RES 14-664RESOLUTION NO. 14 -664
A RESOLUTION of the City Council of the City of Federal Way,
Washington, adopting the fund balance policy to govern the
Administration of fund balance in the city individual funds.
WHEREAS, the City Council seeks at all times to maintain the highest fiscal integrity
with respect to its administration of public funds; and
WHEREAS, the City's revenues stream do not come at the same spending rate as its
expenditures;
WHEREAS, the City needs to have certain amount of fund available to carry out its
functions pending the time the revenue is available to the City;
WHEREAS, the City needs to have certain amount of funds set aside to replace its
equipment, vehicles, roof on its buildings and major building equipment when they become
unserviceable;
WHEREAS, the City desires to minimize the impact of revenue shortfall and flow of
cash on its services;
WHEREAS, the City needs to have certain amount of funds set aside to deal with natural
disaster, revenue shortfalls and unforeseen; and
WHEREAS, the City desires to have a prudent fund balance management as established
by Government Finance Officers Association of United States and Canada;
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF FEDERAL WAY,
WASHINGTON RESOLVES AS FOLLOWS:
Section 1. Fund Balance Policy. The City Council of the City of Federal Way,
Washington hereby adopts the Fund Balance Policy as attached hereto, and hereby incorporated
in full by this reference.
Section 2. Severability. If any section, sentence, clause or phrase of this resolution should
be held to be invalid or unconstitutional by a court of competent jurisdiction, such invalidity or
Resolution 14 -664 Page 1 of 2
unconstitutionality shall not affect the validity or constitutionality of any other section, sentence,
clause or phrase of this resolution.
Section 3. Corrections. The City Clerk and the codifiers of this resolution are authorized
to make necessary corrections to this resolution including, but not limited to, the correction of
scrivener /clerical errors, references, resolution numbering, section/ subsection numbers and any
references thereto.
Section 4. Ratification. Any act consistent with the authority and prior to the effective
date of this resolution is hereby ratified and affirmed.
Section 5. Effective Date. This resolution shall be effective immediately upon passage by
the Federal Way City Council.
RESOLVED BY THE CITY COUNCIL OF THE CITY OF FEDERAL WAY,
WASHINGTON this 3`d day of June, 2014.
FEDERAL WAY
JIM FERRELL
ATTEST:
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CITY CLERK, CAROL CNEIL , C C
Al VE ►D/� AS TO F
INTERIM ATTORNEY, AMY JO PEARSALL
FILED WITH THE CITY CLERK: 5/28/2014
PASSED BY THE CITY COUNCIL: 6/03/2014
RESOLUTION NO.: 14 -664
Resolution 14 -664 Page 2 of 2
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CITY OF
Federal Way
City of Federal Way
Fund Balance Reserve Policy
City of Federal Way - Fund balance is defined as the excess of assets over liabilities, which is
an unreserved, undesignated resource that remains part of the General Government Budget.
The City desires to maintain a prudent level of financial resources to guard its citizens against
service disruption in the event of unexpected temporary revenue shortfalls or unanticipated and
extraordinary one -time expenditures. The Fund Balance has been accumulated to meet this
purpose, to provide stability and flexibility to respond to unexpected adversity and /or
opportunities. The long -term target is to maintain a rolling beginning fund balance of not less
than 17% of operating revenues in the General Fund. The City's goals are to maintain annual
expenditure increases at a conservative growth rate and limit expenditures to anticipated
revenues.
In general, the City shall endeavor to support ongoing operations with ongoing revenues, but
may use reserves on a one -time basis to support City services pending the development of a
longer term financial solution. However, in no event shall reserves be used longer than one
biennium to support City operations. If reserves are used, the City will begin to replenish these
reserves at the end of the biennium if a surplus exists, but no later than the biennium following
their use.
The City will gradually build its reserve balance to the required amount over the next four years
and will require the Councils' approval to use reserve fund balance below the required level.
General Fund:
Operating Cash flow Reserve ($9 million or 17% of operating expenditures):
Government Finance Officers Association of United States and Canada (GFOA)
recommends that a municipality maintains a minimum of two months operating
expenditure in reserve to manage the fluctuation in tax receipts, grant revenues, and
general cash flow management. It provides the liquidity necessary to accommodate the
City's uneven cash flow, which is inherent in its periodic tax collection schedule.
Contingency for Unanticipated Cost ($1.0 million): This fund shall maintain a reserve
equal to $1,000,000 to provide a financial cushion to cover revenue shortfalls resulting
from unexpected economic changes or recessionary periods or to provide funds in the
event of major unplanned expenditures the City could face as a result of landslides,
earthquakes, snow or other natural disasters. In the event that any of the reserve funds
is used in an economic downturn to stabilize the city's finances, such appropriation shall
be repaid to the fund annually over the next three years.
Strategic Opportunities Reserve ($2.0 million): It provides the liquidity to respond to
economic opportunity that is not budgeted for that may provide a long term economic
benefit to the City. In the event that any of the Reserve fund is used, such appropriation
shall be repaid to the fund annually over the next three years.
Fund Balance Reserve Policy 1
Street Fund: The City will maintain an emergency reserve fund for snow and ice removal of not
less than $0.50 million. This reserve is established for use in the event a major storm occurs
and additional funds, above annual operating allocations, are needed.
Arterial Street Fund: The City will maintain an emergency reserve fund of not less than $0.10
million for unexpected natural disasters that affect our infrastructure, pending the receipt of
available grants or other resources, to restore our road infrastructure to its original condition.
The reserve will be restored to its original level within three years.
Utility Tax: The City will maintain a minimum cash flow reserve with the Utility Tax Fund in an
amount equal to $2.5 million which is less than 20% of the 2013 Utility Tax Fund Expenditures
and Transfers, and a little higher than the 2012 Ending Fund balance. The General Fund and
other Funds depend upon the receipts from Utility Tax for their annual operations.
- Proposition #1 - $1.00 million
- General Utility Tax — $1.50 million
REET Fund: The City will maintain a one year revenue reserve in the fund and may be spent
down ONLY upon the Council's approval.
Hotel/Motel Lodging Tax: The City will maintain a minimum cash flow reserve with the
Hotel /Motel lodging tax fund in an amount equal to the prior year's complete revenues ($0.20
million ) in the ending fund balance.
Community Center: The City shall maintain a minimum of $1.5 million in a reserve for the
future general capital needs of the building. This fund is set aside for equipment replacement,
major building upgrades, and roof replacement of the Community Center Building.
Traffic Safety Fund: The City shall maintain a minimum of $1.5 million in a reserve for cash
flow management and a contingent reserve in case of an economic downturn. This fund is set
aside for traffic equipment replacement, and to absolve an unplanned revenue decline.
Debt Fund: The City shall maintain adequate reserve in accordance with the bond ordinance or
a minimum of one year debt service amount.
Capital Project Reserve: The City shall maintain a reserve for the future general capital needs
of the city buildings or other capital projects. The finance director may transfer excess revenue
over expenditures in the General Fund to this fund for future use of the City.
Dumas Bay Center: The City shall maintain a minimum of $0.5 million in a reserve for the
future general capital needs of the building. This fund is set aside for equipment replacement,
major building upgrades, and roof replacement of the Center.
Health Self Insured Administration: (Risk Fund) — The City will maintain a reserve in an
amount not less than 16 weeks of budgeted expenses as recommended by our consultant.
Fund Balance Reserve Policy 2
Unemployment Insurance: The City will maintain a reserve in an amount not less than $0.25
million or annual unemployment expenses.
Liability Insurance: (Risk Fund) — The City will maintain a reserve in an amount of not less
than one year's expenditure from the prior year or $1.20 million.
Surface Water Management Fund: The City shall maintain an operating reserve within the
Surface Water Utility Fund in an amount not less than 17% of operating expenses from the prior
year. Any excess may be transferred to the Capital Project Fund -SWM for future capital
projects. The City will also maintain Emergency /Contingent reserve for unexpected catastrophic
events or system failures of not less than $0.50 million in the SWM Capital Fund based on
comprehensive Surface Water Management Plan.
Information Systems: The City will maintain adequate reserves for capital replacement and
shall be funded through departmental charges and other revenues sufficient to replace both
hardware and software at the end of their useful life.
Mail and Duplication Fund: The City will maintain an adequate reserve fund to replace copy
and mailing equipment.
Fleet and Equipment Fund: The City will maintain an Equipment Replacement Fund
adequately funded to replace a fleet of vehicles and other heavy equipment at their scheduled
replacement time.
Buildings and Furnishings Fund: The City will maintain a reserve of not less than $2.0 million
for equipment replacement, roof repair /replacement, and other major upgrades to the city
buildings other than Community Center, and Dumas Bay Center.
Fund Balance Reserve Policy 3