RES 18-732 - Amending Fund Balance Reserve PolicyRESOLUTION NO. 18-732
A RESOLUTION of the City Council of the City of Federal Way,
Washington, Amending the Fund Balance Reserve Policy, approved by
Resolution No. 14-664 and modified by Resolution No. 15-682.
WHEREAS, the City Council passed Resolution No. 14-664 on June 3, 2014 establishing
the City of Federal Way Fund Balance Reserve Policy; and
WHEREAS, Resolution No. 14-664 directs that the City have a certain amount of funds
available to carry out its functions pending the time the revenue is available to the City; and
WHEREAS, Resolution No. 14-664 directs that the City have a certain amount of funds set
aside to replace its equipment, vehicles, roofs on its buildings and major building equipment when
they become unserviceable; and
WHEREAS, Resolution No. 14-664 directs that the City minimize the impact of revenue
shortfall and flow of cash on its services; and
WHEREAS, Resolution No. 14-664 directs that the City have a certain amount of funds set
aside to provide funds in the event of major unplanned expenditures such as natural disasters,
revenue shortfalls, and other unforeseeable circumstances; and
WHEREAS, Resolution No. 15-682 amended the Fund Balance Reserve Policy to include the
Park Equipment and Infrastructure Reserve Fund.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF FEDERAL WAY,
RESOLVES AS FOLLOWS:
Section 1. The Fund Balance Reserve Policy, approved by Resolution No. 14-664 and
amended by Resolution No. 15-682, is hereby amended as described in Exhibit A, attached and
incorporated herein by this reference. The Traffic Safety Fund reserve will be reduced from $1.5
Resolution No. 18-732 Page 1 of 7
million to $1.2 million. The Dumas Bay Centre reserve will be increased from $0.5 million to $1.5
million. The Park Equipment and Infrastructure Reserve Fund will be increased from $0.75 million
to $1.125 million.
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
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 16th day of January, 2018.
[Signature page follows]
Resolution No. 18-732 Page 2 of 7
ATTEST:
euti
CITY OF FEDERAL WAY:
JIRIOELL, MAYOR
ANIE COURTNEY, C, CITY CLERK
APPROVED AS TO FORM:
J. RYAN CALL, CITY ATTORNEY
FILED WITH THE CITY CLERK: 01/11/2018
PASSED BY THE CITY COUNCIL: 01/16/2018
RESOLUTION NO.: 18-732
Resolution No. 18-732 Page 3 of 7
EXHIBIT A
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 the reserve fund balance below the required level.
Section 1: General Fund
Operating Cash Flow Reserve ($9 million or 17% of operating expenditures): Government Finance
Officers Association of the 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 rovide a financial cushion to cover
revenue shortfalls resulting from unexpected economic chang s or recessionary periods or to provide
funds in the event of major unplanned expenditures the Cit 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.
Fund Balance Reserve Policy (as amended on January 16, 20
Resolution No. 18-732
18) Page 1
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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.
Section 2: 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.
Section 3: Arterial Street Fund
The City will maintain an emergency reserve fund of not less than $0.1 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.
Section 4: Utility Tax
The City shall 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
Section 5: REET Fund
The City shall maintain a one year revenue reserve in the fund and may be spent down ONLY upon
the Council's approval.
Section 6: Hotel/Motel Lodging Tax
The City shall 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.
Section 7: 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.
Section 8: Traffic Safety Fund
The City shall maintain a minimum of $1.2 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.
Fund Balance Reserve Policy (as amended on January 16, 2018) Page 2
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Section 9: Debt Fund
The City shall maintain adequate reserve in accordance with the bond ordinance or a minimum of
one year debt service amount.
Section 10: 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.
Section 10: Dumas Bay Centre
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 Centre.
Section 11: Health Self-insured Administration (Risk Fund)
The City will maintain a reserve in an amount not less than 13weeks of budgeted expenses as
recommended by our consultant.
Section 11: Unemployment Insurance
The City will maintain a reserve in an amount not less than $0.25 million or annual unemployment
expenses.
Section 12: 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.
Section 13: 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.
Section 14: 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.
Section 15: Mail and Duplication Fund
The City will maintain an adequate reserve fund to replace copy and mailing equipment.
Fund Balance Reserve Policy (as amended on January 16, 2018) Page 3
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Section 16: 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.
Section 17: 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.
Section 18: Park Equipment and Infrastructure Reserve Fund
The City will maintain a reserve of not less than $1.125 million for equipment replacement, turf
replacement, and other major upgrades to the City's Park System.
Fund Balance Reserve Policy (as amended on January 16, 2018) Page 4
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