market conditions are more beneficial or timing of the related capital improvements does not correspond with the planned bond issue. Reserve funds used in this manner are replenished upon issuance of the proposed debt. D. Leases - The City may authorize the use of lease financing for certain operating equipment when it is determined that the cost benefit of such an arrangement is advantageous to the City. E. Impact Fees - The City will impose impact fees as allowable under state law for both water and wastewater services. These fees will be calculated in accordance with statute and reviewed at least every three years. All fees collected will fund projects identified within the Fee study and as required by state laws. 25 A. QperatlonM Coy2Lage — The City's goal is to maintain operations coverage of 1.0 (one), such that operating revenues will at least equal or exceed current operating expenditures. Deferrals, short-term loans, or one-time sources will be avoided as budget balancing techniques. Reserves will be used only for emergencies or non- recurring expenditures, except when balances can be reduced because their levels exceed guideline minimums as stated below. 1. Der _'co Reserves — The City will maintain reserves at a minimum of seventy- five (75) days (20.83%) of net budgeted operating expenditures. Net budgeted operating,, expenditure- is defined as total budgeted expenditures less interfund transfers and charges, general debt service (tax supported), direct cost for purchased power and payments from third party grant monies. Total reserves for 2015/16 are $ million. The amount of these funds are allocated within the following operating funds and using the following guidelines to maintain the fund balance, working capital and retained earnings (reserves) of the various V operating funds at levels sufficient to protect the City s creditworthiness, as well ki as, its financial position from unforeseeable emergencies. 2. General Fund — The fund balance reserve in the General Fund should equal ninety (90) days or 25% of annual budgeted General Fund operating expenditures, 2015/16 reserves are million and are allocated as follows: a. Base Level Reserve — will equal sixty (60) days of current year budgeted operating expenditures which will be designated for emergency use only. b. Budget Stabilization Reserve — will equal thirty (30) days of current year budgeted operating expenditures and will be designated to protect the City against short term operating deficits. The funds will be available for the following purposes: i. Defer short term tax increases Cover revenue shortfalls iii. Fund unanticipated expenditures If the Budget Stabilization Reserve is depleted during the fiscal year, the balance must return to the 30 day requirement within the following year's adopted budget, 3. Tourism Fund — A minimum sixty days (60) or 16.67% of operating expenditur will be reserved within the fund balance. These funds are designated to be us to offset any potential revenue shortfall that occurs during the fiscal year a should be replenished in the following fiscal year's budget. I ir. Water Services Fund — Working capital reserves in should be 25% or ninety (91'17 days of operating expenses, net debt service and long-term water contract cost These reserves are designated to be used to offset potential revenue shortfalls fund unexpected or emergency expenses that occur during the fiscal yea These reserves should be replenished in the following budget cycle. 11 5. Stormwater Drainage Fund — $250,000 for unforeseen emergencies or other potential revenue shortfalls. ;T.ql S. Electric Fund — The remaining balance to meet the citywide requirement seventy-five (75) days of reserve funds will be maintained within this fund1 . It ca be used for unforeseen emergencies and expenditures, The Rate Stabilizatio Account and the Power Contract Credit Reserve are not included in th )1 Contingency Reserve. W-IMiowllw"lilllllilol i Reserve requirements will be calculated as part of the annual budget process a any additional required funds to be added to the reserve balances will appropriated within the budget. I r.7,. Liabilities and Receivables - Procedures will be followed to maximize discounts and reduce penalties offered by creditors. Current liabilities will be paid within 30 days of receiving the invoice. Accounts Receivable procedures will target collection for a maximum of 30 days of service. The Chief Financial Officer is'authorized to write-off non -collectible, non-utility accounts that are delinquent for more than 180 days, and utility accounts delinquent more than 180 days, provided proper delinquency procedures have been followed, and include this information in the annual report to the City Council. C. Capital Project Funds — Every effort will be made for all monies within the Capital Project Funds to be expended in a timely manner preferably within thirty-six (36) months of receipt. The fund balance will be invested and income generated will offset increases in construction costs or other costs associated with the project. Capital project funds are intended to be expended totally, with any unexpected excess to be transferred to the Debt Service fund to service project -related debt service. D. Generall Debt Service Funds — Revenues within this fund are stable, based on property tax revenues. Balances are maintained to meet contingencies and to make certain that the next year's debt service payments may be met in a timely manner. Fund balance should not fall below 45 days annual debt service requirements, in accordance with IRS guidelines. E. Investment of Reserve Funds — The reserve funds will be invested in accordance with the City's investment policy. Existing non-cash investment would be exempt through retirement of the investment. MA F. Ratios/Trend Analysis - Ratios and significant balances will be incorporated int# both the mid -year and annual reports to the City Council. This information will provide users with meaningful data to identify major trends of the City's financial condition through analytical procedures. The following ratios/balances will be used as key financial indicators: 0 Fund Balance/Equity: FB/E ® Working Capital: CA -CL * Current Ratio: CA/CL * Quick Ratio: Liquid CA/CL * Debt/Assessed AV Taxes D/AV * Debt Ratio: CL +LTLITA ® Enterprise Oper Coverage: OR/OE ® Times Coverage Ratio: (OR-OE)/DSV 1411we 4601IF-11111 WHIN rg"o Assets - liabilities AL (Acce,#,table level)d& ^ Current assets divided by current liabiliti AL > 1.00 1 "Liquid" current assets divided by current liabilities AL > 1.00 divided by total assets AL < 1 Operating rev divided by operating expensa AL Operating revenue less operating expense dded by annual debt service B. Internal Audit P 2gLam - An internal audit program will be maintained by the Chief Financial Officer to ensure compliance with City policies and procedures and to prevent the potential for fraud. KI 1. Departmental Audits — departmental processes will be reviewed to ensure dual control of City assets and identify the opportunity for fraud potential, as well as, to ensure that departmental internal procedures are documented and updated as needed. 2. Employees or Transaction Review - Programs to be audited include Petty Cash, City Credit Card accounts, time entry, and travel. All discrepancies will be identified, and the employee's Division Director will be notified. The City Manager will also be notified depending on the seriousness of the infraction. 3. Results of all internal audits will be provided to City Council on a quarterly basis. C. Division Directors Responsibility — Each division Director is responsible for ensuring that good internal controls are followed throughout their department, that all Finance Division directives are implemented and that all independent auditor internal control recommendations are addressed. Departments will develop and periodically update written internal control procedures. -1 �1115 1V Realizing the im"portance and contribution of employee's in achieving and maintaining the City of Excellence, the City's goal as an employer is to attract and retain quality employees who provide excellent, friendly services to our community in an effective and efficient manner. A. Adeguate q!qffinq — Staffing levels will be adequate for the fiscal functions of the, City to operate effectively, Workload allocation alternatives will be explored before adding additional staff. B. Competitive Compensation — In order to maintain a competitive pay scale, the City is implementing a Competitive Employee Compensation Maintenance Policy to address competitive market factors and other issues impacting compensation. The program consists of 1 Cost of Living Adjustment - (COLA) — To protect City employees from the effects of general inflation, every odd numbered year, the City may fund a COLA adjustment for all regular employees not included in a defined pay plan. The COLA will be based on a three-year rolling average of the Consumer Price Index (CPI) reported by the U.S. Bureau of Labor Statistics for Southern cities pertinent to Georgetown's population. 2. Pay Scale Review — To ensure the City's pay system is accurate and competitive within the market, every even numbered vear, the City will review its pay plan for any potential market adjustments necessary to maintain the City's pay scale. 3. Pay for Performance — Each year the City will fund pay adjustments to aid retaining quality employees while recognizing increased job experience a rewarding quality performance. W Adjustments are based on the previous year's annual performance evaluation. The percentage adjustments are determined by the employee's position within their pay grade, including merit adjustments for productivity and quality performance during the previous fiscal year. In addition, the City may also choose to fund a one-time on performance that ,-xceeds expectations during the review period. C. Self-insurance !r2qLram - The City i's committed to providing quality, healthcare insurance that offers the most flexibility in health benefits and options to its employees. In order to provide the most cost effective solution, the City has determined that establishing a self-funded health insurance plan offers the greatest opportunity to mitigate future cost increases while offering quality health care services to its employees. The City has established a mechanism to manage the accounts and payments associated with this program. Per GASB Statement No. 66, such funding should be accounted for as an Internal Service Fund (18F). Emplovee Health Insurance ISF - includes premium contributions from employees and budgeted health insurance contributions included in the City's annual budget process. 2. Self -Insurance Reserve - will be included and maintained within the E Mp'oy Oloy Self -Insurance Internal Service Fund to provide staboo ilizatin fr eml fee heal insurance premiums. The amount of the reserve will be determined by t actuarially determined "maximum" amount risk related to the potential claims the plan in one year. Initially, the reserve is targeted to be $1,000,000 by fisQ, year 2017/18. MINIMUM 161161111 30