RES NO. 2020-11 ESTABLISHING EQUIPMENT RENTAL AND REVOLVING FUND POLICYPage 1 of 2
RESOLUTION NO. 2020-11
A RESOLUTION of the City Council of Bainbridge Island,
Washington, Establishing the City’s Equipment Rental and
Revolving Fund Policy.
WHEREAS, the City of Bainbridge Island (“City”) is a code city and the City Council
(“Council”) is responsible for establishing financial policies for the City; and
WHEREAS, state law, including Chapter 35A.33 RCW, provides guidance for budgets
in code cities; and
WHEREAS, state law provisions, including RCW 35.21.088 and RCW 35A.37.010,
provide authority to code cities related to equipment rental funds; and
WHEREAS, Ordinance No. 2004-20 established the equipment rental fund; and
WHEREAS, Ordinance No. 2017-09 amended Chapter 3.24 of the Bainbridge Island
Municipal Code converting the equipment rental fund to an equipment rental and revolving
(“ER&R”) fund; and
WHEREAS, an ER&R fund is a fund through which the City tracks use of its
equipment, and sets aside funds for replacement in a planned manner; and
WHEREAS, an ER&R fund provides for predictable budgeting for capital equipment
replacement, and supports good fleet management and stable budget expenditures; and
WHEREAS, the ER&R fund as included in the 2019-2020 Adopted Budget is an internal
service fund; and
WHEREAS, the establishment of an Equipment Rental and Revolving Fund Policy is an
established current financial best practice.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BAINBRIDGE
ISLAND DOES RESOLVE AS FOLLOWS:
Section 1. The Equipment Rental and Revolving Fund Policy as shown in Exhibit A,
which is attached hereto and incorporated herein by this reference, is hereby adopted.
PASSED by the City Council this 14th day of July, 2020.
APPROVED by the Mayor this this 14th day of July, 2020.
Page 2 of 2
ATTEST/AUTHENTICATE:
FILED WITH THE CITY CLERK: June 26, 2020
PASSED BY THE CITY COUNCIL: July 14, 2020
RESOLUTION NO. 2020-11
Attachment: Exhibit A, “Equipment Rental and Revolving Fund Policy”
Exhibit A to Resolution No. 2020-11
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Equipment Rental and Revolving Fund Policy
Department of Finance and Administrative Services
Prepared by Finance Director DeWayne Pitts and Accounting Manager Karl Shaw
Initial Development: 6/23/2020
Policy
Policy Statement
The Equipment Rental and Revolving (ER&R) Fund is a self-sustaining internal service fund
established to pay the timely replacement cost of existing equipment and vehicles that meet the
capitalization thresholds set forth in the Capital Asset Policy. It is the policy of the City of
Bainbridge Island ER&R fund to charge rental rates sufficient to replace ER&R fund equipment with
an additional reserve amount for unforeseen losses or catastrophic events.
Purpose
This policy will help determine ER&R rental rates and a target ER&R fund balance.
Scope
This policy applies to the City’s ER&R fund only.
Goal
The City of Bainbridge Island has four core values: stewardship, professionalism, connection, and
balance. In order to fulfill the core value of stewardship and meet state-prescribed minimum
requirements, it is necessary for the City to maintain equitable ER&R rental rates and sufficient
fund balance to pay for equipment replacement to meet the operating needs of all City
Departments with an additional replacement reserve available for unforeseen losses or
catastrophic events. The rental charges and target fund balance should reflect amounts that are
anticipated to assure continued funding of necessary asset replacements but not be allowed to
accumulate excessive balances in the fund. In addition, the fund balance should not be allowed to
decrease to a level insufficient to meet ongoing capital needs. When the fund balance is not in line
with the targeted fund balance, rates will be adjusted to bring the fund balance in line with the
targeted fund balance.
Exhibit A to Resolution No. 2020-11
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Table of Contents
Policy .............................................................................................................................. Error! Bookmark not defined.
Policy Statement.................................................................................................................................................................... 1
Purpose ................................................................................................................................................................................... 1
Scope ....................................................................................................................................................................................... 1
Goal .......................................................................................................................................................................................... 1
Authoritative Guidance ....................................................................................................................................................... 3
Responsibilities ...................................................................................................................................................................... 3
General .................................................................................................................................................................................... 3
Procedures .................................................................................................................................................................................. 3
Target fund balance and rental rates................................................................................................................................ 3
Estimating the ER&R target fund balance ................................................................................................................... 3
Calculation of the target fund balance ........................................................................................................................ 4
Rental rates, adjustments, and precision of the ER&R fund balance target ....................................................... 4
Equipment lives ................................................................................................................................................................. 4
Equipment replacement…………………………………………………………………………………………………………………………4
Rental rates ........................................................................................................................................................................ 4
Exhibit A to Resolution No. 2020-11
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Authoritative Guidance
Governmental Accounting Standards Board (GASB)
GASB is the independent organization that establishes and improves standards of accounting and
financial reporting for U.S. state and local governments.1 While GASB is not a governmental agency
and does not have enforcement authority, compliance with GASB is enforced through the
Washington State Auditor’s annual audit of the City.
Washington State Auditor’s Office
The Washington State Auditor’s Office prescribes budgeting, accounting, and reporting2 for local
governments in the State of Washington under the authority of RCW 43.09.200.3 See also,
Washington State Auditor’s Office Budgeting, Accounting Reporting System (BARS) for Generally
Accepted Accounting Cities with a population over 8,000.
Legal
Bainbridge Island Municipal Code Section 3.24 and RCW 35.21.088 and RCW 35A.37.010.
Responsibilities
It is the responsibility of the Department of Finance and Administrative Services (Finance) to
periodically monitor, and adjust if necessary, the fund balances of all City funds. Therefore, the
monitoring of the ER&R fund balance and related rental rates belongs with Finance. The Director
of Finance may delegate this responsibility to one or more specific individuals within the
department.
General
The ER&R fund balance target should be large enough to replace equipment as necessary to meet
operational needs and/or in case of unexpected failure to an expensive piece, or multiple pieces, of
equipment. However, the City recognizes that too large a fund balance becomes an inefficient use
of taxpayer money. Rental rates should be structured, and adjusted as necessary, to maintain the
target fund balance.
Procedures
Target fund balance and rental rates
Estimating the ER&R target fund balance
The possibility of failure of multiple pieces of equipment at or near the same time should be
considered when estimating the target fund balance. One easily available measure of equipment
replacement cost is the City’s six-year Capital Improvement Plan (CIP), which is updated every two
1 “Facts about GASB,” published by the Governmental Accounting Standards Board and available online at
www.gasb.org/facts/facts_about_gasb_2009-2010.
2 “Budgeting, Accounting, and Reporting System (BARS)” Manual, published by the Washington State Auditor’s Office
and available online at www.sao.wa.gov.
3 “RCW” refers to the Revised Code of Washington.
Exhibit A to Resolution No. 2020-11
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years during the development of the biennial budget and updated during the mid-biennium as
necessary. The Director of Finance, or their designee, will consider the CIP when determining the
ER&R fund balance target. This target will be reassessed during the biennial budget process and
after the CIP is updated during the interim years.
Calculation of the target fund balance
To maintain an appropriate fund balance, the City will calculate the balance using the average of the
Fleet and Equipment CIP’s six-year replacement costs times two.
Rental rates, adjustments, and precision of the ER&R fund balance target
If the actual ER&R fund balance is too far above or below the target fund balance, the ER&R rental
rates will be increased or decreased, as necessary, so that the actual fund balance comes into line
with the target. This target is considered approximate and actual fund balance will be allowed to
float 25% higher or lower before rates need to be adjusted. Rates may be adjusted sooner if the
Director of Finance and the Manager of the Operations and Maintenance (O&M) Division deem it
necessary.
Equipment lives
ER&R rental rates will use realistic equipment lives as estimated by the manufacturer and/or the
O&M Division Manager, or his designee.
Equipment Replacement
The ER&R fund will only fund replacement of equipment or vehicles accounted for in the ER&R
fund’s existing asset replacement schedule. New assets not previously listed in the asset
replacement schedule, or significant upgrades to existing assets, will need Council if they meet the
city procurement policy dollar thresholds and will be paid for by the department and fund
requesting the asset. Once the asset is procured, it will be added to the ER&R fund’s existing asset
replacement cycle and sufficient rent will be charged to replace the asset once it has reached the
end of its useful life.
If equipment rental revenue received over the life of an asset is insufficient to cover the equipment
replacement, the funding decision for the incremental difference will be made on a case-by-case
basis depending on the nature and extent of the difference and the short and long term impact on
the ER&R fund balance and future asset replacement schedules.
Rental rates
ER&R rental rates will consider equipment that is replaced earlier or later than anticipated. Other
factors may include salvage value and insurance proceeds. Rental rates will include an equipment
replacement inflation factor.