HomeMy WebLinkAbout02.25.2021 Finance Committee Agenda Packet
CITY OF SARATOGA
COUNCIL FINANCE COMMITTEE
FEBRUARY 25, 2021
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 meeting by:
Using the Zoom website https://us02web.zoom.us/j/82531445233 or App Webinar ID: 825 3144
5233 and raising their hand to speak on an agenda item when directed by the Mayor.
1. 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 prior to the meeting by
commenting online at www.saratoga.ca.us/fc prior to the start of the meeting. These emails will
be provided to the members of the Council and will become part of the off icial 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 City will use its best efforts to provide reasonable accommodations to provide as
much accessibility as possible while also maintaining public safety.
TIME 3:00 p.m.
LOCATION Linda Callon Conference Room
Saratoga City Hall
13777 Fruitvale Avenue
Saratoga, CA 95070
1. CALL TO ORDER Mayor Zhao
2. ROLL CALL Council Members: Bernald, Fitzsimmons, Kumar, Walia, Zhao
3. REPORT ON POSTING OF THE AGENDA: Pursuant to Government Code Section 54954.2,
the agenda for this meeting was properly posted on: February 22, 2021.
4. ORAL & WRITTEN COMMUNICATION
Any member of the public may address the Committee about any matter not on the agenda
for this meeting for up to three minutes. Committee members may not comment on the
matter but may choose to place the topic on a future agenda.
5. APPROVAL OF FINANCE COMMITTEE MEETING MINUTES FOR January 26, 2021
01.26.2021 Finance Committee Minutes
6. OLD BUSINESS
A. N/A
7. NEW BUSINESS
A - Policy Statements-2021-22 Changes
B - OPERATING BUDGET PROCESS
C - CIP BUDGET PROCESS
8. ADJOURNMENT
CERTIFICATE OF POSTING OF THE AGENDA, DISTRIBUTION OF THE AGENDA PACKET,
COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
I, Mary Furey, Administrative Services Director for the City of Saratoga, declare that the
foregoing agenda for the meeting of the Council Standing Finance Committee of the City of
Saratoga was posted and available for public review on February 22, 2021 at the City of
Saratoga, 13777 Fruitvale Ave., Saratoga, CA 95070, and on the City’s website at
www.saratoga.ca.us.
Signed this 22nd day of February 2021 at Saratoga, California.
Mary Furey, Administrative Services Director
In compliance with the Americans with Disabilities Act, if you are a disabled person and need a
disability-related modification or accommodation to participate in this meeting, please contact
the City Clerk’s Office at (408) 868-1216 or by email at debbieb@saratoga.ca.us. Requests must
be made as early as possible and at least one full business day before the start of the meeting.
In accordance with the Ralph M. Brown Act, staff reports and other materials provided to the members
of the legislative body will be made available following removal of State and local shelter in place
orders in the office of the City Clerk at 13777 Fruitvale Avenue, Saratoga, CA 95070.
[28 CFR 35.102-35.104 ADA title II]
INTRODUCTION SECTION
CITY OF SARATOGA ● FISCAL YEAR 2021/22 OPERATING & CAPITAL BUDGET 1
FISCAL MANAGEMENT POLICY STATEMENTS
The City of Saratoga practices fiscal responsibility through conservative financial management, and cautious,
sustainable, and enforceable fiscal policies and internal controls to ensure prudent and efficient use of resources.
Policies and controls represent long-standing accounting, budgeting, debt, investment, and reserve principles and
practices, and are the foundation upon which the City 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 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.
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
Grants & Donations
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, transparency, 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 or Budget Study Session.
Council members are asked to provide comments or suggestions for revisions to the Administrative Services
Director with the final draft made available for review by the entire Council prior to adoption.
The City’s primary long-term financial goals seek 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
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.
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CITY OF SARATOGA ● FISCAL YEAR 2021/22 OPERATING & CAPITAL BUDGET 2
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 essential services and infrastructure at the 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 governmental 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 and federal level.
The City shall develop and incorporate long-term financial planning tools to promote strategic analysis and
prioritization of financial resources in decision making.
Replacement plans shall be maintained for fixed assets, such as vehicles, equipment, park infrastructure, building
fixtures and equipment, and technology infrastructure.
Efficient major infrastructure funding requires comprehensive and long-term Master Plans. The City shall
endeavor to develop major infrastructure maintenance and replacement plans for roadways, bridges, retaining
walls, storm drains, streetlights, and similar infrastructure.
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, Finance & Administrative Services Department staff provides; 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, typically at the
Annual Council Retreat (scheduled in late January or early February). This annual review assists Council with
formulating direction for long-range fiscal planning, Operating Budget development, and capital project 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.
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.
Additionally, a minimal base amount of $500,000 remains in the Unassigned Fund Balance Reserve at year-end
to provide the first layer of fiscal protection for unanticipated operational shortfalls or 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
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CITY OF SARATOGA ● FISCAL YEAR 2021/22 OPERATING & CAPITAL BUDGET 3
revenues; project revenues and reimbursements; community benefit assessments; and federal, state, local, and
private grants.
In practice, budgeted revenues are conservatively stated, and budgeted expenditures are funded at the full level
required to meet annual operational and capital improvement goals. 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 appropriation
limit calculated in accordance with Article XIIIB of the Constitution of the State of California. Known as the
Gann Limit, the City Council 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, departments,
programs, and projects as needed to effectively operate, provided the fund’s total appropriation amount is not
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 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, prioritizing 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.
AUDITING AND FINANCIAL REPORTING
California State statutes require an annual financial audit of the City’s financial records and 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 the 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.
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CITY OF SARATOGA ● FISCAL YEAR 2021/22 OPERATING & CAPITAL BUDGET 4
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 Accessibility) 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.
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 budget 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 develops
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, typicallyscheduledfor completion
within the five yearplan timeline, with cost estimates based on current year dollars. Project estimates are updated
as needed, due to price changes, design specifications, or project scope adjustments.
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
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CITY OF SARATOGA ● FISCAL YEAR 2021/22 OPERATING & CAPITAL BUDGET 5
may propose projects for which staff will 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 in accordance with available
funding. Council also determines what projects shall be included on the Unfunded Project List for future
consideration.
The five-year Capital Improvement Plan (CIP) is updated annually in conjunction with the operating budget.
While the CIP reflects the current and changing needs of the community as well as enhancements to improve the
quality of the community, Council prioritizes the maintenance of City infrastructure to safeguard the public’s
safety and reduce maintenance costs over the long-term. The first year of 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 include: Street Improvements, Park
& Trail Improvements, Facility Improvements, and Administrative & Technology Improvements.
All projects within the CIP programs are appropriated, managed, and tracked as separate funding entities, with
each project’s financial status 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. Proposed uses for the Capital
Project Reserve fund is reviewed by Council, with preliminary allocation direction voted upon by Council at the
Budget Study Session in April. This direction is presented at the Proposed Budget Hearing in late May or early
June, with Final CIP funding direction determined by Council with Budget Adoption 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 be reviewed by Council for budget direction each fiscal year:
$250,000 –RoadwayInfrastructure Maintenance & Repairs (for Sidewalk, Storm Drains, Curb & Gutter,
and Bridge Maintenance)
$200,000 – Retaining Wall Maintenance & Repairs
$125,000 – Parks, Trails, Grounds & Median Replacement Funding
$ 75,000 – Roadway Safety and Traffic Calming
$ 25,000 – City Art Program
$ 25,000 – Hakone Improvements
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 city streets at an average 70 PCI rating. On occasion, separate
street specific resurfacing projects are established that also contribute toward this goal. In FY 2016/17, Council
established a $2 million minimum annual funding goal. Funding comes primarily from dedicated Gas Tax
Revenue and from Vehicle Impact Fees assessed on the Solid Waste Services contract provider. This CIP project
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.
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CITY OF SARATOGA ● FISCAL YEAR 2021/22 OPERATING & CAPITAL BUDGET 6
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
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 is not
full-cost recovery based overall.
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 contract. Contracts are valid 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.
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 Contract 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 Record Retention Policy and schedule.
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CITY OF SARATOGA ● FISCAL YEAR 2021/22 OPERATING & CAPITAL BUDGET 7
Services, supplies, and fixed asset purchases exceeding $25,000 must be authorized by the City Council, unless
purchase is specifically identified as approved in the adopted budget or excluded under the Purchasing Policy.
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 expense 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, and through Internal Service Fund programs to both
maintain and replace operational infrastructure, such as City buildings, 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 retained to provide information for preparation of
financial statements in accordance with GAAP and compliance with GASB 34 requirements.
Infrastructure management systems are to be developed and maintained to provide long-term financial and
operational planning. These shall include various roadway system management programs, storm drain system
management plans, bridge replacements, street signal system replacements, and all other infrastructure categories
that require significant financial resources to fund eventual replacement needs.
Information Technology software, hardware, and auxiliary equipment and system assets are tracked and funded
through the Operating Budget’s Internal Service Replacement Fund, whereas annual appropriations in the
Information Technology Services program budget funds most ongoing license, maintenance, and security costs.
GRANTS & DONATIONS
The City recognizes the value of grants and donations to extend pre-existing services, introduce new initiatives,
add artistic and cultural infrastructure, implement technological advances, and subsidize programmatic staffing
for public safety, recreational activities, development support, social services, homeland security, and economic
efforts.
City will seek to obtain and effectively administer federal, state, local, foundation, business, and private grants
that support the City’s priorities and provide a benefit to the City, with grant requirements taken into
consideration.
City staff shall notify City Manager of grant proposals prior to submitting a grant application. If approved to
pursue, requesting department’s staff are responsible for all aspects of the grant process, including preparing and
submitting grant proposals, preparing staff reports, ordinances and resolutions if needed, developing grant
implementation plans, managing the grant program, preparing and submitting reports to grantors, and properly
closing out grant projects. Staff shall work with Finance staff to track grant funding and expenses, and to generate
grant payment requests.
The acceptance of grant funding will be assessed for both immediate and long-term costs and benefits to the City.
For example, a grant to construct infrastructure would incur future ongoing maintenance costs. These costs shall
be disclosed with the grant application and/or pre-award notice.
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CITY OF SARATOGA ● FISCAL YEAR 2021/22 OPERATING & CAPITAL BUDGET 8
All accepted grants and donations are to have assigned staff, known as the Grant/Donation Administrator, who is
responsible for grant/donation oversight to ensure rigorous adherence to the grant or donation’s related activity,
ensure accountability for financial and ethical administration, and is consistent with the City’s strategic priorities.
Infrastructure addition or improvement grants in excess of $10,000 shall be brought to the Council for review and
approval.
Operating Services grants, such as funding for health and safety programs that primarily utilize staff or contract
service, or pay for material and supplies to accomplish the grant objectives may be approved by the City Manager
up to the City Manager’s current purchasing limit of $25,000.
Art grant/donations, such as artwork loans, transfers of ownership, and art-related services, with a value of up to
$25,000 shall be submitted to the Art Committee for approval. Art grant/donations in excess of $25,000 in value
shall be submitted to the City Council for approval. The Art Commission’s staff designee shall function as the
Grant Administrator.
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.
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. Additionally, funding is used to maintain required safety related
documents, such as the City’s ADA Transition Plan, and the Industrial Injury Prevention Plan (IIPP).
Each Internal Service Fund will set recovery charges at rates sufficient to meet all operating expenses,
depreciation, and fund balance reserve policy objectives.
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 beginning of the
fiscal year.
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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
objective, in order to obtain the lowest possible borrowing cost, and maintain financial responsibility.
The City does not incur debt for operational purposes or capital improvements as a standard practice. Under
extraordinary circumstances, the City may 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
principle, long-term debt is 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 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, the 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 not exceed the expected useful life of the project or extend
beyond functionally appropriate payment terms. Additionally, financing payment terms must be established at
a manageable funding level or reasonable assessment level.
The City shall monitor all forms of debt in conjunction with budget development throughout the year and will
report concerns and remedies 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 law.
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 tools with which to make informed decisions.
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The City’s Long-Term Financial Plan (LTFP) shall include various analyses and documents that support financial
planning efforts, including a financial forecast and analysis, fiscal policies, revenue 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 are reviewed in conjunction with financial projections for
the future. 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 in
the effort 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.
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 prior 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
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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 as an alternative to depositing
UAL payment funds directly with CalPERS . A 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 determines when to use these funds, either as part of the annual budget adoption process, or during the
course of the fiscal year, if needed.
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 and 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 when needed.
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 main 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) the delay or reduction of funding for Internal Service Fund operations, 2) use of one-time
revenue resources, such as an unexpected payment or excessive net operation funding held for future use, and 3)
the reduction of expenditures included in the budget each year that are not essential to providing services, such
as staff conferences or optional consultant and contract services.
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REVENUES
General Revenue funding such as taxes, intergovernmental revenues, and interest provide the funding for
services conducted for city-wide benefit, such as public safety, infrastructure maintenance, and city
administration. Services provided upon request, 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 to maintain infrastructure, the City conducts ongoing
reviews of operations to assess revenue leakage. If applicable, assessments or charges are assessed, 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 contractual agreement to other funds are accounted for in the
General Fund. Funds dedicated for specific capital improvements are accounted for in the appropriate Capital
Improvement Plan fund, within a designated project. An example is VTA Measure B Sales Tax deposited
directly to the Annual Roadway Improvement Project in the Street CIP Fund.
Categories of Revenues include Taxes, Intergovernmental, Fees/Licenses/Permits, Charge for Services, Interest
Income, Rental Income, Other Sources such as grants, donations, sales of copies or maps, and over/short
adjustments, 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
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.
Over the last decade, Property Tax revenue increased at a much faster pace than other tax revenues, due to rapidly
increasing housing prices and the State’s agreement to bring the allocation percentage up to the full 7% minimum
rate. As a result, Property Tax now makes up about 80% of all tax revenues, with Sales Tax, Franchise Fees,
Transient Occupancy Tax, Business License Tax, and Construction Tax making up the remainder. By itself,
Property Tax comprises about one-half of Total Operating Revenue, meaning there is a significant dependency
on this one revenue category. Hence, the City tracks Property Tax revenue closely and makes revenue and
expenditure budgetary projections and adjustments in line with anticipated fluctuations. With revenue growth
expected to increase slowly now that full allocation has been attained, City expenditure budgets will mirror this
restrained growth.
The City follows a vigilantpolicy of collecting local taxes and revenues due to the City through persistent follow-
up procedures. 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.
RISK MANAGEMENT POLICY
The City is insured for up to $30 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 $25 million from an excess insurance provider. 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.
Workers Compensation claims are insured for the first $250,000 of coverage through the City’s participation 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).
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The City’s role in managing both Risk Management and Workers Comp programs is preventative in nature,
which is accomplished through 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 the City’s pooled liability JPA administrator in a timely matter. Adverse
claims in which City property is damaged, are also pursued for restitution. Repair cost for damages, and staff
time for attending to the accident/incident, cleanup, and repair time is billed to the other party. The JPA
Administrator follows up on these matters also.
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 meeting 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. The 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 organization 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 that 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 cost 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 1
st
effective date, however a stand-alone fee adjustment may be brought to Council at any time throughout the year.
The City’s overall goal is to establish user charges and fees at levels that fully recover 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 by 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 Council 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, appropriate 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:
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 City 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 uses 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 purposes, 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 base 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 repaid with year-end net operations if funding in
excess of the next year’s priority Capital Improvement Project is available. At a minimum, reimbursements
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 that must be commenced prior to
the next fiscal year’s CIP Project funding availability.
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 used 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 full if funding is available, or at minimum 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 practice 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 infrastructure 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 efficiency 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 improvement 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 order 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 Fund 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.
Effective FY 2016/17, the Working Capital Reserve is maintained at $1 million (reduced from $2 million), and the
Fiscal Stabilization Reserve in maintained at $2.5 million (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 million 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 requirements.
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 structure.
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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 unanticipated
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 during 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 $3.150 million
Fiscal Stabilization Reserve funding level will be assessed on an annual basis to ensure this funding level is sufficient
in light of operational reserve requirements and utilization needs.
The General Fund budget continues to increase each fiscal year, the overall 60 day General Fund operational reserve
minimum requirement level is close to the current total of Working Capital and Fiscal Stabilization Reserve Fund
total. To assist the Fiscal Stabilization and Working Capital Reserves remain at minimum requirement level, $100,000
shall be allocated annually into the Fiscal Stabilization Reserve from Net Operations as part of the General Fund Year
End Close, effective FY 2021/22. This allocation shall only occur if General Fund Net Operations exceed a minimum
of $1,000,000 to ensure adequate funding is available for other necessary allocations.
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 employees 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 if 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.
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.
General Fund vs Other Fund Reserves
Other Fund’s accumulated net operations are typically accounted for in an undefined reserve account in the fund –
and typically titled ‘Fund Balance Reserve’ meaning they do not have reserve categories. This difference is because
other funds are structured for specific uses or commitments, hence the fund balance already has a directed function
and fund balance is therefore committed for that purpose. Whereas, the General Fund is used for multiple and various
operational purposes thereby requiring a distinction of purpose for each reserve.
SPECIAL REVENUE FUND RESERVES
Landscape & Lighting and Storm Water Assessment Zone Funds
Assessment Zone Funds are Special Revenue Funds, which is a type of governmental fund. As a governmental fund,
the Landscape & Lighting and Storm Water Assessment Zone Funds comply with GASB 54 fund balance
classifications, and by nature of the fund’s purpose, fund balance reserves are classified as restricted reserves.
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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 Saratoga, Assessment Zone Special Revenue
Funds are established to account for each individual assessment zone financial assets separately; thereby each fund
has its own separate fund balance reserve.
Each zone’s Fund Balance Reserve should be sufficient to provide working capital to cover operational expenses
through the first half of assessment receipts in February, therefore equitable to approximately one-half of a district’s
annual expenditure budget. The second half of receipts are received in late May or early June. Some districts may
include capital improvement projects in addition to ongoing regular maintenance. This requires accumulating fund
balance over the years to generate sufficient resources for the improvement projects. As each zone’s situation is
different, a maximum fund balance shall be determined by the Public Works Director.
Requests for use of the reserve for special projects are approved by Council through budget adoption or by a Council
approved budget adjustment resolution throughout the year. Reserves are 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 account 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 is 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 1st 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 issued in December 2018, and participants in the
bond issuance began assessment payments in FY 2018/19. The annual debt service assessment pays for the cost of
the bond’s principal and interest payments, and the associated administrative costs. Fund reserves are comprised of
assessments collected less bond costs. Assessments are established as dollar amounts rather than percentage rates, so
the CFD Bond Debt Reserve does not generate unexpected excess fund balance as does the GO Bond Debt Fund.
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
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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, setting a minimum or maximum amounts is not applicable. Fund Balance is automatically
re-appropriated to budgeted capital projects in the following fiscal year for the improvement 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 projects 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 Tax 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 &
TrailImprovement 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 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 designated 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.
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 improve or
enhance administrative, operational, and technology-based systems and processes. Each of the Administrative &
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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.
Administrative and technology improvement focused grants are limited, and typically limited to the Community
Development function for housing elements or development processes. 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 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.
Internal Service Funds are similar to the separate checking or savingsaccounts a person may use for different purposes.
And, as each fund is accounted for as a separate entity, operational revenues less expenditures result in either a positive
or negative net operations, with their own fund balance to offset operational losses if needed. 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
throughout the fiscal year and to minimize interfund loans. Some of the Internal Service Funds do not accumulate
funds in excess of expected ongoing operational costs, but for the replacement funds, the purpose is to accumulate a
rolling balance to fund future replacement costs as needed. Individual fund reserve levels are explained in more detail
in the following fund sections.
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
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 up to $25,000 per
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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 departments, from grant
funding, and from claim reimbursements. On occasion, the City is obligated to pay a claim settlement. While some
funds are budgeted for miscellaneous claim expenses each year, large claims may need to utilize reserves. For this
reason, the Fund Balance Reserve goal is set at about 100% of annual budget to both fund operational activity and for
claim funding as needed. 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. If claim payments do utilize reserve funds, 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
self-insurance 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 charged to 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 Council through budget adoption
or by a Council approved budget adjustment resolution during the year, such as for an unexpected large claim
settlement. The reserve is replenished from the Fund’s net operations in subsequent years.
Office Support Fund
The Office Support program provides a centralized cost center for administrative office support expenses, including
multifunctional copy machine leases, postage machines, various other office machines and associated maintenance
and repair services, as well as 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 departments. 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. Reserves are maintained at
approximately the 50% of budget level, however on occasion, excess Reserve funds are used for the replacement of
Office Support assets such as the mailing machine. The reserve is replenished 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 collectively 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 departments. At year-end, unspent funding flows
into Unrestricted Net Position. Accumulated 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 year. The reserve is replenished from the Fund’s net
operations in subsequent years.
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Vehicle & Equipment Maintenance Fund
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 Council 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 purchased 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 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.
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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
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 funding 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 the 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 budget 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 assist City-related agencies with fund management needs. Trust Funds hold
another entity’s funds and ensures 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 one Agency Fund; the West Valley Clean Water Program.
Because Agency Funds manage their own money, the City of Saratoga does not develop Reserve Policies for Agency
Funds.
SUMMARY
Fund Balance Reserve Use
Council may utilize reserve funding at budget adoption or by adoption of a budget adjustment resolution during the
course of the year if necessary. Reserve funding is replenished from year-end net operations, or if the fund has a
negative net operation, then Reserve funds would offset the net operation loss with the close of the fiscal year.
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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, to the Council’s CIP Project Review and CIP Budget Study Session meetings, 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 Review Meeting.
STAFF PROJECT DEVELOPMENT
1.CIP Project Initiation
As a function of staff’s day-to-day work, infrastructure improvements, large-scale repairs, and ongoing
maintenance and replacement projects are identified as potential capital improvements. These are often highly-
visible and tangible public assets such as street repaving, retaining walls, or park and trail improvements.
However, many essential CIP projects are less noticeable, including storm drain repairs, electrical or irrigation
upgrades, or ADA enhancements. Other projects are intangible administrative or technology improvements and
in most cases invisible to the general public, such as code updates/revisions, software and process improvements,
or economic vitality programs.
Staff discusses CIP project ideas with the appropriate Director or City Manager 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 approval process. After receiving initial approval, staff moves into the
idea development stage.
2.Idea Development
To move the idea forward, staff will 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 a phased project, information regarding future phases and total costs should be included.
For instance, a design project should include information on the intended project’s construction phases and
total estimated cost.
If the project is ongoing infrastructure maintenance such as a roof replacement, or a program project such as
a General Plan element update, this too should also be clearly noted. In the scope description, constraints or
restrictions may help to identify project limitations. And in some cases, project scope may be clarified by
exclusions – statements about what the project will not accomplish or produce.
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.
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b.Political Considerations -Knowledge of historical information, which attests to the necessity of
Council/staff communication is of vital importance in project development. Determine whether this project
has come up for consideration before, or why was it not completed previously. Have circumstances changed?
Or are there lessons to be learned from a past project proposal?
Another consideration includes knowing whether a project might be controversial. 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. Ultimately,
Council wants to support those projects that 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 not undertaken
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 be of lower danger of minor importance and simply remedied by removal. On the other
hand, if the cost of the removal was minimal in consideration of the danger, it may take priority if funding
was not immediately available for the higher danger. 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
or risk of lawsuits for lack of timely completion. As a result, project priority is based on the overall
assessment of the collective 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 needed for a project to be successful.
Funding plays a critical role in project development. In many cases, lower priority projects are approved
ahead of higher priority projects simply because there is designated funding available for the lower priority
projects. The ability to leverage designated funding with grant funding for a project proposal greatly
increases the likelihood a proposed project will be approved. Overall, a project funded solely by Capital
Project Reserve money needs to be 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 number and types of project brought to Council for review.
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e.Other Considerations -Numerous other factors not mentioned above 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?
Or, does the project provide operational efficiencies or cost savings?
Are there environmental concerns?
Does it enhance the community’s art, education, or cultural resources?
What impacts are there if the project requires development be staged in phases?
Are there risk management concerns, or legal liability issues?
Is there strong community interest in this project?
Does the project contribute toward economic vitality?
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 goal of idea development is to identify, quantify, and assess a project comprehensively. This
effort is intended to ensure that a proposed project is well thought-out, developed, and articulated thereby
enabling the City Manager and Council to make educated and rational decisions.
3.City Manager Approval
Staff’s proposed projects ultimately go to the City Manager. If approved for consideration, Staff will prepare
written narratives with project scope, justification, fiscal impacts, cost estimates, timelines, etc. as necessary for
Council Retreat assessment package and Finance Staff will add the project to the Proposed CIP Project List.
CITY COUNCIL PROJECT DEVELOPMENT
Council Members are often the recipients of residents’ suggestions and requests for capital improvements.
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 contact 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 Proposed Capital Project List is to be recorded in the City Council minutes and acted upon
as a follow-up item. City Manager will clarify/verify understanding of project scope and then assign staff to
complete Proposed CIP Project requirements, including preparation of project scope narrative and justification,
fiscal impacts, cost estimates, timelines, etc.
Council nominated projects are automatically included as a proposed CIP project in the CIP Project Review
package.
CIP PROJECT REVIEW AND APPROVAL
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1.CIP Project Review Package
In preparation for the annual Capital Project Review, Finance Staff will consolidate Proposed CIP projects
information, along with proposed changes to current CIP projects, and the current year’s CIP Unfunded Project
List into a presentation and CIP Project Review package for Council. The CIP Project Review meeting provides
Council with a forum to have an in-depth discussion on funding availability, assess project scopes, evaluate
priority criteria and resources, and examine impacts of other considerations for CIP projects at one time. The CIP
Review package will include:
●Available funding
●Current year CIP projects
●Proposed changes to existing projects
●The current CIP Unfunded List
●Proposed changes to projects on the CIP Unfunded List
●Proposed new CIP projects
●Proposed additions to the CIP Unfunded List
2.Capital Project Review Meeting
The City Council’s review of current and proposed funded and unfunded Capital Projects is held annually,
typically at the Council Retreat as part of the budget development cycle initiation. In addition to reviewing the
Capital Project Review package, the Council may request a currently funded capital project be reviewed to
determine if the project should continue in the following fiscal year. If consensus direction is given, staff will add
the currently funded project into the Review package for discussion at the follow-up CIP Budget Prioritization
Meeting.
In reviewing Capital Projects, 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.
At the conclusion of the CIP Project Review meeting, Council may retain the CIP Project Review Binder although
the documents will also be available on the City’s website in the
3.CIP Budget Study Session
The CIP Budget Study Session agenda is to:
Remind Council of the upcoming fiscal year’s Capital Project funding availability.
Recap the Proposed CIP Projects Review Meeting proposals and associated priority issues.
Inform Council of any changes or modifications since the CIP Project Review Meetings.
Answer questions Council may have on proposed projects.
Reach consensus on the Proposed CIP Funding Scenario and CIP Unfunded List.
Council will conduct a final assessment and provide consensus direction to staff for CIP Project funding to be
included in the upcoming Proposed Budget Hearing to be held in May, and modifications to the CIP Unfunded
Project List, if any.
NOTE: Rejected project ideas may be brought back in following years for another attempt to become an approved
project, but must go through the project development process again.
CIP PROJECT FUNDING
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INTRODUCTION SECTION
CITY OF SARATOGA ● FISCAL YEAR 2021/22 OPERATING & CAPITAL BUDGET 30
1.Proposed Budget Hearing
Staff will incorporate Council’s direction from the CIP Budget Study Session into the Proposed Capital Budget
brought to the City Council Budget Public Hearing that occurs in late May or early June. Council 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 asked to adopt the budget at this time, with budget funding effective on July 1st , the
start of the next fiscal year.
3.Funding Process Follow-up
Approved CIP projects that do not receive funding allocations are assigned to the CIP Unfunded List. The CIP
Unfunded List has a life span of one budget cycle meaning the budget adoption keeps the Unfunded CIP Project
for consideration as a potential project in the following fiscal year CIP project discussions.
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OPERATING BUDGET PROCESS
Operating Budget Activity throughout the year:
1. Department staff monitors program budgets for their respective oversight areas to ensure
revenue and expenditures are in line with workplan/budget.
2. Department staff identifies variations or unexpected activity and adjusts workplan or brings
necessary adjustments forth to Council if required.
3. Finance staff monitors citywide budgets, notifies Departments of variances, corrections, etc.
Council Retreat: (for this year, Feb 3rd City Council meeting)
1. Finance Staff presents a recap of current year’s budget adoption, mid-year status, and five-year
forecast. (This year, Current Year Budget Recap and Mid-Year Budget Status presented at Feb 3rd
City Council Meeting. Five-year forecast to be presented at April 22nd Budget Study Session.)
2. Council receives report, discusses current Operating and Capital budget impacts and financial
trends as needed for budget adjustments and upcoming budget preparations.
Operating Budget Preparation Process:
1. From mid-year status report and financial information, Finance staff prepares revenue budget
information and all operational budget documents for the upcoming proposed budget process.
2. Finance staff works with City’s departments to generate proposed program budgets.
3. Finance staff prepares compiled proposed budget information for CM review.
4. CM reviews proposed operating budget requests and provides direction.
5. Finance staff incorporates direction, develops, and prepares, Proposed Operating Budget
FY 2021/22 Budget Study Session
1. Finance staff prepare binders and slide presentation for proposed Operating and CIP Budget.
2. Council receives budget presentations, discusses, and provides direction.
FY 2021/22 Operating & Capital Budget Hearing and Adoption:
1. Finance staff prepare final proposed budget document and slide presentation for Operating and
CIP Budget Proposed Budget Hearing.
2. Proposed Operating and CIP Budgets presented at City Council Public Hearing.
3. Finance to incorporate any modification direction into final budget for adoption.
4. Council adopts next fiscal year’s Operating and Capital Budget in June.
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CIP BUDGET PROCESS
CIP Activity throughout the year:
1. CIP Staff reviews current CIP project status on quarterly basis with CM.
2. CIP Staff identifies needed project adjustments (timing, scope, funding) for the next fiscal year,
or if urgent, to bring to Council during the current fiscal year.
3. Staff identifies CIP project needs throughout year and gathers project information to prepare
new project proposals.
CIP Budget Process Preparations:
1. Finance staff:
a. compiles CIP project requests
b. identifies CIP funding availability for the next fiscal year.
c. prepares CIP Review package including PY unfunded project list for CM Meetings.
2. CM reviews CIP requests, PY unfunded list, funding availability, and meets with staff.
3. CM develops CIP project funding scenario for the CIP project meeting.
4. CIP Staff and Finance prepares project documents for Council review.
5. Finance staff prepare binders and slide presentation.
Council Retreat: (for this year, March 17th special meeting)
1. Finance Staff presents CIP funding availability and CIP Priority Projects.
2. CM and CIP Staff present capital project funding recommendations:
a. Existing projects with funding requests
b. New project funding requests
c. PY Unfunded projects
d. Recommended additions to Unfunded Project List
CIP Budget Study Session:
1. Finance Staff compiles final CIP proposed project information including funding availability,
additional current project funding requests, new proposed projects, and the Unfunded Project
List into a binder for Council to review prior to meeting.
2. Council receives CIP presentation, asks follow-up questions, discusses recommended funding
scenario, optional projects, and reaches consensus direction.
3. Staff incorporates Council direction into Proposed CIP Budget document to be brought forth at
Proposed Budget hearing.
Budget Adoption:
1. Proposed Operating and CIP Budgets brought to Council at City Council Public Hearing.
2. Finance to incorporate any modification direction into final budget.
3. Council adopts next fiscal year’s Operating and Capital Budget in June.
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