RES 20-795 - Amending the Fund Balance Reserve Policy RESOLUTION NO. 20-795
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 modified by Resolution No. 15-682, and 18-
732.
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, the City Council finds that it is in the City's best interest to establish a Park
Equipment and Infrastructure Reserve Fund for equipment replacement, turf replacement, and
other major upgrades to the City's Park System in accordance with Resolution 14-664, Fund
Balance Reserve Policy; and
WHEREAS, Resolution No. 15-682 amended the Fund Balance Reserve Policy to
include the Park Equipment and Infrastructure Reserve Fund; and
WHEREAS, Resolution No. 18-732 amended the Fund Balance Reserve Policy to
Resolution No. 20-795 Page I of 6
include reduction to Traffic Safety Fund from $1.5 million to $1.2 million, increase Dumas Bay
Centre reserve from $0.5 million to $1.5 million, and increased the Park Equipment and
Infrastructure Reserve Fund to $1.125 million from $0.75 million; and
WHEREAS, the City is no longer self-insured for all of our losses because we joined an
insurance pool and there is no need for a high reserve amount;
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 Nos. 15-682, and 18-732 are hereby amended as described in Exhibit C,
attached and incorporated herein by this reference. The Risk Management Fund reserve will be
reduced from $1.2 million to $0.60 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.
Resolution No. 20-795 Page 2 of 6
RESOLVED BY THE CITY COUNCIL OF THE CITY OF FEDERAL WAY,
WASHINGTON this 6th day of October, 2020.
CITY OF FEDERAL WAY:
011J
Jl, 7,1'i �sR 9EIA, MAYOR
ATTEST:
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COURTNEY,, ;, CITY CLERK
"�E'1 1 ANIIy. M
APPROVED AS TO FORM:
—a� 04. ................— ---.....
J. RYAN CALL, CITY ATTORNEY
.....
FILED WITH THE CITY CLERK: 09/30/2020
PASSED BY THE CITY COUNCIL: 10/06/2020
RESOLUTION NO.: 20-795
Resolution No. 20-795 Page 3 of 6
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EXHIBIT C
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.
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 $1.0 million 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.
Fund Balance Reserve Policy (as amended on October 6, 2020) Page 1
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.
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 $0.1
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.
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 will 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$1.2 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.
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.
Fund Balance Reserve Policy (as amended on October 6, 2020) Page 2
Dumas Bay 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 Center.
Health Self-insured Administration: The City will maintain a reserve in an amount not less
than 13 weeks of budgeted expenses as recommended by our consultant.
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$0.60 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.
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 October 6, 2020) Page 3