RES 2014-17 FINANCIAL AND BUDGET POLICIESRESOLUTION NO. 2014-17
A RESOLUTION of the City of Bainbridge Island,
Washington, establishing a consolidated set of
updated financial and budget policies,
supplementing, superseding, amending and /or re-
affirming certain policies adopted by the City
during or prior to 2014.
WHEREAS, the City Council (the "Council ") is responsible for setting financial policy for the
City of Bainbridge Island (the "City "); and
WHEREAS, the City Administration ( "Administration ") requests that, as part of the 2015 -16
biennial budget process, Council update, rescind, amend and /or re- affirm several financial and
budgetary policies that were initially adopted by the City during or prior to 2014; and
WHEREAS, the Council and Administration wish to establish an ongoing consolidated set of
Financial and Budget Policies (the "Budget Policies ") to be administered by the Administration
and to guide Council action on an ongoing basis.
THE CITY COUNCIL OF THE CITY OF BAINBRIDGE ISLAND DOES RESOLVE AS
FOLLOWS:
SECTION 1. 13UDGET POLICIES
1.1 Adoption
There is hereby established a consolidated set of Budget Policies, in accordance with this
Resolution. Such Budget Policies shall be documented in a consolidated manner for ease of
reference by City Council, Administration and the public. Once adopted, the Budget Policies
replace and supersede all budget, finance and debt policies previously adopted by the Council.
1.2 Review and Amendment
The Council shall, with the support of the Administration, review the Budget Policies as part of
the biennial budget process, and shall recommend any necessary or appropriate amendments to
the Council, for approval by simple majority. Promptly after Council approval of any
amendment of the Budget Policies, the Administration shall publish restated pages of the Budget
Policies incorporating any such amendments.
SECTION 2. APPLICABLE LAW, CITY CODE AND COMPREHENSIVE PLAN
2.1 RCW Chapter 35A.33
Chapter 35A.33 of the Revised Code of Washington ( "RCW "), pertaining to budgets for Code
Cities, is hereby incorporated by reference, as it may be amended from time to time.
2.2. Citv Budget Process
(a) City Budget Process. Pursuant to Chapter 35A.34 RCW, the Council established,
beginning January 1, 2009, a two -year biennium budget for the City. The 2009 -2010
biennial budget and all subsequent budgets shall be prepared, considered, and adopted
under the provisions of the Bainbridge Island Municipal Code (BIMC) Chapter 2.82 and
Chapter 35A.34 RCW.
(b) Budget Calendars. As part of the city budget process, the Council, with the
advice and assistance of the City Manager, shall review an annual calendar or schedule
for the process of preparing and adopting any Capital Facilities Plan update, and the two -
year budget, or mid - biennium modifications (whichever is applicable under the biennial
cycle).
2.3. Applicable Provisions of BIMC Incorporated by Reference
These Budget Policies incorporate by reference the provisions of the City's Municipal Code
(BIMC) that are applicable to the budgetary and financial policies and practices of the City.
2.4. Comprehensive Plan — Capital Facilities Goals and Policies
The Capital Facilities Goals and Policies that are stated in the City's Comprehensive Plan, as
amended from time to time are hereby included in full in the Budget Policies.
SECTION 3: MONITORING, ANALYZING AND PROJECTING
3.1 Monthly, Quarterly and Mid -Year Budget Reports
On a monthly basis, the Administration shall make available a report of the year -to -date revenues
and expenditures through month -end of the reported month, against budget, and shall report any
material trends and unexpected developments. On a quarterly basis, the reports shall be more
detailed and shall include a report on the City's larger capital projects. The mid -year report
through June 30 shall provide comprehensive details and summaries.
3.2 Financial Capacity Analysis
(a) In General. Based on the schedule stated in the annual budget calendar reviewed
by Council, the Administration shall deliver to Council a ten -year Financial Capacity
Analysis, depicting (i) detailed revenue and expenditure forecasts for the current year and
also including (ii) the three prior years, and (iii) projections for the ensuing six future
years. The purposes of the Financial Capacity Analysis shall be (i) to enable Council to
utilize this data to analyze and evaluate the long -term fiscal impacts of up to date cash
forecasts and current budget choices, decisions and policy options, and (ii) to meet the
requirements of Growth Management Act for a Financial Capacity Analysis to
accompany the Capital Facilities Plan.
(b) Conservative Forecasts. For each Financial Capacity Analysis, the
Administration shall prepare each such analysis as follows: (i) underlying economic and
financial assumptions shall be reasonable and shall take into account an appropriately
chosen set of inflation factors and an appropriate set of economic projections from
recognized governmental or professional bodies, and (ii) all projections of revenues for
future years, and all adjusted estimates for the current year, will be conservatively
forecasted. The Administration's chosen assumptions for revenues, expenditure inflation
factors and economic measures shall be disclosed to the Council. The City's revenue
estimates will be realistically forecasted and will employ revenue policies which rely on
recent revenue performance, in combination with current data.
SECTION 4. RESERVES
4.1 Emergencv Reserve
Resolution No. 2010 -35, establishing an Emergency Reserve within the City's General Fund,
and providing for the budgetary target amount for such a reserve, is hereby included in the
Budget Policies. Effective January 1, 2011, it is the Council's policy that the Emergency
Reserve shall be treated as a Restricted Reserve, which shall ideally be funded as and when
resources, such as from the sale of surplus property, become available.
4.2 Contingency Reserve
Section 2 of Resolution No. 2008 -01, establishing a Contingency Reserve within the City's
General Fund is hereby included in the Budget Policies. Resolution No. 2010 -35 set a year -end
policy target of $800,000 for this reserve.
4.3 Reserves — Generall
(a) Restricted Reserves. Each restricted reserve shall be accounted for on the City's
books, and may not be obligated or expended by the Administration in the absence of a
vote of Council. The City's General Fund restricted reserves (as of 2014) are:
• General Fund: Emergency Reserve
• General Fund: Contingency Reserve
(b) Designated Reserves. Each designated reserve shall be a budgetary allocation that
is accounted for on the City's books, and may be expended by the Administration solely
for the designated purpose for which the reserve is established. The City's General Fund
Designated Reserves (as of 2014) are:
• General Fund: Police Investigations Reserve
• General Fund: Police Marine Reserve
• General Fund: Public Arts
• General Fund: PEG Capital
• General Fund: Capital Improvement Opportunity Reserve
4.4 General Fund Minimum Fund Balance Policy
Resolution No. 2010 -35, establishing a General Fund Stability Reserve within the City's General
Fund, and providing for the budgetary target amount for such a reserve, is hereby included in the
Budget Policies. This reserve shall serve as the General Fund minimum fund balance amount.
The General Fund minimum fund balance shall mean the dollar amount of unencumbered fund
balance, excluding:
a) Amounts held in restricted reserves, and
b) Amounts held in designated reserves.
The target for end -of -year General Fund Minimum Fund Balance for each year from 2012
onward, shall be $3,000,000.
SECTION 5. REVENUES AND EXPENSES
5.1 Funds and Subfunds
For purposes of GASB reporting, the City's funds shall be those enumerated from 001 to 901, as
shown on the City's general ledger. However, for purposes of the Administration's financial
management and cash management reporting to Council, the Administration will report
revenues, expenditures, and balances, under the following fund categories:
• Tax - Supported Funds: The funds of which shall be the following:
■ General Fund
■ Street Fund
■ REET Fund
■ Affordable Housing Fund
■ Civic Improvement Fund (LTAC)
■ FAR - Public Amenities
■ FAR - Farmland /Agriculture
■ General Obligation Bond Fund
■ Capital Construction Fund
■ LID Capital Construction Fund
■ Building and Development Services Fund
• Enterprise Funds: The funds of which shall be the following:
■ Water Utility Fund
■ Sewer Utility Fund
■ SSWM Utility Fund
• Other Funds: The funds of which shall be the following:
■ Equipment Reserve and Replacement Fund
■ Transportation Benefit District
5.2 In General
Resolution Nos. 2006 -35, 2006 -41, 2009 -34 are hereby rescinded and are replaced by this
Section 5. Statements in this subsection 5.2 apply to both the tax - supported and utility funds of
the City:
(a) The City shall use major one -time revenue to fund capital improvements, debt
reductions, or reserves. The use of one -time revenues to fund operating expenditures is
discouraged.
(b) The City shall maintain a structure for all fees and charges where the beneficiary
of the service pays the cost of that service except to the extent that the Council has
determined that provision of the specific service in question provides a general public
benefit. The Council shall review, at least biennially, the Administration's recommended
policy for the allocation of City costs to various funds.
(c) The City is authorized to allocate up to three percent (3 %) of unrestricted
revenues of the tax - supported and respective utility funds for replacement of capital
equipment as deemed appropriate by the Administration.
(d) As a general rule, when an expenditure is incurred for which both restricted and
unrestricted fund balance is available, the City will consider the more restricted amounts
to have been spent first.
5.3 For Utility Funds
(a) In 2010 and thereafter the City shall maintain separate reserves for each utility
fund, as follows:
(i) Capital Contingency Reserve. This designated reserve shall have a
targeted level (by December 2011 and thereafter) of at least one percent (1 %) of
the utility system's fixed assets (at book value). The primary purpose of the
reserve is to provide a ready source of cash in case of an emergency, should a
major piece of equipment or a portion of the utility's infrastructure fail
unexpectedly. This reserve holds debt proceeds, system participation fee
revenues, system reinvestment funding from rates, and any transfers of surplus
cash reserves from the operating account.
(ii) Operating Reserve. This designated reserve shall have a targeted level as
of each year -end of at least forty -five (45) days' operating expenses in the cases
of the sewer and stormwater funds, and at least sixty (60) days in the case of the
water fund. The primary purpose of the Reserve is to provide cash for operations
in case of seasonal variations in revenue or expenses, or to support operations in a
year in which revenues are abnormally low. Because water usage for irrigation,
and therefore water revenues, are particularly sensitive to a year's weather
patterns, the reserve requirements for the water fund are set higher than for the
other two utilities.
(iii) Restricted Debt Reserve. To the extent that the City issues a form of debt
(e.g. Revenue Bonds) that requires the municipality to maintain a restricted cash
reserve during the term of the debt repayment period, the utility shall maintain a
restricted reserve for such purpose. This reserve is to safeguard the purchasers of
the utility's debt, and may be used to fund the final installment or last year's debt
service.
(b) The City will maintain water, sewer and stormwater utility rates adequate to
ensure that each of the three utility funds is fully self - supporting.
5.4 For Tax - Supported Funds
(a) Departmental revenues of the tax - supported funds shall be considered unrestricted
revenue of the City — subject to any applicable legal restriction, and subject to any
applicable provision of the Budget Policies, that may apply to a particular revenue
source.
(b) Revenues from the Commercial Parking Tax shall be treated as revenues of the
Streets Fund.
(c) REET revenues shall be first applied to current capital debt service and then, to
the extent available, to current capital projects.
(d) On a periodic basis, Building and Development Services (B &DS) revenues shall
be reviewed, with a goal of revenues contributing approximately seventy -five percent
(75 %) of expenditures on a planning basis for the B &DS Fund.
(e) Organizations that are not part of the City, but which receive funding from the
City for contractual services, shall not have their appropriation carried forward from year
to year unless expressly authorized under the terms of a contract approved by Council.
Contractual documents may include inter -local agreements, memorandums of agreement,
contracts or other forms of agreement. Except as expressly stated contractually to the
contrary, annual review and reauthorization by the Council of any such funding shall be
required.
SECTION 6. EXPENSES PERTAINING TO PERSONNEL
6.1 City Staffing Levels
(a) Monitoring. The Administration shall include a report of the number of FTEs, by
Department, in the mid -year financial report
(c) City Manager's Discretion to Approve Part -time __Service. Nothing in the
assumptions that underlie the Administration's estimates of full -time equivalent
employees for a budget year shall eliminate the City Manager's discretion to encourage
and /or agree to one or more employees performing on a part-time basis (e.g. 80% or other
percentage) rather than a full -time basis during part or all of a budget year.
6.2 Comnensation and Benefits
(a) Comparison of Compensation and Benefits. On a periodic basis, the City
Administration shall compare the cash compensation, and the value of benefits, for City
employee positions to the compensation and benefit levels to a set of comparable
employers, to provide data for potential compensation and benefit policies which may be
adopted by the Council from time to time.
(b) Training and Staff Development Expenses. The City is authorized to allocate up
to 0.5% of unrestricted revenues of the tax - supported and respective utility funds to
professional training and development for staff as deemed appropriate by the
Administration.
SECTION 7. DEBT
7.1 Debt Policy
The City's Debt Policy, as it may be amended from time to time, is hereby included in the
Budget Policies.
SECTION 8. STRATEGIC PRIORITIES
The budget shall be built on an understanding of community priorities and organizational goals,
and a commitment by the Council and Administration to an ongoing process of identifying and
implementing strategic priorities of government.
SECTION 9. INVESTMENT
The provisions of Chapter 3.12 BIMC (Investments) are incorporated by reference.
SECTION 10. BANKING AND MONEY MANAGEMENT
10.1 Safety
The City shall engage in relationships, and conduct its business, with one or more banks,
repositories of public pooled funds, and financial institutions in a manner that avoids
concentrating City balances in a way that may expose the City to material losses in the event of
an adverse development affecting any bank or financial institution in which City assets are held.
10.2 Money Management
The City Administration shall seek to form relationships with banking and financial institutions
that offer the City efficient and effective tools and technologies to manage and track transactions
and balances.
PASSED by the City Council this 14 th day of July, 2014.
APPROVED by the Mayor this 14th day of July, 2014.
Anne S. Blair, Mayor
ATTESPAUTHENTICATE:
Rosalind D. Lassoff, City Clerk
FILED WITH THE CITY CLERK: July 1, 2014
PASSED BY THE CITY COUNCIL: July 14, 2014
RESOLUTION NO.: 2014 -17