HomeMy WebLinkAbout05-11-2020 Council agenda packetSaratoga City council Agenda – Page 1 of 2
SARATOGA CITY COUNCIL
SPECIAL MEETING
MAY 11, 2020
Teleconference/Public Participation Information to Mitigate the Spread of COVID‐19
This meeting will be entirely by teleconference. All Council members and staff will only
participate via the Zoom platform using the process described below. The meeting is being
conducted in compliance with the Governor’s Executive Order N‐29‐20 suspending certain
teleconference rules required by the Ralph M. Brown Act. The purpose of this order was to provide
the safest environment for the public, elected officials, and staff while allowing for continued
operation of the government and public participation during the COVID‐19 pandemic.
Members of the public can view and participate in the Special Meeting Session of the meeting
by:
1. Using the Zoom website https://us02web.zoom.us/j/78519159789 or App Webinar ID:
785 1915 9789 and raising their hand to speak on an agenda item when directed by the
Mayor.
2. Calling 1.669.900.6833 or 1.408.638.0968 and pressing *9 to raise their hand to speak on
an agenda item when directed by the Mayor; OR
3. Viewing the meeting on Saratoga Community Access Television Channel 15 (Comcast
Channel 15, AT&T UVerse Channel 99) and calling 1.669.900.6833 or 1.408.638.0968
and pressing *9 to raise their hand to speak on an agenda item when directed by the
Mayor; OR
4. Viewing online at http://saratoga.granicus.com/MediaPlayer.php?publish_id=2 and
calling 1.669.900.6833 or 1.408.638.0968 and pressing *9 to raise their hand to speak on
an agenda item when directed by the Mayor.
The public will not be able to participate in the meeting in person.
As always, members of the public can send written comments to the Council prior to the meeting
by commenting online at www.saratoga.ca.us/comment prior to the start of the meeting. These
emails will be provided to the members of the Council and will become part of the official record
of the meeting.
During the meeting the Mayor will explain the process for members of the public to be recognized
to offer public comment.
In accordance with the Americans with Disabilities Act and the Governor’s Executive Order, if
you need assistance to participate in this meeting due to a disability, please contact the City Clerk
at debbieb@saratoga.ca.us or calling 408.868.1216 as soon as possible before the meeting. The
Saratoga City council Agenda – Page 2 of 2
City will use its best efforts to provide reasonable accommodations to provide as much
accessibility as possible while also maintaining public safety.
6:00 PM CITY COUNCIL SPECIAL MEETING
AGENDA ITEMS
FY 2020/21 Budget Study Session Review
Recommended Action:
Council to review and provide consensus direction to staff on:
1) Recession Impacts
2) Draft Proposed FY 2020/21 Operating Budget
3) Draft Proposed FY 2020/21 Fiscal Policy Changes
4) Draft Proposed FY 2020/21 Capital Project Funding Allocations
5) Finance Committee recommendations
6) Additional budget funding requests
ADJOURNMENT
CERTIFICATE OF POSTING OF THE AGENDA, DISTRIBUTION OF THE AGENDA
PACKET, COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
I, Debbie Bretschneider, City Clerk for the City of Saratoga, declare that the foregoing agenda for
the meeting of the City Council was posted and available for review on May 8, 2020 at the City of
Saratoga, 13777 Fruitvale Avenue, Saratoga, California and on the City's website at
www.saratoga.ca.us.
Signed this 8th day of May 2020 at Saratoga, California.
\s\Debbie Bretschneider
Debbie Bretschneider, City Clerk
In accordance with the Ralph M. Brown Act, copies of the staff reports and other materials
provided to the City Council by City staff in connection with this agenda, copies of materials
distributed to the City Council concurrently with the posting of the agenda, and materials
distributed to the City Council by staff after the posting of the agenda are available on the City
Website at www.saratoga.ca.us. Following removal of State and local shelter in place orders
these materials will be available for review in the office of the City Clerk at 13777 Fruitvale
Avenue, Saratoga, California.
In Compliance with the Americans with Disabilities Act, if you need assistance to participate in
this meeting, please contact the City Clerk at debbieb@saratoga.ca.us or calling 408.868.1216 as
soon as possible before the meeting. The City will use its best efforts to provide reasonable
accommodations to provide as much accessibility as possible while also maintaining public safety.
[28 CFR 35.102-35.104 ADA title II]
SARATOGA CITY COUNCIL
MEETING DATE:June 3, 2020
DEPARTMENT:Finance & Administrative Services Department
PREPARED BY:Mary Furey, Administrative Services Director
SUBJECT:Review of recession impacts, the draft Proposed FY 2020/21 General Fund Operating Budget,
Fiscal Policy revisions, a recap of the proposed Capital Improvement Project funding allocations,
Finance Committee recommendations, and additional budget requests.
RECOMMENDED ACTION:
Council to review and provide consensus direction to staff on:
1)Recession Impacts
2)Draft Proposed FY 2020/21 Operating Budget
3)Proposed Fiscal Policy Changes
4)Proposed FY 2020/21 Capital Project Funding Allocations
5)Finance Committee recommendations
6)Additional budget funding requests
BACKGROUND:
The annual Budget Study Session provides an update of the current year’s funding and expenditure estimates, a
summary overview of next fiscal year’s proposed operating budget and notable changes, and a final review of
recommended capital project funding allocations. Council direction will be incorporated into the Proposed
Operating and Capital Budgets to be presented at the June 3rd public hearing. Additionally, as fiscal policies are
included as part of the annual budget adoption, proposed policy changes are provided for discussion.
This informal review process provides Council with the opportunity to ask questions, request clarifications, and
provide direction in preparation of the final proposed budget presentation.
Recession Impacts
This year’s Budget Study Session will focus on anticipated fiscal impacts unfolding from the COVID-19 Shelter-
in-Place order, and planned budget strategies for offsetting revenue shortfalls to ensure continuity of City service
levels. After years of conservative budgeting, the City is prepared to weather this recession and maintain service
levels without having to use the Fiscal Stabilization Reserve or cutting services to balance this next fiscal year’s
budget. In short, Council’s recession mitigation practices have built sufficient resources to ensure stability and
mitigate service reductions during this recession, even if the recession were to worsen or continue on for several
more years.
Planned budget strategies for the next fiscal year,as recommended by the Council Finance Committee, include the
use of a one-time funding source, Internal Service Fund funding reductions and General Fund expenditure
reductions. Additional strategies were discussed and will provide further options during next budget year, if needed.
Staff will bring notable fiscal changes to the Finance Committee and Council as soon as possible throughout the
year, with recommendations to mitigate impacts if any are needed.
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DISCUSSION:
General Fund Summary Overview
Attachment A, the General Fund Summary schedule, provides three years of revenue and expenditure history, the
current fiscal year budget and estimate, and next year’s proposed budget. A review of Total Operating Sources will
include a general discussion of major revenues, trends and projections in the context of continued fiscal impacts,
and information on the use of fund balance reserves. A review of Total Operating Uses will highlight notable
changes for the current year and proposed budgeted expenditures, trends, and projections.
Total Fund Activity Overview
Attachment B, the Total Fund Activity Schedule provides a high-level summary of all funds: General, Internal
Services, Debt Service, Trust & Agency (new), and Capital Funds. Beginning with estimated beginning fund
balances in the first column, budgeted revenues, expenditures, and transfers in the following columns lead to the
estimated ending fund balances at the end of next fiscal year for each of the City’s funds.
This high-level summary of the City’s funds provides a broad understanding of how the funds are structured for use
in either general or specific functions, how they individually contribute to City operations, and how these funds
balance both short and long-term objectives. Collectively the funds represent and illustrate the City’s overall fiscal
health.
Fiscal Policies
On an annual basis, and as part of the Finance Committee’s function, portions of the City of Saratoga’s fiscal
policies are reviewed. Policy revisions generally include policy language refinement and clarifications, expanded
policy direction, documentation of existing best practices or verbal policy direction during the course of the year,
and any necessaryoperational or fiscal changes to reflect current practices or legal requirements. Proposed changes
are then submitted to the Council and integrated into the budget adoption process.
This year’s proposed Fiscal Policy update includes a more in-depth update to expand on several of the current topics
and to add several new policy topics within the base Fiscal Management Policy Statements, to both better articulate
established procedures, and to meet the Government Finance Officer Association’s updated standard for budget
policies. The new topic areas include policy statements on Investments, Long-Term Planning, Pension Funding,
Recession Preparations, Trust & AgencyPolicies, and User Fees. Expanded GeneralFinancial Principal Statements
include additional Financial Reporting, Development Policy, Investments and Long-Term Debt, Revenue, and Risk
Management information.
Of particular note is the expanded Capital Improvement Planning (CIP) section which refines and establishes a
conceptual framework going forward for City infrastructure planning. This ongoing process is to identify projects
as either Capital Maintenance Projects or one-time Capital Improvement Projects as a step toward the broader goal
to identify and establish long-term financial maintenance plans for citywide infrastructure. In the short-term, this
methodology will help inform Council on capital project funding decisions.
Capital Project Funding
Council assessed both proposed and current capital project proposals during the Council CIP Project Allocating
meeting on March 4th. Attachment D captures Council’s CIP project scope and funding direction for the FY
2020/21 Capital Improvement Program Budget.
Finance Committee Recommendations
Subsequent to the Council’s CIP project allocation meeting on March 4th, the Finance Committee discussed CIP
funding allocations in reference to operational functions versus capital functions. As a result of the discussion, the
committee recommends:
1. Defund the annual $50,000 Risk Management CIP, and budget expenses in the Operating Budget.
2. Reallocate $25,000 of the $50,000 to the Art Infrastructure CIP to continue the goal of integrating Art into
the Saratoga community.
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3. Allocate the remaining $25,000 to the underfunded Annual Parks, Trails, Grounds & Median Infrastructure
Replacement CIP project.
Wildfire Task Force Budget Recommendations
At the April 30th Finance Committee meeting, the Committee considered a recommendation from the Wildfire Task
Force to the City Council to create a $50,000 Wildfire Risk Mitigation Reserve Fund. The Finance Committee
requested that the Task Force refine the recommendation. Subsequently, the Task Force revised its recommendation
to the City Council to allocate $50,000 to a Capital Wildfire Risk Mitigation project for fuel reduction work, such
as fuel breaks projects, brush clearing, or roadside fuel treatments.
The Task Force has also recommended that the City Council increase the annual $25,000 Operating Budget
allocation to Santa Clara County FireSafe Council to $50,000 in Fiscal Year 2020/21 (one time) to operate a dead
tree removal incentive pilot program and to support fuel reduction efforts. Staff is available to explain the request
in more detail.
Please Note: The Proposed Operating & Capital Budget is currently being finalized for the City Council Budget
Hearing on June 3, 2020. Documents and fiscal information provided at this budget study session are in
development and subject to Council direction, revisions and updates.
ATTACHMENTS:
Attachment A – Fiscal Impacts
Attachment B – Draft Proposed FY 2020/21 General Fund Summary
Attachment C – Draft Proposed FY 2020/21 Total Fund Activity Summary
Attachment D – Fiscal Policy Revisions
Attachment E – Results of FY 2020/21 CIP Funding Prioritization
Attachment F – Proposed FY 2020/21 Capital Improvement Plan
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Revenue Budget Variance
Over Budget
Property Tax (ERAF - $675,000)900,000
Business, Franchise, IG, Other 120,000
Under Budget
Sales Tax (150,000)
Transient Tax (175,000)
Services, Fees, Licenses, Permits (610,000)
Rental Income (135,000)
Revenue Shortfall (50,000)
Expenditure Budget Variance
Salary & Benefits 650,000
Operational Savings 565,000
Expenditure Savings 1,215,000
RECAP
Budgeted Revenue Shortfall (50,000)
Budgeted Expenditure Savings 1,215,000
Budgeted Net Operations 291,000
Ending Estimated Net Operations 1,456,000
General Fund
FY 2019/20 Budget Variance
Attachment A
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FY 2016/17 FY 2017/18 2018/19 2019/20 2019/20 2020/21 % of
General Fund Revenues Actuals Actuals Actuals Adjusted Estimated Proposed Budget
Property Tax 12,003,942 12,963,531 14,166,177 14,009,000 14,902,500 14,936,000 66.5%
Sales Tax 1,185,035 1,124,647 1,207,471 1,100,000 950,000 750,000 3.3%
Transient Occupancy Tax 343,618 389,037 347,605 350,000 175,000 150,000 0.7%
Business & Other Taxes 513,431 571,326 548,815 515,000 565,000 505,000 2.2%
Franchise Fee Tax 2,356,539 2,338,794 2,482,074 2,382,000 2,451,000 2,432,000 10.8%
Intergovernmental 584,480 557,026 533,058 515,000 501,456 500,000 2.2%
Fees, Licenses & Permits 1,500,843 2,217,363 1,936,019 1,841,850 1,465,412 1,483,180 6.6%
Charge for Services 1,666,164 1,671,955 1,416,278 1,184,442 952,436 872,584 3.9%
Interest 102,787 270,929 639,154 510,000 513,167 310,000 1.4%
Rental Income 494,176 445,161 432,595 399,250 263,086 297,697 1.3%
Other Sources 361,396 420,339 406,703 244,977 260,911 238,077 1.1%
Total GF Revenues 21,112,412 22,970,107 24,115,948 23,051,519 22,999,967 22,474,538 100%
Fund Transfers In 55,384 442,198 158,391 - - -
Total Rev & Transfers 21,167,796 23,412,305 24,274,339 23,051,519 22,999,967 22,474,538
Use of (Addition to) Fund Balance Reserves
Carryforward Reserve - 7,246 5,264 47,647 47,647 -
Development Reserve - - - - - -
Environmental Reserve 50,000 50,000 50,000 50,000 50,000 50,000
CIP Reserve 1,410,648 1,872,909 1,840,866 3,505,000 3,505,000 2,360,500
Hillside Reserve 210,000 (210,000) - - - -
Fiscal Stabilization Repayment (250,000) - - - - -
LLD Fund Closeout - - - - - 844,774
Total Operating Sources 22,588,444 25,132,460 26,170,468 26,654,166 26,602,614 25,729,812
FY 2016/17 FY 2017/18 2018/19 2019/20 2019/20 2020/21 % of
General Fund Expenditures Actuals Actuals Actuals Adjusted Estimated Proposed Budget
Salary & Benefits 7,171,061 7,264,949 7,617,050 8,820,625 8,217,249 9,075,239 39.1%
UAL Payment 500,000 750,000 1,052,631 1,050,000 1,000,942 1,025,000 4.4%
Materials & Supplies 248,600 246,785 223,304 336,370 259,705 303,665 1.3%
Fees & Charges 939,859 788,811 891,961 928,982 914,327 1,045,387 4.5%
Consultant & Contract Svs 2,322,212 2,034,666 2,451,965 2,526,776 2,185,539 2,365,481 10.2%
Sheriff Services 5,176,515 5,319,341 5,680,745 6,057,371 6,057,371 6,408,958 27.6%
Meetings, Events & Training 87,606 105,621 115,690 180,210 98,984 117,500 0.5%
Community Grants & Events 222,127 233,336 242,667 308,636 258,546 303,932 1.3%
Fixed Assets - 19,785 20,459 20,000 20,000 - 0.0%
Internal Services Charges 2,535,472 2,626,497 2,591,332 2,629,224 2,629,224 2,563,404 11.0%
Total Expenditures 19,203,452 19,389,791 20,887,806 22,858,195$ 21,641,887$ 23,208,565$ 100%
Streets CIP 1,305,000 1,319,000 1,037,866 1,560,000 1,560,000 905,500
Park & Trails CIP 75,000 420,000 100,000 1,495,000 1,495,000 845,000
Facilities CIP 190,648 - 653,000 375,000 375,000 500,000
Admin & Technology CIP 50,000 133,909 50,000 75,000 75,000 110,000
CIP Reserve Transfers 1,620,648$ 1,872,909$ 1,840,866$ 3,505,000$ 3,505,000$ 2,360,500$
General Fund Transfers
Transfer to Street CIP - - - - - -
Total General Fund Transfers -$ -$ -$ -$ -$ -$
Total Transfers Out 1,620,648 1,872,909 1,840,866 3,505,000 3,505,000 2,360,500
Total Expenditure & Transfers 20,824,100 21,262,700 22,728,672 26,363,195 25,146,887 25,569,065
Net Operations 1,764,343$ 3,869,760$ 3,441,797$ 290,971 1,455,727 160,747
OPERATING USES
OPERATING SOURCES
GENERAL FUND SUMMARY
DRAFT PROPOSED
5/8/2020
Attachment B
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Revenues Expenditures Source (Use)Estimated
Fund Balance && of Fund Balance
Fund Category July 1, 2020 Transfers In Transfers Out Fund Balance June 30, 2021
Operating Funds
General Fund Reserves
Environmental Services 113,182$ -$ -$ (50,000)$ 63,182$
Hillside Stability 1,000,000$ - - - 1,000,000
Capital Projects 1,864,134$ - (2,360,500) 955,727 459,361
Facility Reserve 3,200,000$ - - 500,000 3,700,000
Carryforwards -$ - - - -
Working Capital 1,000,000$ - - - 1,000,000
Fiscal Stabilization 3,150,000$ - - - 3,150,000
LLD Reserve 844,774 - - (844,774) -
Compensated Absences 249,620$ - - - 249,620
Other Unassigned 1,955,727$ 22,474,538 (23,208,565) (560,953) 660,747
Total General Fund Reserves 13,377,437$ 22,474,538$ (25,569,065)$ -$ 10,282,910$
Special Revenue Funds
Landscape & Lighting Districts 767,379$ 512,131 (507,457) - 772,053
Total Special Revenue Reserves 767,379$ 512,131$ (507,457)$ -$ 772,053$
Internal Service Funds
Liability/Risk Management 534,895$ 511,362 (774,764) - 271,492
Workers Compensation 246,803$ 185,000 (220,910) - 210,894
Office Support Services 118,378$ 25,000 (69,250) - 74,128
IT Services 357,167$ 666,000 (750,083) - 273,084
Vehicle & Equipment Maintenance 270,119$ 275,000 (268,800) - 276,319
Facility Maintenance 625,213$ 900,000 (956,382) - 568,831
Vehicle & Equipment Replacement 534,596$ - (250,825) - 283,771
IT Equipment Replacement 527,343$ 150,000 (252,100) - 425,243
Facility FFE Replacement 180,056$ 200,000 (350,000) - 30,056
Total Internal Service Reserves 3,394,569$ 2,912,362$ (3,893,114)$ -$ 2,413,817$
Total Operating Funds 17,539,385$ 25,899,031$ (29,969,636)$ -$ 13,468,781$
Debt Service Funds
2001 Series GO Bond 820,170$ 772,250 (844,635) - 747,785
2018 Arrowhead CFD Bond 300,878 152,460 (356,650) 96,688
Total Debt Service Funds 1,121,048$ 924,710$ (1,201,285)$ -$ 844,473$
Trust & Agency Funds
West Valley Clean Water JPA 581,759 985,916 (980,916) - 586,759
Arrowhead Project Fund 408,605 - - - 408,605
Total Trust & Agency Funds 990,364$ 985,916$ (980,916)$ -$ 995,364$
Total Operating Budget 19,650,798$ 27,809,657$ (32,151,837)$ -$ 15,308,618$
Capital Improvement Funds
Street Projects 737,769 4,512,523 (5,250,292) - -
Park & Trail Projects 1,214,750 1,448,649 (2,648,004) - 15,395
Facility Projects 671,541 620,000 (1,256,542) - 35,000
Administrative & Tech Projects 205,449 240,000 (445,449) - -
Total Capital Improvement Funds 2,829,509 6,821,172 (9,600,286) - 50,395
Total Operating & Capital Budget 22,480,307$ 34,630,829$ (41,752,123) -$ 15,359,013
DRAFT PROPOSED
TOTAL FUND ACTIVITY SUMMARY
FY 2020/21
5/8/2020
Attachment C
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INTRODUCTION SECTION
CITY OF SARATOGA ● FISCAL YEAR 2020/21 OPERATING & CAPITAL BUDGET 11
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FISCAL MANAGEMENT POLICY STATEMENTS
The City of Saratoga With both a general management philosophy and Council goal to practices fiscal responsibility,
the City of Saratoga’s through conservative and cautious financial management is achieved through responsible, and
cautious, sustainable, and enforceable fiscal policies and internal controls to ensure prudent and efficient use of
resources. PThese policies and controls represent long -standing accounting, budgeting, debt, investment, and reserve
principles and practices, and are the foundation upon which the City maintains its fiscal stability prepares its Long-
Term Financial Plan.
Saratoga’s general fiscal management policy statements provide a summary overview of financial, operational, and
budgetary management, in one comprehensive centralized format to act as guidelines and to assist elected officials
and staff with understanding the City’s financial practices for fiscal operations. Detail level fiscal policies are
administrative in nature and therefore not included in the budget document. However, fiscal policies that rise to
Council review and impact budgetary decision making approval standards at a more specific level are incorporated
into the budget document for annual adoption by Council. Currently this includes the Fund Balance Reserve Policy
and the Capital Project Process Policy which follows this section. Other Council defined policies will be added as
directed/approved.
The Summary Fiscal Management Policy Statements in this document are organized into the following categories:
• General Financial Principles
• Appropriations and Budgetary Control
• Auditing and Financial Reporting
• Capital Improvement Planning
• Development Related Financial Policies
• Expenditures and Purchasing
• Fixed Assets and Infrastructure
• Internal Service Funds
• Investments
• Long-Term Debt
• Long-Term Financial Planning
• Pension Funding
• Revenues
• Risk Management
• Treasury Management
• Trust & Agency Policies
• User Fees
GENERAL FINANCIAL PRINCIPLES
• The City shall ensure prudent financial practices are incorporated into operational procedures to ensure fiscal
integrity and safeguard the City’s assets.
• The City’s fiscal policies are structured to ensure fiscal responsibility, accountability, transpar ency, and efficient
use of resources. Fiscal policies are to be reviewed, updated, and refined as necessary, with general policy level
decisions brought to City Council for review and approval as Council Policies, and administrative and operational
level functions approved by the City Manager as Administrative Policies.
• Proposed revisions to the Fiscal Management Policy Statements and Council Policies are reviewed by the Finance
Committee and then provided to the entire City Council at the annual Council Retreat. Council members are
asked to provide comments and concerns regarding or suggestions for revisions to the Mayor or City Manager
Administrative Services Director at least two weeks prior to the budget study session to clarify or include on the
agenda.
• The City’s primary long-term financial goals areseek to maintain the City’s fiscal health, preserve essential
services, reduce financial risk, and support short and long -term administrative, financial, and operational goals in
a financially judicious manner. Long-term financial and infrastructure planning and the annual adoption of a
structurally balanced budget provides the foundation to these long -term financial goals. The City shall promote
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Attachment D
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INTRODUCTION SECTION
CITY OF SARATOGA ● FISCAL YEAR 2020/21 OPERATING & CAPITAL BUDGET 12
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and implement strong internal financial controls to manage risks and monitor the reliability and integrity of
financial transactions and operational activities.
• Financial information shall be provided in a relevant, thorough, and timely manner, to effectively communicate
the City’s financial status to the Council, citizens, employees, and all other interested parties.
• Financial stability goals and judicious responsiveness shall be the foundation upon which proactive and
advantageous financial decisions are made, and which guide the City’s response to local, regional, and broader
economic changes through the years.
• The City shall undertake, adopt, and integrate new initiatives or programs in a cautious, well planned manner to
support the City’s long-term ability to maintain its essential services and infrastructure at the same level and
quality required by its citizens.
• The City Council’s financial, operational, and community goals, objectives, and policies are incorporated into
and implemented with the development and adoption of the City’s Operating and Capital Budgets.
• Efforts will be coordinated with other gover nmental agencies and joint power associations to achieve common
policy objectives, create beneficial opportunities and services for the community, share the cost of providing
governmental services, and support legislation favorable to cities at the state a nd federal level.
• The City will seek out, apply for, and effectively administer federal, state, local, foundation, business, and private
grants which address the City’s current priorities and policy objectives.
• The City shall develop and incorporate long -term financial planning tools into operational practices to promote
strategic analysis and prioritization of financial resources in decision making. Strategic operational masterplans
shall incorporate infrastructure purpose and use, current and future needs, infrastructure maintenance, repair,
and/or replacement schedules, funding, and other related issues for consideration.
• All City infrastructure should be tracked through inventorying all current assets, location, program responsibility,
asset costs and lifespan, Replacement timelines, maintenance schedules, and funding needs and availability are
integral to establishing a broader capital improvement plan. Future infrastructure needs and funding plans Long-
term perspectives Infrastructure (Roadway infrastructure, bridges, retaining walls, storm drains, streetlights, etc.),
Parks Vehicles, Equipment, Facility Fixtures and Equipment, and Technology infrastructure should all have
inventory Assets,
APPROPRIATIONS AND BUDGETARY CONTROL
• The City Council shall adopt an annual balanced operating budget and the first year of an integrated five -year
capital improvement plan budget by June 30th of each year, to be effective for the following fiscal year running
from July 1st through June 30th. Balanced budgets present budgeted sources in excess of budgeted uses. Budgeted
“Sources” include Revenues, Transfers In, and Appropriated Uses of Fund Balance. Budgeted “Uses” include
Expenditures and Transfers Out. Operating and Capital Budgets are to align with the City’s long -term financial
goals.
• Each year the Finance & Administrative Services Department provid es a short recap of the prior-year budget, a
mid-year budget status report, and an updated five-year financial forecast to the City Council at the Annual
Council Retreat (scheduled in late January or early February ) to assist Council with formulating direction for
long-range fiscal planning, oOperating Bbudget development, and capital funding appropriations.
• Budgets are prepared on the same basis of accounting used for financial reporting: governmental fund types
(General, Special Revenue, and Debt Service) are budgeted according to the modified accrual basis of accounting;
proprietary funds (Internal Service Funds) and fiduciary funds (Custodial Funds) are budgeted under the accrual
basis of accounting.
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Attachment D
10
INTRODUCTION SECTION
CITY OF SARATOGA ● FISCAL YEAR 2020/21 OPERATING & CAPITAL BUDGET 13
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• The Operating Budget is primarily funded with current year revenues. Dedicated fund balance reserves, such as
the Carryforward or Fiscal Stabilization Reserves represent prior- year savings designated for specific uses, which
may be used to fund current year operational expenses, in accordance with their purpose, upon Council approval.
Council may also approve the use of long-term debt for operational liabilities if they deem it fiscally prudent.
• With funding for other committed reserves already in place, Additionally, a minimal base amount of $500,000 is
to remains in the Unassigned Fund Balance Reserve at year-end to provide the first layer of fiscal protection a
buffer for unanticipated operational shortfalls or and unforeseen needs in the following fiscal year.
• The Capital Budget is funded with both prior- year surplus funding and dedicated capital funding resources.
Dedicated funding sources include Gas Tax (HUTA) revenues, VTA Measure B funding, road impact assessment
revenues; project revenues and reimbursements; community benefit assessments; and federa l, state, local, and
private grants.
• In practice, budgeted revenues are conservatively stated, and budgeted expenditures are funded at the full level
required to meet comprehensive allowing for the annual operational and capital improvement goals to be
completed. With effectively managed revenue streams and efficient use of resources, fiscal year -end operational
budget surpluses are typically available to fund future capital improvement projects and contribute to the City’s
fiscally responsible reserve accounts.
• The City Council maintains budgetary control at the fund level; any changes in total fund appropriations during
the fiscal year must be submitted to the City Council for review and Council majority approval. Operating Budget
appropriations lapse at the end of each fiscal year unless specifically carried forward by appropriation in the
following fiscal year’s budget. Capital Budget appropriations are structured as a multi -year workplan; therefore,
project expenditure balances are automatically carried forward to the following fiscal year as part of the annual
budget adoption until funding is exhausted, modified, or the project is completed.
• The City’s adopted budget shall comply with State law that limits annual budget expenditures to the annual
determination of the City’s appropriation limit calculated in accordance with Article XIIIB of the Constitution of
the State of California. Known as the Gann Limit, the City Council and adopt an annual resolution to this effect.
• The City Manager is authorized to implement the City’s workplan as approved in the adopted budget. Within a
specific fund, the City Manager has the discretion to adjust appropriations between categories, depart ments,
programs, and projects as needed to effectively operateimplement the adopted budget, provided no change is
made to the the fund’s total appropriation amount is not provided for any one fund changed. An example would
be to backfill a vacant salaried position with a contract service, therefore shifting budgeted funds from wage and
benefit appropriations to an operating expense expenditure within the Operating Expense General Fund
appropriations. The City Manager also has the authority to withhold filling the position for a time if conditions
warrant a delay.
• Generally, recurring expenditures are funded with recurring revenues , or with revenues specifically designated
for operational use. One-time expenditures may be funded with one-time revenues or fund balances reserves.
Fund balance reserves are to be used for non-recurring one-time expenditures and capital projects.
• In compliance with Council’s Fiscal Stewardship goal, fiscal stability and sustainability principles are
incorporated into budget planning. Appropriating adequate funds on an annual basis for the replacement and
maintenance of assets through Internal Service Funds, pr ioritizing infrastructure maintenance and repair in the
capital budget, and institutionalizing prudent payment strategies for long -term liabilities are foundational
strategies of fiscal stability and sustainability.
• The City Council appropriates $50,000 annually to a ‘Council Discretionary account’ to provide Council with
funding for unplanned expenditures. Council direction and consensus approval is required to utilize these funds.
Unexpended Council Discretionary appropriations are carried forward into the following fiscal year.
•
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CITY OF SARATOGA ● FISCAL YEAR 2020/21 OPERATING & CAPITAL BUDGET 14
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• In FY 2014/15 CalPERS notified the City that the City’s Unfunded Accrued Liability obligation of $7.7 million
(as of 6/30/2015) was to be repaid over a thirty (30) year payment plan. In accordance with the City’s responsible
fiscal stewardship objective, approximately 43% of the outstanding liability was immediately paid from current
year net operations and expendable reserve funding to significantly reduce the financing portion of the obligation.
Council also established an alternative repayment policy to contribute an annual amount approximately equal to
the annual amount due at the five-year mark to both lower the overall total long -term cost of the liability and to
stabilize the annual payment. This is expected to shorten the payment period to approximately 15 years and
maintain fiscal stability into the future. Subsequently, CalPERS revised their UAL estimates significantly as a
result of actuarial changes and further investment losses. The City’s UAL grew significantl y necessitating an
increase in the annual UAL excess contribution amount from $500,000 to $750,000 effective FY 2017/18. Then,
as a result of CalPERS making further discount rate revisions, Council again increased the annual UAL
contribution amount effective FY 2018/19, bringing the total budgeted annual payment to $1,000,000 in the effort
to continue the accelerated payoff schedule.
• The City Council appropriates $50,000 annually to a ‘Council Discretionary account’ to provide Council with
funding for unplanned expenditures. Council direction and consensus approval is required to utilize these funds.
Unexpended appropriations are carried forward into the following fiscal year.
• In recognition that many planning and building services are provided primarily for individual and monetary
benefit rather than for the community’s benefit, the Community Development Department sets planning
application and building permit fees to recover full cost of the service provided. A number of services provided
by the department are not fee based, hence the department overall is not full -cost recovery based.
AUDITING AND FINANCIAL REPORTING
• California State statutes require an annual financial audit of the City’s financial records a nd transactions by
independent Certified Public Accountants. The City shall comply with Generally Accepted Accounting
Principles (GAAP) and produce annual financial reports pursuant to Governmental Accounting, Auditing, and
Financial Reporting (GAAFR) guidelines. The independent auditor will issue an audit opinion to be included in
the City’s Comprehensive Annual Financial Report (CAFR) testifying to the financial report’s conformance with
accounting principles.
• Additional financial reports issued by th e Auditor’s may include: Singe Audit Report (annual report of federal
grant expenditures if in excess of the federal single audit limit is expended in a fiscal year), a Transportation
Development Act (TDA) report (annual report of TDA fund expenditures), an Appropriations Limit review
report (to establish tax revenue appropriation limit), and a Management report on the City’s Internal Controls.
• The City shall submit the CAFR to the Governmental Finance Officers Association (GFOA) Financial Reporting
Program each year for review, and if in compliance with the program’s requirements, apply to receive an award
for meeting GFOA’s financial reporting standards.
• Regularly scheduled external Financial Reports include the following:
State required Annual Cities Report and Annual Streets Report completed in conjunction with the year -
end close
State required Annual Debt Transparency Report for any debt issued after January 21, 2017
California Debt and Investment Advisory Commission’s (CDIAC) Mello-Roos Community Facilities
District (CFD) Fiscal Status Report for CFD bond debt
Quarterly SMIP (Seismic Motion) fee reconciliation reports; CASp (ADA Acc essibility) reconciliation
reports: and California Building Standard Commission (green building standards) reconciliation reports
Quarterly Use Tax Reports to remit uncollected sales tax to the State Board of Equalization
SB90 Mandated Cost reports for claims to comply with State regulated legislation
Annual UST Certification report to show fiscal responsibility for the City’s underground storage tanks
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CITY OF SARATOGA ● FISCAL YEAR 2020/21 OPERATING & CAPITAL BUDGET 15
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Annual Possessory Interest Report submitted to the County’s Assessor’s Office to report City owned
leased property
• Regularly scheduled internal Financial Reports include the following:
Weekly check registers and monthly Cash and Investment Treasurer Reports are submitted for review
and approval at City Council meetings.
Quarterly financial reports provide a status update on General Fund revenues and expenditures for the
first, second, and third quarters.
A mid-year budget status report is presented to City Council in February each year to provide a
comprehensive financial overview of the current year’s bud get and to propose recommended budget
adjustments as appropriate.
A year-end financial recap is provided after the City’s annual financial audit is completed.
CAPITAL IMPROVEMENT PLANNING
• The Capital Improvement Plan is an ongoing process through which the City identifies, prioritizes, and develop s
a multi-year workplan for major capital expenditures and their associated funding sources, in the effort to
improve and maintain the City of Saratoga’s roadways, parks, and facility infrastructure. Non-infrastructure
projects may also be included in the CIP under the Administrative & Technology programs if they are one-time,
operational efficiency, technology, or multi-faceted administrative projects.
• Generally, CIP improvements are major expenditures that have a multi -year life span and result in becoming
City assets. The City’s standard definition of a Capital Improvement Plan project is for the construction,
acquisition, rehabilitation or non-routine maintenance work that generally costs $25,000 or more with a useful
life of at least 5 years at a fixed location. The City also includes projects under $25,000 if they include staged
or ongoing improvement projects, or if they are significant multi-year projects.
• Capital Planning is developed and prioritized through infrastructure and operational assessments of asset
maintenance plans, urgent mitigation needs to prevent structure or system failures, health and safety issues,
federal or state mandates, availability of city and external funding, efficiencies, impacts if project not completed,
business or community input/demand, and short-term vs long term cost of replacement considerations.
• The Capital Improvement Plan includes funded capital improvement projects planned for completion in the next
five years, with cost estimates based on current year dollars. Project estimates are updated as needed, due to
price changes, design specifications, or project scope adjustmen ts.
• Departmental staff research and prepare project proposals for review by Department Directors. Directors meet
with the City Manager to identify and collaborate on approved proposals. Additionally, City Council members
propose projects which staff also research and prepare project proposals. Finalized project proposals are brought
to Council for review. Council then collectively directs which project proposals are to be funded and included
in the following year’s proposed Capital Improvement Plan budget. Council also determines if a proposed
project is put on the Unfunded Project List and brought back the next year for consideration, or if a project is
rejected.
• TheA five-year Capital Improvement Plan (CIP) is updated annually in conjunction with the operating budget.
The CIP reflects the current and changing needs of the community as well as enhancements to improve the
quality of the community. The first year of the CIP funding is adopted annually to authorize current year
appropriations, which includes any remaining funds appropriated in the prior year ’s CIP. .
• The CIP is categorized into programs by project type. The four programs includeare: Street Improvements, Park
& Trail Improvements, Facility Improvements, and Administrative & Technology Improvements.
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• All projects within the CIP programs are appropriated, managed, and tracked as separate funding entities, with
separately, and each project’s financial status is reported on a monthly basis in the Treasurers Report.
• Project updates are recorded in the annual Capital Budget, with narrative, timeline, and financial summary
information updated with each published budget document.
• Capital improvements that specifically benefit a select group of users and/or are fee -for-service based are to be
financed through user fees, service charges, special assessments and taxes, or development impact fees.
• The City shall identify and dedicate capital improvement related funding directly to the CIP and to maximize the
use of grant funding for capital improvement projects.
• Grants, insurance, or other reimbursement funding is to be returned to the expenditure’s funding source, unless
otherwise directed by Council. For instance, Hillside Reserve funded projects that receive insurance
reimbursement payments are to be returned to the Hillside Reserve, and grant reimbursements for projects funded
through the CIP Reserve are to be returned to the CIP Reserve when payment is received.
• After completion of the prior year’s audit and the General Fund’s priority funding requirements are met, the
remaining net operations are moved into the Capital Project Reserve at year end. Use s for of the Capital Project
Reserve fund for the subsequent fiscal year is reviewed at Council’s Annual Retreat in late January/early
February, with and preliminary allocation direction voted upon given by consensus of the City Council at a
follow-up the AnnualBudget Study Session in March or April. This direction is presented at the Proposed Budget
Hearing in late May or early June, with Council Retreat. Final CIP funding direction is determined provided by
Council with Bat budget Aadoption in June.
• Council has designated the following capital projects as fundamental to maintaining City infrastructure on an
ongoing basis, and shall therefore have priority status for available Capital Improvement Reserve funding: The
below funding allocations are guidelines to shall bbe reviewed by Council for final CIP bBudget direction each
fiscal year:
$2500,000 – Annual Infrastructure Maintenance & Repairs (for Sidewalk , Storm Drains, Curb & Gutter,
and Bridge Maintenance)
$2100,000 – Annual Retaining Wall Maintenance Parks, Trails, Grounds & Median Replacement &
Repairs Project
$100,000 – Annual Parks, Trails, Grounds & Median Replacement Funding
$ $ 7550,000 – Roadway Safety and Traffic Calming
$ 50,000 – Risk Management and Mitigation Projects
$100,000 – Annual Parks, Trails, Grounds & Median Project$ 25,000 – City Art Program
• The Annual Roadway Maintenance and Repair (ARM&R) CIP project is the primary CIP project funded in
support of Council’s goal to maintain Saratoga cit y streets at an average 70 PCI rating. On occasion, separate
street specific resurfacing projects are established that due to funding requirements; they also contribute toward
this goal. In FY 2016/17, Council established The a $2 ARM&R project was originally established with a $1
million minimum annual funding goal. Funding comes primarily from dedicated Gas Tax Revenue and Solid
Waste Services contract assessed Vehicle Impact Fees. However, after decreases in the PCI, Council has
established a new goal of $2 million annually with the FY 2016/17 budget. Council is to consider this goal in
conjunction with funding requests during the CIP budget discussion each year. This CIP project shall encompass
roadway repairs, resurfacing, and rehabilitation projects, traffic light, curb and gutter, and other miscellaneous
repairs, striping and signage, and assorted street materials and supplies.
DEVELOPMENT RELATED FINANCIAL POLICIES
• Most planning and building services are provided for business and individual benefit rather than for the general
community’s benefit. As such, the Community Development Department planning application and building
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permit fees are established at rates to recover the full cost of the service provided. However, a number of services
provided by the department are not fee based (code compliance, event permits, etc.), hence the department overall
is not full-cost recovery based.
• The Williamson Act, also known as the California Land Conservation Act, was passed by the California
Legislature in 1965 to encourage rural & agricultural land owners to keep their land undeveloped. When land
owners enter into a contract under the act, they benefit from lower property taxes, which are based on the property’s
current use, rather than paying market value-based tax rates. In exchange, the property is to remain undeveloped
and continue to function in the same manner for the duration of the contra ct. Contracts are valid run for 10 years
and are automatically renewed unless the farmer or rancher cancels it. The City does not limit the number of
Williamson Act contracts entered into each year.
• The Mills Act is State-sponsored legislation granting local governments the authority to enter into an agreement
with property owners to allow reduced property tax payments in return for the restoration and continued
maintenance of their historic property. The property must be privately owned and on a local, state, or national
register of historic places. After the initial 10-year contract expires, the contract may extend one year annually
unless either party elects to non-renew.
Since the agreement reduces the property tax assessment, the City receives a smaller share of property tax revenue
in comparison to a property that is assessed at market value. Per State law, the County Assessor is required to
recalculate each individual property’s tax assessment each year, based upon a variety of stated market factors.
This results in reductions that are specific to each property, with some benefiting more than others. The City will
allow approval of up to three Mills Act Contracts per year.
•
EXPENDITURES AND PURCHASING
• All expenditures shall be in accordance with the City’s purchasing policy, travel policy, credit card policy,
contract policy and public contract code, state or federal law, or any other applicable guidelines or regulations.
• Expenditures are managed at the program level. Program managers are to ensure expenditures do not exceed the
budgeted workplan and must take immediate action if at any time during the fiscal year an operating deficit is
projected at year-end. Corrective actions may include expenditure reductions, service reductions, or with
Council approval, budget adjustments to increase the program budget. , or service reductions.
• The City’s current purchasing policy establishes purchasing authority levels, purchasing procedures, and
procedural requirements, for the procurement of supplies, equipment, and services, in conformance with Federal
and State codes and regulations, and City Ordinance No. 2 -45.
• Public Work projects governed by the State’s Public Cont ract Code are excluded from provisions of the City’s
purchasing policy.
• Guidelines established by the City’s Purchasing Policy directs the City’s departments to purchase the best value
obtainable, securing the maximum benefit for funds expended, while providing all qualified vendors an equal
opportunity to do business with the City.
• Services and supplies purchases that exceed $5,000 require written quotes, and must be approved by the
Purchasing Officer or designee, typically through the Purchase Order process. Documentation is to be retained
by the department in accordance with the rRecords rRetention pPolicy and schedule.
• Services, supplies, and fixed asset purchases exceeding $25,000 must be authorized by the City Council, unless
purchase is specifically identified as approved called out in the adopted budget or excluded under the Purchasing
Policy.
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CITY OF SARATOGA ● FISCAL YEAR 2020/21 OPERATING & CAPITAL BUDGET 18
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• City departments shall conduct quarterly program and capital project reviews to determine if projected operating
revenues and expenditures meet budgeted expectations. If an operating deficit is projected to occur at year-end,
the departments shall evaluate and implement corrective actions as needed, and notify Council before services
will be impacted.
FIXED ASSETS AND INFRASTRUCTURE
• Tangible assets with a cost equal to or greater than $10,000 and a useful life of more than one year are considered
fixed assets and added to the capitalization schedules. Repairs and maintenance of infrastructure assets will
generally not be subject to capitalization unless the expenserepair extends the useful life of the asset.
• The City will sustain a long-range fiscal perspective through the use of a five -year Capital Improvement Plan
designed to maintain the quality of City infrastructure, including streets, sidewalks, curbs and storm drains,
lighting, building, parks, and trees, and through Internal Service Fund programs to both maintain and replace
operational infrastructure, such as City buildings infrastructure, fixtures, and equipment, vehicles, and public
works equipment, and technology related equipment on an ongoing basis
• A Capital Asset system will be maintained to identify all City assets, their condition, historical and estimated
replacement costs, and useful life. Asset information is re tained to provide information for preparation of
financial statements in accordance with GAAP and, with emphasis placed on compliance with completion of
GASB 34 requirements.
• Infrastructure management systems are to be developed and maintained to provide long-term range financial and
operational planning. These shall include various rRoadway sSystem management programs, sStorm dDrain
sSystem management plans, bBridge replacements, sStreet sSignal sSystem replacements, and all other
infrastructure categories that require significant financial resources to fund the eventual replacement needs.
• Information Technology software, hardware, and auxiliary equipment and system assetss are tracked and funded
to be maintained through the Operating Budget’s Internal Service Replacement Fund, whereas annual
appropriations in the Information Technology Services program budget operating budget or departmental
program budgets are to funds most ongoing license, maintenance, and security costs.
• indebtedness to an aggregate 15% of the assessed value of all real and personal property of the City.
INTERNAL SERVICE FUNDS
• Internal Services Funds are established to both equitably allocate operating costs to departments for support and
maintenance services, and to stabilize and spread the City’s replacement and operational costs over fiscal years
for the purpose of providing an accurate and balanced long -range fiscal perspective of the use of services and
assets.
• Vehicles, Equipment, and Building asset replacement and maintenance types of Internal Service Funds are
structured to provide a consistent level of funding for asset and equipment replacement, and to ensure sufficient
funding is available for the regular maintenance, repair, and replacement of the City’s vehicles, equipment, and
building fixtures in an ongoing manner.
• Technology and Office Equipment replacement and maintenance Internal Service Funds are structured to provide
a consistent level of funding for the replacement of assets and projects, and to appropriately distribute support
and maintenance costs to City departments.
• The Liability and Workers Compensation Insurance Internal Service Funds shall maintain adequate reserves to
pay all valid self-insured claims and insurance deductibles, including those incurred but not reported, in order to
keep the insurance funds actuarially sound.
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• Each Internal Service Fund will set recovery charges at rates sufficient to meet all operating expenses,
depreciation, and fund balance reserve policy objectives.
• indebtedness to an aggregate 15% of the assessed value of all real and personal property of the City.
INVESTMENTS
• The City maintains a detail-level Council approved Investment Policy that outlines the goals of fiscal security
and investment risk levels allowed to achieve the City’s stated security restrictions and investment objectives.
The Investment Policy is brought to Council for review and adoption each year, just prior to the begin ning
of the fiscal year.
• The policy shall comply with the State’s California Debt and Investment Advisory Commission (CDIAC)
guidelines for the practice of public finance.
• Fund Reserves and excess operational funding reside in the State managed Local Agency Investment Fund
(LAIF) unless expressly approved by the City Council’s Finance Committee to invest in other vehicles
approved in the City’s Investment Policy.
• The City’s Finance & Administrative Services Department shall oversee Treasury functions and submit a
monthly Treasurer’s Report to report on City funds , investments, and interest earnings.
LONG-TERM DEBT
• The City maintains a Council approved Debt Policy to provide clear direction on debt issuance. Existing debt
shall comply with all legal and reporting requirements to ensure the City is in compliance with State regulations,
GASB guidelines, and transparency efforts.
• The City shall seek to maintain a high credit rating through sound financial practices as a foundational financial
objectivepractice, in order to obtain the lowest possible borrowing cost, and maintain financial responsiblityand
to maximize borrowing costs.
• The City does not incur debt for operation al purposess or capital improvements as a standard practice. except
uUnder extraordinary circumstances, the City may seek and with citizen support. Under these circumstances
the City will seek voter approval for General Obligation (GO) Bond Debt for city-wide major infrastructure
rehabilitation, or through Community Facility District Bonds for specific community desired infrastructure
improvements.
• Long-term Financing Debt is typically incurred for capital improvements or special projects that cannot be
financed from current or dedicated revenues, or for large liabilities resulting in significant financial impacts. In
principal, long-term debt is to be used only if the debt service requirements do not negatively impact the City’s
ability to meet future operating, capital, and cash reserve policy requirements.
• Through City Council approval, the City may function as a bonding conduit for special assessment districts.
This may occur when a neighborhood or distinct area is seeking to improve private or cooperatively owned
infrastructure, such as private roads or water system cooperatives. A special district may also be established to
improve publicly owned infrastructure, such as a neighborhood park or a parking lot.
• For special district debt offerings, tThe City shall require full liability protection and cost recovery as necessary
to protect the City and mitigate the cost associated with such actions.
• The term for repayment of long-term financing shall:l not exceed the expected useful life of the project or extend
beyond functionally appropriate payment terms. Additionally, ; include financing payment terms must be
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established at a manageable funding level or reasonable assessment level; and, does not extend beyond
functionally appropriate payment terms.
• The City shall monitor all forms of debt in conjunction with budget development throughout the year , and will
report concerns and remedies if necessary to the City Council if needed.
• The City will ensure compliance with bond covenants, providing financial information to reporting parties as
required under the terms of the contract or State lawnecessary.
• The City will comply with Government Code Section 43605 limitations on debt, which limits general obligation
indebtedness to an aggregate 15% of the assessed value of all real and personal property of the City.
LONG-TERM FINANCIAL PLANNING
• City policy is to develop, build upon, and incorporate long-term financial planning processes into a
comprehensive plan that provides Council, staff, and the public with the resources to understand issues
impacting the City’s financial condition, and the t ools with which to make informed decisions.
• The City’s Long-Term Financial Plan (LTFP) is to ultimately include various analyses and documents that
support financial planning efforts, including a financial forecast and analysis, fiscal policies, revenu e
descriptions and trend analysis, an annual pension review, the City’s Strategic Plan, the Capital Improvement
Plan and funding analysis, Information Technology Strategic Plan, and numerous asset and infrastructure
master plans. While the financial trend analysis and forecast is the foundation of the LTFP, the entirety of
the various documents provide a comprehensive outlook on many operational fronts.
• Long-Term Financial Planning is an ongoing event that begins at the Council Retreat to review Strategic Plan
goals and the current financial situation at the mid-year point, and as the starting point for the following years
budget process. Trends, critical or concerning issues, policy changes, new initiatives and priorities, new
resource requirements, and potential impacts and opportunities a re reviewed, and financial projections for
the future are presented. Direction is compiled into the following year’s budgets, and plans are updated
throughout the year, as needed.
• Council shall review a General Fund revenue, expenditure, and financial position forecast of at least five-
years, to garner a longer-term perspective of current fiscal expectations and fairly reliable projected fiscal
impacts so as to anticipate or mitigate operational changes for the near future. Because funds other than the
General Fund are both specific and limited in nature, they are not currently included in the annual review.
However, staff shall assess the funds and incorporate any items of concern into the forecast discussion.
• Revenues shall be described, documented, and properly classified with historical trend analysis and known
upcoming impacts built into forecast projections. Projections should be conservative , with those revenues of
a more volatile nature projected with a greater conservative weight than those known to be consistent and
dependable. Additional factors, such as unsustainable growth, shall also be identified and folded into the
projections with caution.
• Expenditures are classified by category in summary, but forecast by individual programs application in detail.
This methodology allows for greater specificity and accuracy in workplan expectations, while providing a
broader view of trends. These trends are utilized for longer perspectives in the forecast analysis, strategic
planning, asset management, capital prioritization and funding decisions, and funding gap analyses within
the LTFP.
• A Reserve Analysis is conducted to review and recommends appropriate levels of reserves per the needs of
the reserve purpose, the priority of the reserve over other needs, and compliance with GFOA
recommendations and legal requirements.
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PENSION FUNDING
• In the pursuit of prudent fiscal practices and long-term financial sustainability, the City seeks to mitigate the
overall cost of pension benefits, and prior year liabilities. Several strategies are utilized, which includes lower
tier pension benefits, lump sum prepayments, and accelerated payments.
• The City has three Miscellaneous Employee Pension Plan tiers:
Tier I for employees hired up to May 12, 2012
Tier II for employees hired on/after May 12, 2012, and “Classic” employees hired on/after January 1, 2013
Tier III/PEPRA, for employees entering into the CalPERS pension plan system on/after January 1, 2013
Tier I provides a 2% at 55 pension benefit. Tier II provides a 2% at 60 pension benefit. Tier III/PEPRA provides
a 2% at 62 pension benefit.
• In FY 2014/15, with CalPERS change to their pension funding methodology, Council paid off a large portion of
the UAL liability, and then established an alternative to CalPERS 30-year repayment policy to contribute an
annual amount approximately equal to double the minimum Annual Required Contribution (ARC) due at the five-
year mark. The intent was to lower the overall cost of the liability , but also to shorten the payment period to 15
years and maintain fiscal stability by establishing a set payment amount. Detailed information is provided in the
Financial Summaries Staffing Information section.
• Council also established a practice to pay Tier II and Tier III UAL amounts in full each year, to eliminate future
unfunded liabilities for the growing segments of employees. This amount is minimal each year as the actuarial
determined rates are in line with current actuarial factors, until actuarial factors are modified.
• The City’s goal is to fund pension liabilities near or at 100% to reduce unfunded liability payments to minimal
payments each year. Currently, Tier II and III unfunded accrued liability payments are minimal, if any, and paid
in full each year in alignment with this policy, however the Tier I pension unfunded accrued liability is understood
to be a long-term goal.
• A review of the City’s Unfunded Accrued Liability and CalPERS annual actuarial report will be brought to the
Finance Committee for review and analysis each year, along with CalPERS Pension liability projection tools as
they become available.
• In addition to the City’s policy to reduce the Tier I UAL through additional discretionary payments each year, a
115 Trust may be established to prefund future year’s CalPERS liability payments. The 115 Trust is used to hold
dedicated reserve funding in a higher investment-return vehicle, while also setting aside the funds that are
designated for recession planning. Council direction will determine when to use th ese funds as part of the annual
budget adoption process, or during the course of the fiscal year , if necessary.
RECESSION PREPARATIONS
• The City shall incorporate preparations for the inevitable future recession in its fiscal and operational practices.
This includes prudent and cautious assessment of expansions in ongoing services, diligence in maintaining cost
recovery for user services, aggressive funding of fund balance reserves to healthy levels in strong economies,
conservative budgeting practices, fiscal frugality, alignment of one-time funding sources and uses, and a
continued practice of long-term financial planning.
• Education of City finances is vital to knowledgeable financial decision making . Finance staff remain available
to all Council Members for one-on-one training sessions and to answer specific finance an d budget questions
throughout their tenure on the Council, either spontaneously or scheduled, in person, by phone, or email.
• Council’s identification of priority operational services, and Council Priorities as a whole are defined in the
Strategic Plan, which is adopted as part of the overall budget plan each year. The Strategic Plan helps to drive
long-term planning and operations, and provides guidance in recession decision making whe n needed.
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• Recession fiscal decisions will ultimately be specific to the unique time period, recessionary causes, and economic
environment, but a basic assumption is that recessions will impact the City’s ma in revenue category of Property
Tax. Fortunately, this impact is delayed due to the nature of tax assessments occurring before severe impacts are
felt, and the subsequent distribution of funding, providing the City time to prepare. More immediate impacts
come from development-related services fees, Sales Tax, and Hotel Tax revenue reductions. The advantage of
having impacts hit City finances in phases allows for preliminary mitigation steps, and time to plan if more severe
mitigation steps are needed. However, this delay also plays out in reverse as a time lag occurs before the City’s
finances return to normal. Hence, recession impacts will last a minimum of two years if minor, and (typically)
three to five years if more severe.
• Overall, financial resources funded during good economic periods are recommended for initial recessionary
reductions, such as 1) delaying or reducing funding for Internal Service Fund operations, 2) one-time revenue
resources, such as an unexpected payments or excessive net operation funding held for future use, and 3) to reduce
expenditures that are included in a budget each year that are not essential to providing services, such as staff
conferences or optional consultant services.
REVENUES
• Revenue funding is designed to ensure services that provide city-wide benefit such as public safety, infrastructure
maintenance, and city administration are provided for by general revenue sources such as taxes,
intergovernmental revenues, and interest. Services where a customer determines the use, such as for planning
services and building permits, are financed through user fees, service charges, and assessments directly linked
to the level of services provided.
• To provide the Saratoga community with services and maintain infrastructure, ongoing reviews of operations are
conducted to assess revenue leakage. If applicable, assessments or charges are pursued, and user fees are
implemented for cost recovery.
• Designated and legally restricted tax and revenue funding sources will be accounted for in the appropriate funds.
General taxes and revenues not allocated by law or some other contractual agreement to other funds are
accounted for in the General Fund. Funds dDedicated for specific cCapital Pimprovements roject revenues are
to be directly accounted for in the appropriate Ccapital project Improvement Plan fund, within a designated
project. An example is VTA Measure B Sales Tax is deposited directly to the Annual Roadway Improvement
Project in the Street CIP Fund.
• A master schedule of User Fees is reviewed and presented to Council on an annual basis to adjust fees to an
appropriate level. Operating departments shall review services and the existing fees to ensure discretionary
services (not specifically waived or modified) reflect direct and reasonable indirect costs of providing such
services.
• The City typically establishes user charges and fees at levels that recover the direct and indirect activity cost of
providing a service or product. The City also considers market rates and charges levied by other municipalities
of similar size for like services in establishing rates, fees, and charges. As some services have partial cost
recovery objectives (such as development fees), cost recovery ratios will vary in accordance with policy
objectives.
• The City will follow an aggressive policy of collecting local taxes and revenues due to the City through persistent
follow-up procedures, and external resources as necessary. Categories of Revenues include Taxes,
Intergovernmental, Fees/Licenses/Permits, Charge for Services, Interest Income, Rental Income, Other Sources,
Internal Service Fund charges, and Capital Improvement Revenues.
• While a diversification of revenue funding is desired, the City only pursues additional funding streams that are
in alignment with the City’s overall goal to support and protect the Saratoga community. The City does not enter
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into profit-making enterprises that service select user groups, but rather seeks to engage in cost -recovery
activities or taxpayer-funded services that maintain or enhance the Saratoga community as a whole.
• Tax revenues are reliable funding streams, with most tax revenues steadily increasing at a slow but steady pace.
Almost 80% of tax revenue comes from Property Tax, with Sales Tax, Franchise Fees, Transient Occupancy
Tax, Business License Tax, and Construction Tax making up the remainder . As Property Tax comprises about
44% of Total Operating Revenue, there is a significant dependency on this revenue stream. Hence, the City
tracks these revenues closely, and makes budgetary projections and adjustments in line with Property Tax
fluctuations. And, with this revenue growth is expected to decrease in future years, the City budgets revenue
increases conservatively to help restrain expenditure growth.
• City will seek to obtain grants that support the City’s priorities and provide a benefit, however grant requirements
are taken into consideration to assess immediate and long-term costs and benefits to the City. Grants are brought
to the Council for approval.
•
• Donations may be accepted in accordance with the City of Saratoga Donation Policy most recently approved by
the City Council. Under the current policy, unrestricted donations of $5,000 or less may be accepted or declined
by the City Manager. Restricted donations of $500 or less may be accepted or declined by the City Manager.
Unrestricted donations of more than $5,000 and restricted donations of more than $500 must be brought to the
City Council for consideration. The City Manager may choose to request City Council consideration of any
donation, regardless of value.
• The City follows a vigilant policy of collecting local taxes and revenues due to the City through persistent fo llow-
up procedures, however efficiency of collections is paramount, and external resources are used as needed . An
example of this practice is the City’s Business License audit engagement where a consultant is utilized to both
educate and ensure companies doing businesses within Saratoga are paying their business license tax.
•
In FY 2014/15 CalPERS notified the City that the City’s Unfunded Accrued Liability obligation of $7.7 million
(as of 6/30/2015) was to be repaid over a thirty (30) year p ayment plan. In accordance with the City’s responsible
fiscal stewardship objective, approximately 43% of the outstanding liability was immediately paid from current
year net operations and expendable reserve funding to significantly reduce the financing portion of the obligation.
Council also established an alternative repayment policy to contribute an annual amount approximately equal to
the annual amount due at the five-year mark to both lower the overall total long -term cost of the liability and to
stabilize the annual payment. This is expected to shorten the payment period to approximately 15 years and
maintain fiscal stability into the future. Subsequently, CalPERS revised their UAL estimates significantly as a
result of actuarial changes and fur ther investment losses. The City’s UAL grew significantly necessitating an
increase in the annual UAL excess contribution amount from $500,000 to $750,000 effective FY 2017/18. Then,
as a result of CalPERS making further discount rate revisions, Council again increased the annual UAL
contribution amount effective FY 2018/19, bringing the total budgeted annual payment to $1,000,000 in the effort
to continue the accelerated payoff schedule.
RISK MANAGEMENT POLICY
• The City is insured for up to $25 million of general liability, auto, and property damage claims through a Bay
Area Joint Powers Association insurance cooperative (PLAN JPA). Claim coverage consists of up to $5 million
from the JPA, and a following $20 million from and an excess insurance provider. for claims in excess of this,
up to $20 million. The City is self-insured for the first $25,000 for general liability and auto claims; property
damage up to $5,000 and third party auto claims up to $10,000.
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• Workers Compensation claims are insured for the first $250,000 of coverage through the City’s p articipation in
a Workers Compensation risk pool. After the $250,000 limit is met, an excess insurance coverage policy is
activated. The excess coverage provides an employer liability limit of $5 million per occurrence, and workers’
comp per occurrence limit of $100 million. Workers' Compensation claims are managed by the PLAN JPA as a
third-party administrator (TPA).
• The City’s role in managing both its risk management and workers comp programs is to be preventative in
nature which is accomplished thro ugh careful monitoring of losses, working closely with the third -party
administrator, participating in training, proactively addressing infrastructure maintenance and potential risks,
and by designing and implementing safety programs to minimize risk and reduce losses.
• Claims against the City are submitted to and addressed in conjunction with the City’s pooled liability JPA
administrator in a timely matter. Responses are carried out Adverse claims are also pursued for restitution.
TREASURY MANAGEMENT
• The City’s Investment Policy shall be brought to the Finance Committee and City Council for review, discussion,
direction, and adoption on an annual basis. California Government Code Section 53600 and City of Saratoga
Municipal Code Section 2-20.035 require the City Council to annually review and approve the City’s Investment
Policy.
• It is the policy of the City of Saratoga to invest public funds in a manner which will provide the maximum security
with the highest investment return, while meetin g the daily cash flow demands of the City and conforming to all
state and local statutes governing the investment of funds.
• Finance staff shall exercise due diligence to comply with the Investment Policy. The City currently practices
conservative and cautious investment practices by limiting its investments to the State’s Local Agency Investment
Fund (LAIF). Certificates of Deposits and high -grade investment vehicles may also be utilized under the
Investment Policy, however the Finance Committee will provide oversight, review and direction on any decisions
to move a portion of the City’s available funds into these other permitted investments. Administrative Services
Department’s Finance Division shall prepare a monthly report to the City Council that has sufficient detail to
present the financial condition of the City at month end, the cash and investments balance by fund, and fund
balances by fund type.
TRUST & AGENCY FUNDS
• The City may serve as a Fiscal Agent for an agency organ ization only if the purpose of the agency is related to
City operations and is in the best interest of the City.
• A legal agreement governing the Trust or Agency relationship is approved by the City Council.
• The Trust or Agency organization remains a separate entity from the City and shall not represent itself as a
component of the City.
• As the Fiscal Agent, the City may hold funds provided by the agency organization in a separate and clearly
designated fund. The fund may earn interest at the City’s investment rate.
• Depending on the level of services provided to the agency organization, the City may charge for the cost of any
and all fiscal services provided.
• Depending on the agreement, the City may purchase goods or services on behalf of the agency organization, and/
or disburse funds as directed and permitted by the agency’s by -laws and purpose. However, the City is not liable
for any of the agency organization’s debts, liabilities or actions.
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USER FEES
• The City allows for discretion in the use of general taxes to meet the cost of services tha t provide a larger public
benefit, such as code enforcement, and to recover the full or partial cost of services that largely or solely benefit
individuals, such as a building permit.
• In some cases, fees are established with a goal to discourage the use of a service, such as a false alarm fee that
results in the dispatch of a public safety officer. The fee may be structured to accelerate with usage, but allows
for a level of leniency initially for this service with the understanding that co st recovery goals are not met.
• A master schedule of User Fees is reviewed and presented to Council on an annual basis to allow for the
adjustment of discretionary service and rental fees. If an adjustment is needed, a request to increase or decrease
the fee is brought to Council as a Public Hearing, and becomes effective 60 days (or later if stated) following
approval of the fee adjustment. Typically, fee adjustments are brought to Council in late April for a July 1st
effective date, however a stand-alone fee adjustment may be brought to Council at any time thro ughout the year.
• The City’s overall goal is to establish user charges and fees at levels that fully recovers the direct and indirect
activity cost of providing a service or product. However, market rates and charges levied by other municipalities
(of similar size) for like services are taken into consideration when establishing rates, fees, and charges. As some
services have partial cost recovery objectives, cost recovery ratios will vary in accordance with policy objectives.
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FUND BALANCE RESERVE POLICIES
Prudent financial management dictates that the City reserve a portion of its funds for future use to: maintain fiscal
stability; ensure the continued orderly operation of government and provision of services to residents; and to mitigate
current and future risks.
As a general budget precept, the City Council decides when and whether to appropriate available funds to and from a
reserve account. Use of reserve funds must be authorized b y either specific direction in the annual budget, or by a
separate City Council action – unless specifically directed by policy. Responsible fiscal stewardship also requires
adequate reserves be maintained for all known liabilities and established City Co uncil and community directed
initiatives.
In the following Fund Balance/Reserve Policy guidelines, the descriptions include identification of the fund type and
classification, the purpose of the reserve, minimum and maximum funding goals if appropriate, a ppropriate utilization
of the reserve and by what authority, and the procedure for funding the reserve initially; on an ongoing basis, or after
utilization.
FUND BALANCE AND NET POSITION
In 2009, Governmental Accounting Standards Board (“GASB”) Statement No. 54 revised fund balance classifications
for “Governmental Funds” into five specific classifications of fund balance with the intent to identify the extent to
which a specific fund balance reserve is available for appropriation and therefore spendable, or whether the fund
balance reserve is constrained by special restrictions. Government Funds for which these new rules apply include:
the General Fund, Special Revenue Funds, Capital Project Funds, and Debt Service Funds.
For “Non-Governmental Funds”, equity classifications are classified as “Net Position” with sub -classifications of
Restricted or Unrestricted Net Position. A third component of a Non -Governmental Fund’s equity is “Net Investment
in Capital Assets,” which for Saratoga refers to the non-monetary portion of equity such as vehicles and equipment,
net of depreciation. Non-Governmental Fund types include Proprietary Funds (Enterprise and Internal Service Funds)
and Fiduciary Funds.
GOVERNMENTAL FUND TYPE RESERVE CLASSIFICATIONS
The Governmental Reserve classifications are defined as follows, which includes the applicable reserves that fall into
the classification.
Non-Spendable Fund Balance
Represents resources that are inherently non -spendable from the vantage point of the current period. The City does
not presently hold Non-Spendable Reserve funds.
Restricted Fund Balance
Represents fund balance that is subject to external enforceable legal restrictions. The City maintains the following
restricted fund balances under this designation:
• General Fund: Environmental Services Fund Balance Reserve
• Special Revenue Funds: Landscape & Lighting Assessment Districts Fund Balances
• Debt Services Fund: Library General Obligation Bond Debt Service Fund
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• Capital Project Funds
a) Park in Lieu Funds
b) Highway User Tax Allocation Fund (Gas Tax)
c) Capital Project Grant Funds
Committed Fund Balance
Represents fund balance constrained by limitations the government imposes upon itself at its highest level of decision
making and remains binding unless removed in the same manner. The City maintains the following fund balances
under this designation:
• General Fund: Hillside Stability Reserve
• General Fund: Facility Replacement Reserve
• Capital Improvement Plan Funds: Capital Improvement Project Fund Balance Reserve
Assigned Fund Balance
Represents fund balance identified by Council for an intended use; however as no legal obligations exist, the funds
may be re-designated and utilized for another purpose if Council chooses. The C ity maintains the following General
Fund reserves under this designation:
• General Fund: Future Capital & Efficiency Project Reserve
• General Fund: Carryforward Reserve
Unassigned Fund Balance
Represents funding which may be held for specific types of use s or operational funding/stabilization purposes, but is
not yet directed to a specific purpose. Only General Fund reserves can be designated under the “Unassigned” fund
balance classification. Other fund types are by nature structured for specific purpos es, hence the fund balances are
therefore considered “assigned” for that purpose.
• General Fund: Working Capital Reserve
• General Fund: Fiscal Stabilization Reserve
• General Fund: Other Unassigned Fund Balance Reserve
Fund Balance Ratios
To ensure the City maintains available working cash flow and emergency funding at all times, the collective total of
the General Fund’s Assigned and Unassigned Reserves shall be sustained at a minimum of 20% of General Fund
expenditure appropriations, net of transfers out.
GENERAL FUND YEAR-END ALLOCATIONS
After the City’s financial records are finalized and audited, with legal obligations and liability reserves funded,
revenues in excess of expenditures are closed out to the Other Unassigned Fund Balance Reserve. A b ase amount of
funding, as set by budget policy, is to remain in the Other Unassigned Fund Balance Reserve, with the remainder
distributed in the following order:
1. Repayment of Fund Balance Reserve loans - back to established levels (e.g. borrowing from/usage of the Fiscal
Stabilization or Hillside Stability Reserves).
• For the Hillside Stability Reserve, loan repayment shall be made in annual contributions of $100,000 until
reserve balance reaches the $1 million reserve goal.
• Fiscal Stabilization loan repayments shall be made as directed by Council.
2. Annual contribution of $500,000 to Facilities Replacement Reserve.
3. Remaining funds are allocated to the Future Capital Improvement and Cost Efficiency Projects Reserve.
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GENERAL FUND RESERVES
Environmental Services Reserve
Under the Restricted Fund Balance classification, the Environmental Services Reserve represents revenues collected
under a prior funding structure for environmental purposes, and is therefore restricted for use in funding environmental
program costs such as clean water programs, street sweeping, and storm drain cleaning services. Per policy, the
Environmental Service Reserve is being utilized through annual budget appropriations of $50,000.
The Environmental Services Reserve originated from a one -time funding structural change and therefore will not be
replenished when depleted.
Hillside Stability Reserve
Under the Committed Fund Balance classification, a Hillside Stability Reserve of $1 million is set aside to provide
funding for unanticipated or unforeseen emergency or extraordinary costs related to hillside degradation, inclusive of
slide prevention and mitigation, slide repair, and associated drainage and roadwork.
Use of the reserve requires an analysis be prepared and presented to Council for approval, or in the event of a landslide
requiring immediate emergency work, the Public Works Director may direct use of up to 10% of the reserve to make
emergency repairs and mitigate further damage until Council takes action. Reserve funding is to be u sed for
emergency work which exceeds operational funding provided for in the Operations Budget. Upon use, refunding of
the reserve shall be provided from year -end net operations in the amount of $100,000 each fiscal year until the
$1,000,000 reserve cap is reached.
Facility Replacement Reserve
The Facility Replacement Reserve is established to accrue funding for the major rehabilitation or replacement of City
Facilities (buildings/structures). Eligible uses of this reserve include both direct funding of public facility
improvements, and the servicing of related debt. Small facility building replacements, major facility renovations, and
down payment contributions toward a large facility replacement in conjunction with bond measure funding are
examples of intended Facility Replacement Reserve uses.
An initial contribution of $300,000 was established in FY 2012/13 with Council’s recommendation to continue
funding at this level, as a priority use of year -end net operations funding. Effective FY 2016/17, Council’s direction
is to increase the annual year-end contribution amount to $500,000, as funding is available. Council has set a goal to
fund the Facility Replacement Reserve to a level equal to 1/3 of the City’s insured value over the next 20 years (by
FY 2036/37) as a fiscally responsible pra ctice to maintain city infrastructure In principle, Saratoga does not pursue
bond money to fund capital improvements, however, replacing high cost facility infrastructure requires a long -term
funding plan that may or may not be attainable through annual contributions. Therefore, the Facility Replacement
Reserve demonstrates both the City’s good faith funding effort and financial stewardship for future bond measures if
needed, as well as accumulating funding for a down payment on replacement infrastructur e to minimize bond funding
needs.
A facility’s insured value represents the initial cost of the facility decreased each year over the facility’s estimated
lifespan. Therefore, insured value represents the remaining life of the facility’s purchase cost –
it does not represent the current cost to replace a facility. The City recognizes insured value is not sufficient to fund
facility replacements, therefore annual contributions will continue as an ongoing funding obligation even after the 1/3
reserve goal is met.
Changes in annual contributions and the reserve goal amount shall be determined by Council during the budget
process, in line with changes in the City’s economic situation. Utilization of the reserve shall be brought to Council
for discussion and consideration as needed.
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Future Capital & Efficiency Projects Reserve
Under the Assigned Fund Balance classification, the Reserve for Future Capital Improvement & Efficiency Projects
shall reserve funding for as yet undefined capital and efficie ncy improvement projects. Reserve funding is derived
from General Fund accumulated net operations (as available) and is therefore considered a “one -time funding source”.
Funds are held in this reserve until Council reviews funding requests and approves a use or transfer to a capital project
fund.
Use of the reserve funding is at the Council’s discretion, but typically occurs in conjunction with the annual budget
adoption after Council conducts a comprehensive review of capital and efficiency improvemen t needs. Reserve
replenishment is dependent upon net operational savings in subsequent fiscal years.
Carryforward Reserve
Under the Assigned Fund Balance classification, the Reserve for Carryforwards represents funding held at the end of
each fiscal year for critical unexpended operating budget appropriations to be purchased in the following fiscal year,
and any remaining Council Contingency funding. The reserve is reconciled at the end of each fiscal year to both
release prior year carryforward funding and reserve current year carryforward funding into the following budget year.
Staff determines the year-end reserve amount after all fiscal year payments are finalized; the reserve amount is
conceptually appropriated by Council each year in the budget adoption resolution.
Working Capital Reserves
In accordance with the City’s cautious and conservative fiscal philosophy, the City’s general prevailing financial
policy holds that the City should fund daily operations with current resources in o rder to avoid use of short-term
borrowing for cash flow management.
To support this policy a Working Capital Reserve is maintained that meets cash flow requirements, and in turn, ensures
the continuance of services to the public while also preserving the City’s credit worthiness. To provide adequate
working capital in the case of extreme circumstances, the City shall maintain, in combination with the Fiscal
Stabilization Reserve, a minimum operational reserve of 60 days of the following year’s General Fun d budgeted
expenditures (net of internal service charges and transfers out), up to a maximum operational reserve amount equal to
90 days of the following year's General Fund budgeted expenditures (again, net of internal service charges and
transfers out). This reserve falls under the Unassigned Fund Balance classification.
Beginning with the FY 2016/17 budget, the Working Capital Reserve is maintained at $1 million (reduced from $2
million), and the Fiscal Stabilization Reserve in maintained at $2.5 milli on (increased from $1.5 million). At this time
a Working Capital Reserve of $1 million is sufficient for cash flow needs, however, the funding level will be assessed
on an annual basis to ensure $1 million is sufficient for cash flow needs. The $1 millio n funding shift to the Fiscal
Stabilization Reserve reflects a more realistic reserve usage structure – the Working Capital Reserve’s purpose is to
ensure sufficient operating cash; the reserve has no defined fund uses, repayment terms, or authorization re quirements.
On the other hand, the Fiscal Stabilization Reserve’s purpose is defined and may be called upon for critical uses in the
future. The overall 60-day General Fund operational reserve minimum requirements shall continue to be met.
Fiscal Stabilization Reserve
Under the Unassigned Fund Balance classification, the Fiscal Stabilization Reserve represents a funding set -aside to
provide temporary financing for budget stabilization caused by fiscal downturns, unanticipated extraordinary
expenditures related to a natural disaster or calamity, or from an unexpected liability or funding decrease created by a
legislative action. Effective July 1, 2016, the Fiscal Stabilization Reserve funding level increased by a $1 million
transfer from the Working Capital Reserve, up to $2.5 million. As of FY 2018/19, the Development Services Reserve
of $650,000 was integrated into the Fiscal Stabilization Reserve to reflect the Council’s desire to review citywide
operational priorities and needs as a whole rather than segmented sections. This brought the Fiscal Stabilization
Reserve up to $3,150 million; approximately 15% of the General Fund’s budgeted operations. Together, these funding
shifts provide a focused but flexible reserve funding purpose and utilization s tructure.
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Fiscal stabilization uses are defined and restricted to: 1) revenue declines lasting more than one year and equal to more
than 5% of either property tax, the combined total of other taxes, or General Fund revenues in total; 2) an unanticipate d
extraordinary operational increase of more than 5% such as from a natural disaster; or 3) an unexpected Federal, State,
County or CalPERS funding change.
Council may utilize funding at budget adoption, by adoption of a budget adjustment resolution d uring the course of
the year, or after a Federal, State, or locally declared emergency. In the event a locally declared emergency takes
place, the City Manager has the authority to spend funds until such time as the City Council takes action. Reserve
appropriations are to be replenished from year -end net operations, as available, on a priority basis. The $2.5 million
Fiscal Stabilization Reserve funding level will be assessed on an annual basis to ensure this funding level is sufficient
in light of operational reserves and utilization needs.
Compensated Absences Reserve
Under the Unassigned Fund Balance classification, the Compensated Absences Reserve is established to smooth
expenditure fluctuations resulting from the payout of accrued leave to employ ees at service separation and distribution
payouts. Reserve funding equal to one-third of the compensated absences liability is established at year -end. Reserve
funding in excess of one-third of the liability is to be returned to the General Fund’s Other Unassigned Reserve.
Use of the reserve occurs when total annual compensated absences payouts exceed budgeted salary funds. Large
payouts decrease the compensated absences liability at year -end, thereby supporting the practice of utilizing the
reserve as needed. Year-end reconciling allocations to and from the reserve are approved though Council’s budget
resolution adoption each fiscal year, with the liability and resulting reserve amounts determined as part of the year -
end close process.
Council Discretionary Reserve
Under the Unassigned Fund Balance classification, the Council Discretionary Reserve represents unspent funds from
the Council’s annual appropriation. The reserve provides a mechanism to roll forward remaining Council
Discretionary Funds as reserve funds are immediately re-appropriated into the following fiscal year. This allows
Council the flexibility to take advantage of unforeseen opportunities or needs without the restriction of fiscal year
boundaries. Use of the reserve funding requi res Council majority approval. The reserve exists at year -end only when
there are remaining unspent Council Discretionary funds at the end of the fiscal year.
Other Unassigned Reserve
The ‘Other Unassigned Reserve’ represents accumulated net operations not yet allocated to other fund balance
reserves, and by definition, fall into the Unassigned Fund Balance classification.
Other fund’s accumulated net operations are typically accou nted for in an undefined reserve account in the fund – and
typically titled ‘Fund Balance Reserve’. As other funds are structured for specific uses or commitments, the fund
balance, by its distinctiveness, already has a directed purpose, whereas the Gener al Fund is used for multiple and
general operational purposes thereby requiring a distinction of purpose for each reserve. Council may utilize reserve
funding at budget adoption or by adoption of a budget adjustment resolution during the course of the ye ar. Reserve
funding is replenished from year-end net operations, as available.
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SPECIAL REVENUE FUND RESERVES
Landscape & Lighting Assessment District Funds
Assessment District Funds are Special Revenue Funds, which is a type of governmental fund. As a governmental
fund, the Landscape and Lighting Assessment District Funds comply with GASB 54 fund balance classifications, and
by nature of the fund’s purpose, fund balance reserves are classified as restricted reserves.
Special Revenue Funds account for and report the proceeds of specific revenue sources that are restricted or committed
to specified purposes (other than for debt service or capital projects.) For the City, Landscape & Lighting Assessment
District Special Revenue Funds were established to account for each individual assessment district; thereby each fund
has its own separate fund balance reserve.
Each district’s fund balance reserve should be sufficient to provide working capital to cover operational expenses
through the first half of assessment receipts in January, therefore equitable to approximately one -half of a district’s
annual expenditure budget. The second half of receipts are rece ived in June. Some districts may include capital
improvement projects in addition to ongoing regular maintenance resulting in fund balance increasing over the years
to accumulate sufficient resources for the improvement projects. As each district’s situ ation is different, a district’s
maximum fund balance shall be determined by the Public Works Director.
Requests for use of the reserve are approved by Council through budget adoption or by a Council approved budget
adjustment resolution throughout the ye ar. The reserve is replenished from the Fund’s net operations in subsequent
years.
DEBT SERVICE FUND RESERVES
Library General Obligation (GO) Bond Debt Fund
The Library General Obligation (GO) Bond Debt Fund is a Debt Service Fund established to acco unt for the financial
resources accumulated for principal, interest, and cost of issuance expenditures associated with the Library Bond Debt.
As Debt Service Funds are a governmental fund type, the fund reserves fall under the GASB 54 fund balance
classifications. Debt Service Fund reserves are classified as a Restricted Reserve with the funding only spent for
specific purposes as stipulated by the bond covenants.
The Library GO Bond Debt Fund ensures receipts are tracked separately, and that funding i s available for the GO
Bond debt service requirements. At a minimum, the year -end fund balance reserve shall be sufficient to provide
working capital to cover the semi-annual principal and interest debt payment due on August 1 st as the GO Bond tax
receipts are received after the 1st debt payment is due. December receipts provide for the February payment. In
addition, as bond assessments are collected as a percentage of property values, reserves should provide sufficient
funding to compensate for tax fluctuations. The fund’s reserve maximum is set at no more than one-year of budgeted
annual expenditures.
The reserve balance is increased (or reduced) through establishing assessment rates at more (or less) than the semi -
annual payments and bond services require. Therefore, use or replenishment of the reserve is approved by Council
through budget adoption, and implemented through an increased or reduced assessment rate as a result of the fund’s
net operations.
Arrowhead Community Facility District Bond Debt Fund
In 2016, the City agreed to act as the fiduciary agent for the Arrowhead Community Facility District’s bond issuance
to fund the community’s water system infrastructure. The bond was finally issued in December 2018, and participant s
in the bond issuance began assessment payments in FY 2018/19. The annual debt service assessment is to cover the
cost of the bond’s principal and interest payments, and the associated administrative costs. The fund’s reserves are
comprised of funds collected less bond costs. As flat dollar amount assessments are set rather than percentage rates,
the CFD Bond Debt assessments do not generate excess fund balance as does the GO Bond Debt Fund.
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CAPITAL IMPROVEMENT PROJECT FUND RESERVES
Overview
Capital Improvement Project (CIP) Funds account for the acquisition and maintenance of major capital assets other
than those financed through special assessments or enterprise funds. Capital Project Funds are a type of governmental
fund and therefore comply with GASB 54 fund balance classifications. Because Council has directed the fund’s
appropriated funding be spent on specific capital improvement projects, the Capital Project Fund Balance Reserve is
classified as Committed Fund Balance.
Budgeted capital improvement project funding is determined by the scope of work approved by Council, and remains
assigned for that use until completed or reassigned by Council. Fund Balance amounts represent the total remaining
funds in the individual projects at year-end. As Fund Balance amounts are determined by the amount of project
completion at year-end, they cannot be standardized for minimum or maximum amounts. Fund Balance is re-
appropriated to the capital projects in the following fiscal year for the work to be completed.
Street Improvement Projects Funds
Street Improvement Project Funds provide for a safe and functional roadway and pedestrian street system. Each Street
Improvement Fund (CIP Street Fund, CIP Grant Fund, and Gas Tax Fund) has multiple proj ects which roll up into the
overall fund balances, but remain designated for use by project.
The CIP Street Fund receives annual funding from designated fees, reimbursements, contributions, and transfers from
other funds. The CIP Grant Fund receives federal, state, and local grants which vary in source and amount from year -
to-year. On occasion, a private grant may be received. Typically, CIP Grant Funds
have a negative fund balance as project work is conducted before reimbursement is received. Gas T ax Funds represent
annual Highway User Tax and Transportation Congestion Relief revenue allocations that are to be accounted for
separately and are subject to State audits.
Park & Trail Improvement Project Funds
Park & Trail Improvement Project Funds provide for capital improvements to the City’s neighborhood and city parks
and plaza, the sport fields, bike and pedestrian trails, and open space areas throughout the City. Each of the Park &
Trail Improvement Funds (CIP Park & Trail Fund, CIP Tree Fund, and the CIP Park & Trail Grant Fund) have multiple
projects which roll up into the overall fund balances, but remain designated for use by project.
The CIP Park & Trail Fund receives annual funding from Park-In-Lieu fees, occasional subventions, reimbursements
and contributions, and transfers in from other funds. The Tree Fund receives revenue from tree fines and transfers
from other funds upon Council direction. The CIP Grant Fund receives federal, state, local and occasional private
grants which vary in source and amount from year-to-year. Typically, CIP Grant Funds have a negative fund balance
as project work is conducted beforehand and then reimbursed from expenditure invoices.
Year end fund balance represents the remaining unexpended project funds (net of any negative CIP Grant Fund
Balance) which are subsequently re-appropriated by Council into the following budget year through budget adoption.
Facility Improvement Project Funds
Facility Improvement Project Funds provide for capital maintenance and improvements of the City-owned buildings
and structures throughout the City. Each of the Facility Improvement Funds (CIP Facilities Fund and the Facility
Grant Fund) have multiple projects which roll up into the overall fund balances, but remain desi gnated for use by
project.
The CIP Facilities Fund receives annual funding from a General Fund transfer, from Theater Ticket Surcharge Fees,
and from reimbursements and contributions. The Facility Grant Fund receives revenue from grants that vary in amount
from year-to-year. Typically, CIP Grant Funds have a negative fund balance as project work is conducted beforehand
and then reimbursed from expenditure invoices.
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Year end fund balance represents the remaining unexpended project funds (net of any negative CIP Grant Fund
Balance) which are subsequently re-appropriated by Council into the following budget year through budget adoption.
Administrative & Technology Improvement Funds
Administrative & Technology Improvement Project Funds provide for major capital expenditures to imp rove or
enhance administrative, operational, or technology-based systems, processes, or functions. Each of the Administrative
& Technology Improvement Funds (CIP Admin & Tech Improvement Fund and the Admin & Tech Grant Fund) have
multiple projects which roll up into the overall fund balances, but remain designated for use by individual project.
The CIP Administrative & Technology Improvement Fund typically receives funding from a General Fund transfer
as administrative and technology improvement focuse d grants are limited. If grants are received, projects typically
have a negative fund balance as project work is conducted beforehand and then reimbursed from expenditure invoices.
Year end fund balance represents the remaining unexpended project funds (net of any negative CIP Grant Fund
Balance) which are subsequently re-appropriated by Council into the following budget year through budget adoption.
INTERNAL SERVICE FUND RESERVES
Overview
Internal Service Funds are established to provide centralized cost centers for shared expenses and services in order to
efficiently track costs and manage resources. Costs are then allocated back to the operational programs based on
usage to more accurately determine cost of services.
The City’s Internal Service Funds include the two Insurance funds: Risk Management and Workers Compensation,
four Service/Support funds: Office Support, IT Services, Vehicle & Equipment Maintenance, and Building
Maintenance Funds, and three Equipment Replacement funds: the Vehicle & Equipment Replacement Fund, the
Office Technology Equipment Replacement Fund, and the Building FF&E (Furniture, Fixture, & Equipment)
Replacement Fund.
As each fund is accounted for as a separate entity, operational revenues less expenditures result in either a positive or
negative fund balance at any given point in time – Internal Service Funds are similar to the separate checking and
saving accounts a person may use for different purposes. At year end, each fund’s net balance is represented as the
“Fund Balance Reserve”.
The intent of the Internal Service Funds Reserves is to hold appropriate levels of reserves to support cash flow needs
and minimize interfund loans, not to accumulate funds in excess of expected ongoing operational costs. Reserve levels
are determined by the specific operational needs of the program, but typically will fall within 25 – 50% of annual
budgeted expenditures.
Internal Service Funds are a type of Proprietary Fund; therefore GASB 54 fund balance classification (for
Governmental Fund types) does not apply. Instead, Internal Service Fund’s financial statement reports are presented
similar to private-sector businesses and use “Restricted” and “Unrestricted Net Position” to define net operational
balances (equity/fund balance reserves).
Unrestricted Net Position allows reserve funding to be used (with Council approval) within the general scope of the
fund’s purpose. Restricted Net Position reserves are limited to a specific use, narrower than the stated purpose of the
fund. For example, grant funding provided for a defined use, as in remaining funds from a Risk Management Training
Grant within the Liability/Risk Management Fund, must be used for qualified training purposes. Most Internal Service
Funds reserves are held in the Unrestricted Net Position category.
Liability /Risk Management Reserve Fund
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The Liability/Risk Management Fund’s Unrestricted Net Position reserve supports cash flow needs and minimizes
interfund loans. Appropriate levels are maintained through service chargebacks to the programs, based on operational
risk factors. Most claims are covered under the insurance risk pool JPA. The City is self -insured for up to $25,000
per General Liability and City Vehicle Auto Liability occurrence, and up to $5,000 for Property Damage and 3rd Party
Auto Liability. Non-covered claims are paid fully by the City.
The Liability/Risk Management program receives funding from allocations charged to covered departments, from
grant funding, and from claim reimbursements. At year end, unspent funding flows into Unrestricted Net Position or
Restricted Net Position for specific purposes. Requests for use of reserve balance are approved by Council through
budget adoption or by a Council approved budget adjustment resolution during the year. The reserve is replenished
from the Fund’s net operations in subsequent years.
Workers Compensation Fund
The Workers Compensation Fund’s Unrestricted Net Position reserve supports cash flow needs and minimizes
interfund loans. Appropriate levels are maintained through service chargebacks to the programs, based on operational
risk factors. The purpose of the Workers' Compensation program is to provide insurance benefit coverage for
employee work-related illness and/or injuries through its membership in a shared risk pool. The risk pool provides
coverage up to $250,000, and excess insurance provides coverage over this amount up to $10 million.
The Workers Compensation program receives funding from allocations char ged to covered departments, from grant
funding, and from claim reimbursements. At year end, unspent funding flows into Unrestricted Net Position, or
Restricted Net Position for grant funding. Requests for use of the reserve balance are approved by Counci l through
budget adoption or by a Council approved budget adjustment resolution during the year. The reserve is replenished
from the Fund’s net operations in subsequent years.
Office Support Fund
The Office Support program provides a centralized cost cen ter for administrative office support expenses, including
photocopy machine leases, postage machines, shared office machines, and the associated maintenance and repair
services, postage, paper, and copier supplies. For efficiency, office support costs are managed collectively and charged
back to departmental programs on a use-basis allocation. Accumulated net operations are held in the Office Support
Fund for working capital cash flow.
The reserve is funded from the allocations charged to covered depart ments. At year end, unspent funding flows into
Unrestricted Net Position. Requests for use of excess reserve balance are approved by Council through budget
adoption or by a Council approved budget adjustment resolution during the year. The reserve is re plenished from the
Fund’s net operations in subsequent years.
Information Technology Services Fund
Information Technology Services provide for the delivery of technology -based services throughout the City’s
operations, including maintenance of the City’s information systems and infrastructure, program implementation,
streaming video, internet, landline, and wireless communications systems, cloud-based technology, and support of all
existing information technology as well as new technology initiatives. For technology oversight, security, and
efficiency, information technology costs are managed collective ly and charged back to departmental programs on a
service-based allocation to fund the program.
Funding for the program comes from these allocations charged to covered departments. At year end, unspent funding
flows into Unrestricted Net Position. Accu mulated net operations are held in the Information Technology Services
Fund for working capital cash flow. Requests for use of the reserve are approved by Council through budget adoption
or by a Council approved budget adjustment resolution during the yea r. The reserve is replenished from the Fund’s
net operations in subsequent years.
Vehicle & Equipment Maintenance Fund
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The Vehicle & Equipment Maintenance program provides for the fuel, maintenance, and servicing of the City’s fleet
and major equipment to ensure all vehicles and equipment comply with manufacturer’s recommendations and safety
requirements.
To fund the program, vehicle & equipment replacement costs are charged back to the departmental programs based
on assigned usage. Accumulated net operations are held in the Vehicle & Equipment Maintenance Fund for working
capital cash flow. At year end, unspent funding flows into Unrestricted Net Position. Requests for use of the reserve
are approved by Council through budget adoption or by a Counci l approved budget adjustment resolution during the
year. The reserve is replenished from the Fund’s net operations in subsequent years.
Facility Maintenance Fund
The Building Maintenance program provides for the custodial, maintenance, and non -major repairs and building
improvement services for all facilities at the Civic Center, Prospect Center, and Museum Park. Additionally, the
program supports the maintenance and repair needs for the tenants of City leased buildings as defined in the lease
agreements. To fund the program, total costs are allocated back to
departmental programs primarily based on building space usage. General and public use is allocated to the Non -
Departmental program.
Accumulated net operations are held in the Building Maintenance Fund for working capital cash flow. Funding comes
from the allocations charged to covered departments. At year end, unspent funding flows into Unrestricted Net
Position. Requests for use of the reserve are approved by Council through budget adoption or by establishing
chargeback funding levels higher or lower than budgeted expenditures. The reserve is replenished from the Fund’s
net operations in subsequent years
Vehicle & Equipment Replacement Reserve
The Vehicle and Equipment Replacement Fund Balance Reserve accounts for accumulated funding over an asset’s
lifespan, to be used for the replacement of the vehicle or equipment at the end of its useful
life. Initial purchases are paid for through a department’s operational budget. If the pu rchased item is for ongoing
use, the Vehicle & Equipment Replacement program appropriates an annual allocation for the replacement of the
vehicles and equipment based on the asset’s cost and years of life. Final determination for replacement of the asset is
determined through an analysis of whether the cost of maintenance equals or exceeds the cost of replacing the asset.
The reserve is funded from allocations charged to covered departments and represents accumulated funding, less
amounts expended for asset replacement. At year end, unspent funding is held in Unrestricted Net Position. The
reserve is to be maintained at a level sufficient to provide replacement funding of vehicles and equipment in
accordance with replacement schedules.
Requests for use of the reserve are approved by Council through budget adoption or by a Council approved budget
adjustment resolution throughout the year. The reserve is replenished from the Fund’s net operations in subsequent
years.
Office Technology Equipment Replacement Fund
The Office Technology Equipment Replacement Fund accounts for accumulated funding over an asset’s lifespan to
be used for the replacement of office technology -based equipment such as desktop computers and monitors, laptops
and tablets, network infrastructure, and various other related equipment. Replacement costs are charged back to the
departments based on assigned equipment costs. Initial purchases are paid for through a department’s operational
budget. If the purchased item is for ongoing use, the Office Equipment Replacement program appropriates an annual
allocation for the replacement of the equipment based on the asset’s cost and years of life.
The reserve represents accumulated funding, less amounts expended for replacements. The reserve shall be funded to
provide replacement funding in accordance with replacement schedules. Funding for the reserve comes from the
allocations charged to covered departments. Requests for use of the reserve are approved by Council through budget
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adoption or by a Council approved budget adjustment resolution during the year. The reserve is replenished from the
Fund’s net operations in subsequent years.
Facility Furniture, Fixtures & Equipment (FFE) Replacement Fund
The Facility FF&E Fund accumulates fu nding over an asset’s lifespan to be used for the replacement of furniture –
such as tables, chairs, and cubicle partitions; for fixtures - such as kitchen appliances, sound equipment, lighting, for
equipment - such as HVAC units, boilers, and generators; and for facility infrastructure – such as roof, door, window,
and floor/carpeting replacement.
Initial purchases for new assets may be paid for through the Operating Budget or through the Capital Budget. Annual
replacement charges are charged-back to the supported department programs with full replacement funding to be
accumulated over the asset’s estimated lifetime. Final determination for replacement of the asset is determined
through an analysis of whether the cost of maintenance equals or exceeds t he cost of replacing the asset. The reserve
is intended to be maintained at a level sufficient to provide replacement funding in accordance with replacement
schedules.
Requests for use of the accumulated reserve funding are approved by Council through bu dget adoption, or if an
unplanned situation occurs, by a Council approved budget adjustment resolution during the fiscal year. The reserve
is replenished by replacement charge allocations in subsequent years.
TRUST & AGENCY FUND RESERVES
Overview
Trust and Agency Funds are created to enable City’s to assist associated agencies with fund management needs. Trust
Funds are established to hold another entity’s funds and ensure the proper management of their money. Agency Funds
are established to receive and disburse another entity’s money, as directed by the associated entity.
The City does not currently have any Trust Funds but has set up two Agency Funds: West Valley Clean Water
Program; and the Arrowhead CFD Project Fund. Because the Agency Funds manage their own money, the City of
Saratoga does not develop Reserve Policies for Agency Funds.
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CIP PROJECT PROCESS POLICY
This procedural policy defines how a project moves through the CIP Budget Funding process: from the initial project
idea, through project development, nomination, and project approval process, and if successful, into the Capital Budget
as a funded project.
The CIP project development stage of the policy takes different tracks, depending upon whether the project idea is
staff driven or Council nominated. These two paths are discussed separately below, until the tracks converge for CIP
project assessment preparation.
STAFF PROJECT DEVELOPMENT
1. CIP Project Initiation
As a function of staff’s day-to-day work, infrastructure improvements and large-scale repairs and maintenance
are identified as potential capital improvement projects. These are often high ly-visible tangible public assets such
as street repaving, or park and trail improvements. However, many CIP projects are less noticeable, including
facility roof repairs, tree planting, or ADA enhancements. Projects may also be administrative or technol ogy
improvements, and hence invisible to the general public, such as code updates/revisions, process improvements,
software implementations, or economic vitality programs.
Staff is to discuss the CIP project idea with the appropriate staff or City Manag er for feedback and refinement.
Ultimately, projects need clearly defined boundaries to identify project requirements, specifications, and
resources. While this is not always feasible in the initial stages of project development, the understanding that a
project will eventually require a clear and specific scope will encourage better preparation for discussing the
project idea and moving it through the nomination process. After receiving initial approval, staff moves into the
idea development stage.
2. Idea Development
To move the idea forward, staff will need to analyze and articulate the project’s scope, political impacts, priority
factors, resource requirements, and any other relevant considerations.
a. Project Scope – Scope may include the description, project size and location parameters, project purpose,
and goals or deliverables, such as products, services or results. Project justifications and assumptions should
support the project’s purpose and definition, and may include cost -benefit analysis, risk assessments, funding
availability, or even community desirability factors.
The scope should clearly state if a project is to be funded and/or completed in phases rather than as a singular
body of work. If the project is ongoing infrastructure main tenance or a program project, this too should also
be clearly noted. In some cases, project scope may be defined by exclusions – statements about what the
project will not accomplish or produce. Additionally, constraints or restrictions may identify pro ject
limitations.
Project Scope defines a commitment to produce a body of work or end -product with the resources provided
under the stated assumptions. The written scope helps to manage expectations and provide clarity to the
involved parties, reduce confusion and failure, prevent scope creep, and provide transparency to the
community.
b. Political Considerations - Knowledge of historical information, which attests to the necessity of
Council/staff communication is of vital importance in project develo pment. Determine whether this project
has come up for consideration before, or why was it not completed previously. Are there lessons to be learned
from a past project proposal?
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Another consideration includes knowing whether a project might be controv ersial. Is there a segment of the
community strongly opposed to, or strongly supportive of this specific project? Will this project prompt
demand for further funding or resources? Have similar projects been
completed in another part of the city? Determine why this project should be considered a priority over others,
and whether the project’s cost or benefits would be supported by the community.
c. Priority Factors - Project priority is an important consideration in the CIP approval decision factor.
Council’s role is to determine which projects are of higher priority than others since there will never be
enough money or resources to do every project. Decision criteria may include factors such as:
• Health and Safety Issues
• Imminent failure of structure/system
• Short-term cost of repair vs. long-term cost of replacement
• Availability of external or dedicated funding
• Efficiencies
• Federal or State mandates
• Business or community support
• Impacts if project is not completed
A project’s priority is also affected by the severity of the criteria. For instance, a project that falls under the
“Imminent Failure of Structure/System” criteria may be an extremely dangerous situation in need of
immediate repair, or low danger of minor importance and simply remedied by removal. Another example
would occur with Federal or State mandated projects. There may be little impact as to whether the mandate
is met, or there may be severe fines for lack of timely completion. As a result, projec t priority is based on
the overall assessment of the circumstances; many factors contribute to priority decisions and Council cannot
rely upon a clear hierarchical order upon which to base their decisions.
d. Project Resources - In the City’s project development discussions, resources typically refer to financial
funding. However, resources may also refer to staff time, equipment and materials, community/stakeholder
participation or support, space requirements, information technology services, or some other type of support
or contribution.
Funding plays a critical role in project development. In many cases, lower priority projects may be approved
ahead of higher priority projects simply because there is designated funding available for the lower priority
projects. The ability to bring designated funding (such as a grant award) with a project proposal greatly
increases the likelihood that the proposed project is approved. Overall, projects that request undesignated
Capital Project Reserve funding are more competitive due to funding limitations and the number of projects
competing for the same pot of funds.
An additional component of project resource considerations are the unstated resources (identified above)
required in project construction or implementation. For instance, staff time is limited, and time spent working
on one project prevents staff time being spent on another project. Project timing and staff time requirements
are therefore an important component of the project that Council may wish to review.
e. Other Considerations - There are numerous other factors not mentioned above that are also taken into
consideration when assessing a project idea. For example, can the City afford the ongoing operating budget
increases to maintain or implement the project? Does the project contribute toward economic vitality? Are
there environmental concerns? Does it enhance the community’s art, education, or cultural resources? Does
the project provide operational efficiencies or cost savings? Are there r isk management or legal liability
issues? Possibly the project requires development be staged in phases? Is there strong community interest
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in this project? Each project will differ, meaning analysis is specific to the circumstances, and diligent
research and thought should be put into developing project scope and justification.
In summary, the overall goal of idea development is to identify, quantify, and assess the project
comprehensively. This effort is intended to ensure that a proposed project i s well-thought-out, developed,
and articulated thereby enabling the City Manager and Council to make educated and rational decisions.
3. City Manager Approval
Staff is to propose the project idea to the City Manager for approval. If approved, the project is moved onto the
CIP Project Candidate List. Staff is to notify the Administrative Services Director of the project’s approval and
provide pertinent project information.
Staff will prepare written narratives with project scope, justification, fiscal impacts, cost estimates, timelines, etc.
as necessary for Council Retreat assessment package.
CITY COUNCIL PROJECT DEVELOPMENT
Council Members are often the recipients of residents’ suggestions for capital project work. Depending on the
topic, Council Members can take these opportunities to: 1) educate the residents on why a project may not be
feasible; or 2) provide residents with information on how to conta ct City staff with their requests to determine
feasibility; or 3) Council may support the project suggestion and decide to act as a proponent for the project by
guiding it through the Capital Project Nomination process:
1. Nomination
To move a project idea onto the CIP Candidate List, a Council Member is to propose the idea to fellow Council
Members at the end of a City Council Meeting during the Council Items session and request that it be put on the
CIP Candidate List for review during the next upcoming CIP budget cycle.
2. Idea Concurrence
A second Council Member must concur with the request to move the project idea onto the Capital Project
Candidate List.
3. Follow-up
A nomination to the Capital Project Candidate List is to be recorded in the City Coun cil minutes, and acted upon
as a follow-up item. City Manager will notify Council Member of project nomination (to clarify/verify
understanding of project scope and of the assignment to a staff member. Staff member will complete Candidate
List step requirements, including: preparation of project scope narrative and justification, fiscal impacts, cost
estimates, timelines, etc. as required for Council Retreat assessment package.
CIP PROJECT ASSESSMENT
1. Assessment Package
In preparation for the annual Capital Project Assessment, Finance will consolidate the CIP Project Candidates,
along with proposed changes to current CIP projects, and the current year’s CIP Unfunded Project List into an
assessment package for Council’s review. The Capital Proj ect Assessment review provides a forum to assess all
projects at one time. These assessment package will include:
● A review of available funding
● Existing projects in the current year’s CIP
● Proposed changes to existing projects
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● The current CIP Unfunded List
● Proposed changes to projects on the CIP Unfunded List
● New projects on the CIP Candidate List
● Review of requests in conjunction with funding sources
2. Capital Project Assessment
The City Council’s review of the capital project assessment package is to be held annually, early in the budget
development cycle, in late January or early February. In addition to reviewing the assessment package, the
Council will also review currently funded capital projects that have unencumbered funds to determine if the
project will continue in the following fiscal year.
In their review, Council may request revisions to a project’s scope, funding, or other component. However,
changes that redefine a proposed project must be Council’s consensus direction. During the assessment review
process, as projects are assessed, they are either:
● Rejected
● Accepted, or
● Modified and Accepted
At the conclusion of the assessment review, Council will prioriti ze accepted projects and designate project
funding. Projects placed on the Funded List will be brought forward to the upcoming Budget Study Session. The
remainder will be placed on the CIP Unfunded Project List.
NOTE: Rejected project ideas may be nominated for another attempt to become an approved project in the
following year(s), but must again go through the project development and assessment process.
3. Budget Study Session
Updated CIP funding availability and project revisions will be reviewed a fi nal time with Council. Council will
conduct a final assessment and provide consensus direction to staff for inclusion in the upcoming Proposed Budget
Hearing to be held in May.
CIP PROJECT FUNDING
1. Proposed Budget Hearing
The final Proposed Capital Budget with the recommended project funding will be brought to the City Council
Budget Public Hearing in May. Council is to provide any final comments or direction for budget adoption.
2. Budget Adoption
The Operating and Capital Budgets are brought to Council in June with all final direction incorporated into the
final summaries. Council is to adopt the budget at this time, with budget funding effective on July 1 st of that year.
3. Funding Process Follow-up
Approved CIP projects that do not receive funding allocations will be assigned to the next budget year’s CIP
Unfunded List. The list will be included in the budget document, and assessed again during the following year’s
Capital Project Nomination and Assessment Process. The new CIP Unfunded Li st has a life span of one budget
cycle.
Attachment D
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2,839,134
Roadway Safety & Traffic Calming 75,000
Infrastructure Maintenance and Repairs 250,000
Annual Retaining Wall Maint & Repairs 200,000
McFarland Avenue Curb & Gutter Replacement 350,000
Fruitvale/Allendale Ave. Intersection Impr.125,000
Prospect Road Improvements 40,000
Quito Road Bridges - Project Engineering 50,000
Saratoga Village to Quarry Park Walkway 100,000
Saratoga-Sunnyvale Road Pathway Rehab (Cox to RRXing)125,000
Traffic Signal Battery Backup - Citywide 150,000
Village Clock 15,500
1,480,500
Park, Trail, Grounds, and Medians R&R 100,000
Guava Ct/Fredericksburg Entrance 250,000
Reconstruction of Hakone Koi Pond 300,000
Kevin Moran Park Accessible Parking 95,000
745,000
Senior Center/Community Center Generator and EV Charging Stations 500,000
500,000
Safe Routes to School Needs Assessment 60,000
Risk Management Projects 50,000
110,000
2,835,500
3,634
Funding
Source
Funding
Allocation
Landscape & Lightning Fund Closeout 150,000
Quito Neighborhood Improvements CIP 150,000
Risk Management CIP elimination 50,000
Art Infrastructure CIP 25,000
Annual Parks, Trails, Grounds, and Medians Replacement CIP 25,000
Wildfire Task Force CIP request 50,000
Additional Requests
Total All Projects
Council Directed Allocations
Total Administrative & Technology Projects
Remaining Funds
Parks & Trails Projects
Total Parks & Trails Projects
Facilities Projects
Total Facilities Projects
Administrative & Technology Projects
Finance Committee Recommended Changes
DRAFT PROPOSED
Results of FY 2020/21 CIP Funding Prioritization
Street Improvement Projects
Total Street Improvement Projects
DISCRETIONARY CIP RESERVES
Attachment E
39
Project #Project CIP - Reserve Park In-Lieu Gas Tax Grants Other Total
Street Projects
9111-003 Annual Roadway Improvements 941,270 - 980,325 - - 1,921,595
9121-001 Roadway Safety & Traffic Calming 75,000 - -- - 75,000
9121-004 Traffic Signal Battery Backup - Citywide 150,000 - -- - 150,000
9122-006 Prospect Road Improvements 40,000 - 145,555 1,075,000 - 1,260,555
9122-010 Fruitvale/Allendale Ave. Intersection Impr.- - - - - -
9132-006 Village Clock 27,500 - - - - 27,500
9141-005 Annual Infrastructure Maintenance & Repairs 250,000 - - - - 250,000
9141-006 McFarland Ave. Curb & Gutter Repair - - - - - -
9142-005 Saratoga Avenue Sidewalks - - - 79,656 - 79,656
9142-011 Village Sidewalk & Pedestrian Impr. - Phase II 65,530 - - - - 65,530
9142-014 Big Basin Way Sidewalk Repairs - - 20,990 163,000 - 183,990
9142-019 Saratoga Village Crosswalk & Sidewalk Rehab.44,000 - - 3,141 - 47,141
9142-020 Quito Road Sidewalk Improvements 43,370 - - - - 43,370
9142-021 Saratoga/Sunnyvale Sidewalks 92,183 - - - - 92,183
9142-022 Saratoga Sunnyvale Rd. Pathway Rehab 125,000 - - - - 125,000
9152-001 4th Street Bridge 99,837 - - 1,704 - 101,541
9152-002 Quito Road Bridges - Project Engineering 167,348 - 7,085 19,029 - 193,462
9152-004 Quito Road Bridges - ROW Acquisition 32,043 - - 302,982 - 335,025
9153-003 Annual Retaining Wall Maintenance & Repairs 200,000 - - - - 200,000
9171-002 Quito Road Electric Underground Project - - - - 98,744 98,744
Total Street Projects 2,353,081 - 1,153,955 1,644,512 98,744 5,250,292
Parks & Trails Projects
9211-001 Annual Park & Trail Repairs 100,000 - - - - 100,000
9211-002 Citywide Tree Replanting - - - - 45,445 45,445
9212-001 Tree Dedication Program - - - - 24,125 24,125
9222-004 Hakone Gardens Infrastructure Improvements 23,175 120,000 - - - 143,175
9222-008 Hakone Pond Reconstruction 300,000 300,000
9237-002 Kevin Moran Park Accessible Parking 95,000 95,000
9274-002 Guava Ct/Fredericksburg Entrance 300,047 - - - - 300,047
9277-004 Saratoga Village to Quarry Park Walkway 306,584 - - - - 306,584
9278-001 Saratoga-to-the-Sea Trail 697,309 - - 636,319 - 1,333,628
Total Parks & Trails Projects 1,822,115 120,000 - 636,319 69,570 2,648,004
Facilities Projects
9322-001 Theater Improvements 115,667 - - - - 115,667
9322-013 PEG Funded Projects 420,789 - - - - 420,789
9331-011 Preschool Turf Conversion 12,500 - - - - 12,500
9333-007 Senior Center Entrance Remodel 112,585 - - - - 112,585
9333-008 Community Center Improvement Program 85,000 - - - - 85,000
9333-009 Community Center Generator & EV Stations 500,000 - - - - 500,000
9372-001 Library Building Exterior Maintenance 10,000 - - - - 10,000
Total Facilities Projects 1,256,541 - - - - 1,256,541
Administrative & Technology Projects
9413-002 City Website/Intranet Redesign 16,949 - - - - 16,949
9415-001 Development Technology Management 99,051 - - - - 99,051
9442-001 Citywide LLD Initiation Match Program 25,000 - - - - 25,000
9442-002 Horseshoe LLD Beautification 19,250 - - - - 19,250
9443-003 Art Infrastructure CIP - - - - - -
9443-004 Safe Routes to School Needs Assessment 60,000 - - - - 60,000
9451-002 General Plan Update - CIP 175,199 - - - - 175,199
9491-001 Risk Management Mitigation Project 50,000 - - - - 50,000
Total Administrative & Technology Projects 445,449 - - - - 445,449
Total All Projects 5,877,186 120,000 1,153,955 2,280,831 168,314 9,600,286
PROPOSED FY 2020/21 CIP FUNDING
PER 3.4.2020 COUNCIL CIP MEETING
Attachment F
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