HomeMy WebLinkAbout2018_04_17 City Council Study Session Agenda PacketSaratoga City Council Agenda – Page 1 of 2
SARATOGA CITY COUNCIL
SPECIAL MEETING
APRIL 17, 2018
6:00 P.M. SPECIAL MEETING
Administrative Conference Room, City Hall | 13777 Fruitvale Avenue, Saratoga, CA 95070
ORAL COMMUNICATIONS ON NON-AGENDIZED ITEMS
Any member of the public will be allowed to address the City Council for up to three (3) minutes
on matters not on this Agenda. The law generally prohibits the Council from discussing or taking
action on such items. However, the Council may instruct Staff accordingly.
AGENDA ITEMS
Review of the draft FY 2018/19 proposed General Fund Operating Budget, proposed
Capital Improvement Project funding, and proposed updates to the City’s Fiscal Policies.
Recommended Action:
Council to review and provide consensus direction to staff on:
1) Draft Proposed FY 2018/19 Operating Budget
2) Proposed Fiscal Policy Changes
3) Proposed FY 2018/19 Capital Project Funding Allocations
Staff Report
Attachment A - General Fund Summary
Attachment B - Total Fund Activity Summary
Attachment C - Fiscal Policy Revisions
Attachment C.2 - Capital Improvement Plan
Attachment D - Results of CIP Funding Prioritization FY 2018/19
ADJOURNMENT
CERTIFICATE OF POSTING OF THE AGENDA, DISTRIBUTION OF THE AGENDA
PACKET, COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
I, Nora Pimentel, City Clerk for the City of Saratoga, declare that the foregoing agenda for the
meeting of the City Council was posted and available for review on April 12, 2018 at the City of
Saratoga, 13777 Fruitvale Avenue, Saratoga, CA 95070 and on the City's website at
www.saratoga.ca.us.
Signed this 12th day of April 2018 at Saratoga, California.
/s/
Nora Pimentel, MMC, City Clerk
Saratoga City Council Agenda – Page 2 of 2
In accordance with the Ralph M. Brown Act, copies of the staff reports and other materials
provided to the City Council by City staff in connection with this agenda are available at the
office of the City Clerk at 13777 Fruitvale Avenue, Saratoga, CA 95070. Note that copies of
materials distributed to the City Council concurrently with the posting of the agenda are also
available on the City Website at www.saratoga.ca.us. Any materials distributed by staff after the
posting of the agenda are made available for public review at the office of the City Clerk at the
time they are distributed to the City Council. These materials are also posted on the City website.
In Compliance with the Americans with Disabilities Act, if you need assistance to participate in
this meeting, please contact the City Clerk at 408/868-1269. Notification 24 hours prior to the
meeting will enable the City to make reasonable arrangements to ensure accessibility to this
meeting. [28 CFR 35.102-35.104 ADA title II]
SARATOGA CITY COUNCIL
MEETING DATE:April 17, 2018
DEPARTMENT:Finance & Administrative Services Department
PREPARED BY:Mary Furey, Administrative Services Director
SUBJECT:Review of the draft FY 2018/19 proposed General Fund Operating Budget, proposed
Capital Improvement Project funding, and proposed updates to the City’s Fiscal Policies.
RECOMMENDED ACTION:
Council to review and provide consensus direction to staff on:
1)Draft Proposed FY 2018/19 Operating Budget
2)Proposed Fiscal Policy Changes
3)Proposed FY 2018/19 Capital Project Funding Allocations
BACKGROUND:
The annual Budget Study Session provides an update of the current year’s funding and expenditure estimates, a
summary overview of next fiscal year’s proposed operating budget and notable changes, and a final review of
recommended capital project funding allocations. Council direction will be incorporated into the Proposed
Operating and Capital Budgets to be presented at the May 16th public hearing. Additionally, as fiscal policies are
included as part of the annual budget adoption, proposed policy changes are provided for discussion.
This informal review process provides Council with the opportunity to ask questions, request clarifications, and
provide direction in preparation of the final proposed budget presentation.
General Fund Summary Overview
Attachment A, the General Fund Summary schedule, provides 3 years of revenue and expenditure history, the
current fiscal year budget and estimate, and next year’s proposed budget. A review of Total Operating Sources will
include a general discussion of major revenues,trends and projections, and information on the use of fund balance
reserves. A review of Total Operating Uses will highlight notable changes in the current and proposed year’s
budgeted expenditures, trends, and projections.
Total Fund Activity Overview
Attachment B, the Total Fund Activity Schedule provides a high-level summary of all funds:General, Internal
Services, GO Debt, and Capital Funds. Beginning with estimated beginning fund balances, a quick review of
budgeted revenues, expenditures, and transfers lead to estimated ending fund balances for each of the City’s funds
and illustrate the City’s overall fiscal health. This high-level fund review provides a broad understanding of how
City funds are structured for use in either general or specific functions,and how they contribute to City operations.
Fiscal Policies
On an annual basis, and as part of the Finance Committee’s function, portions of the City of Saratoga’s fiscal
policies are reviewed. Policy revisions generally include policy language refinement and clarifications, expanded
policy direction, documentation of existing best practices or verbal policy direction during the course of the year, 3
and any necessary operational or fiscal changes to reflect current practices or legal requirements. Proposed changes
are then submitted to the Council and integrated into the budget adoption process.
This year’s proposed update includes the assimilation of the Development Reserve into the Fiscal Stabilization
Reserve, and the elimination of references to the Development Reserve throughout the Fiscal Policy document. The
second policy change is to revise the Capital Project Assessment section in the CIP Project Process Policy to include
a review of current projects with no encumbrances on available funds to determine if the project funding will
continue in the following fiscal year. This proposed process change reflects the current year’s change in procedure.
Capital Project Funding
Council assessed both proposed and current capital project proposals during the Council Retreat. Attachment D
captures Council’s CIP project scope and funding direction for the FY 2018/19 Capital Improvement Program
Budget.
Please Note: The Proposed Operating & Capital Budget is currently being finalized for the City Council Budget
Hearing on May 16, 2018. Documents and fiscal information provided at this budget study session are in
development and subject to revisions and updates.
ATTACHMENTS:
Attachment A – General Fund Summary
Attachment B – Total Fund Activity Summary
Attachment C – Fiscal Policy Revisions
Attachment C.2 – Capital Improvement Plan
Attachment D – Results of CIP Funding Prioritization FY 2018/19
4
Attachment A
FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 FY 2017/18 2018/19 % of
General Fund Revenues Actuals Actuals Actuals Adjusted Estimated Proposed Budget
Property Tax 10,436,621 11,301,176 12,003,942 12,110,800 13,354,441 13,398,900 58.3%
Sales Tax 1,224,427 1,189,398 1,185,035 1,150,000 1,033,000 1,000,000 5.5%
Transient Occupancy Tax 309,618 319,109 343,618 315,000 350,000 350,000 1.5%
Business & Other Taxes 556,654 578,652 513,431 505,000 580,000 580,000 2.4%
Franchise Fee Tax 2,234,068 2,235,514 2,356,539 2,349,429 2,408,619 2,462,000 11.3%
Intergovernmental 586,596 547,075 584,480 372,000 533,640 487,500 1.8%
Fees, Licenses & Permits 1,409,199 1,544,844 1,500,843 1,407,400 1,725,985 1,604,150 6.8%
Charge for Services 1,789,649 2,079,939 1,666,164 1,682,215 1,529,520 1,550,798 8.1%
Interest 45,229 79,341 102,787 147,500 149,454 169,500 0.7%
Rental Income 474,750 527,596 494,176 463,802 428,754 410,606 2.2%
Other Sources 452,734 379,952 361,396 274,627 303,168 254,477 1.3%
Total GF Revenues 19,519,545 20,782,596 21,112,412 20,777,773 22,396,581 22,267,931 100%
Fund Transfers In - 267,918 55,384 32,000 235,166 -
Total Rev & Transfers 19,519,545 21,050,514 21,167,796 20,809,773 22,631,747 22,267,931
Use of (Addition to) Fund Balance Reserves
Carryforward Reserve 118,788 176,560 - 7,246 (142,754) 2,752
Development Reserve - 60,000 - - - -
Environmental Reserve 50,000 50,000 50,000 50,000 50,000 50,000
CIP Reserve 1,633,345 1,777,896 1,410,648 1,747,909 1,747,909 1,225,000
CY CIP Reserve 500,000 - - - - -
Hillside Reserve - - 210,000 - (210,000) -
Fiscal Stabilization Loan 1,000,000 - - - - -
Fiscal Stabilization Repayment (500,000) (250,000) (250,000) - - -
Working Capital Reserve 930,184 - - - - -
Total Operating Sources 23,251,862 22,864,970 22,588,444 22,614,928 24,076,901 23,545,683
FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 FY 2017/18 2018/19 % of
General Fund Expenditures Actuals Actuals Actuals Adjusted Estimated Proposed Budget
Salary & Benefits 6,484,653$ 6,814,803 7,171,061 7,833,226 7,289,779 8,351,074 38.3%
UAL Payment 3,294,619 500,000 500,000 750,000 750,000 750,000 3.7%
Materials & Supplies 195,949 207,649 248,600 339,090 299,037 370,970 1.7%
Fees & Charges 732,387 835,636 939,859 854,840 814,571 1,090,634 4.2%
Consultant & Contract Svs 1,966,367 2,115,325 2,123,635 2,098,703 1,942,377 2,252,187 10.3%
Sheriff Services 4,611,024 4,973,080 5,375,092 5,517,918 5,517,918 5,913,322 27.0%
Meetings, Events & Training 73,668 59,431 87,606 145,800 108,963 166,490 0.7%
Community Grants & Events 162,516 202,525 222,127 252,751 237,870 264,429 1.2%
Operating Grant Expenditures - 34,762 - - - - 0.0%
Fixed Assets 35,343 - - 20,000 20,000 - 0.1%
Internal Services Charges 2,325,823 2,455,758 2,535,472 2,626,498 2,626,525 2,591,332 12.9%
Total Expenditures 19,882,349$ 18,198,969$ 19,203,452$ 20,438,826$ 19,607,039$ 21,750,437$ 100%
Streets CIP 662,753 1,099,000 1,305,000 1,194,000 1,194,000 835,000
Park & Trails CIP 443,445 295,000 75,000 420,000 420,000 100,000
Facilities CIP 339,900 233,896 190,648 - - 240,000
Admin & Technology CIP 120,000 265,000 50,000 133,909 133,909 50,000
CIP Reserve Transfers 1,566,098$ 1,892,896$ 1,620,648$ 1,747,909$ 1,747,909$ 1,225,000$
Developmt Reserve Transfer - 60,000 - - - -
General Fund Transfers
Annual Facilities CIP 100,000 - - - - -
Transfer to Street CIP - 64,760 - - - -
Total General Fund Transfers 100,000$ 64,760$ -$ -$ -$ -$
Total Transfers Out 1,666,098 2,017,656 1,620,648 1,747,909 1,747,909 1,225,000
Total Expenditure & Transfers 21,548,447$ 20,216,625$ 20,824,100$ 22,186,735$ 21,354,948$ 22,975,437$
Net Operations 1,703,415 2,648,344$ 1,764,343$ 428,193$ 2,721,953$ 570,246$
TOTAL OPERATING USES
TOTAL OPERATING SOURCES
GENERAL FUND SUMMARY
4/10/2018
5
Attachment B
Revenues Expenditures Source (Use)Estimated
Fund Balance && of Fund Balance
Fund Category July 1, 2018 Transfers In Transfers Out Fund Balance June 30, 2019
Operating Funds
General Fund Reserves
Environmental Services 213,182$ -$ -$ (50,000)$ 163,182$
Hillside Stability 1,000,000 - - - 1,000,000
Capital Projects 1,350,499 - - 984,035 2,334,534
Facility Reserve 2,200,000 - - 500,000 2,700,000
Carryforwards 2,752 - - (2,752) -
Working Capital 1,000,000 - - - 1,000,000
Fiscal Stabilization 2,500,000 - - - 2,500,000
Development Services 661,653 - - - 661,653
Compensated Absences 223,988 - - - 223,988
Other Unassigned 3,209,035 22,267,931 (22,975,437) 1,431,283 1,070,246
Total General Fund Reserves 12,361,109 22,267,931 (22,975,437) 2,862,566 11,653,603
Special Revenue Funds
Landscape & Lighting Districts 1,315,626 697,451 (787,820) - 1,225,257
Total Special Revenue Reserves 1,315,626 697,451 (787,820) - 1,225,257
Internal Service Funds
Liability/Risk Management 427,074 411,362 (534,863) - 303,573
Workers Compensation 289,478 185,000 (222,136) - 252,342
Office Support Services 109,414 50,000 (59,850) - 99,564
IT Services 337,898 585,000 (628,136) - 294,762
Vehicle & Equipment Maintenance 194,574 275,000 (261,298) - 208,276
Facility Maintenance 529,103 925,000 (922,814) - 531,289
Vehicle & Equipment Replacement 488,968 150,000 (311,800) - 327,168
IT Equipment Replacement 379,300 150,000 (191,250) - 338,050
Facility FFE Replacement 213,596 200,000 (76,400) - 337,196
Total Internal Service Reserves 2,969,405 2,931,362 (3,208,547) - 2,692,220
Total Operating Funds 16,646,140$ 25,896,744$ (26,971,804)$ 2,862,566$ 15,571,080$
Debt Service Fund
2001 Series GO Bonds 1,016,262 729,200 (841,535) - 903,927
Total Debt Service Reserves 1,016,262 729,200 (841,535) - 903,927
Total Operating Funds 17,662,402$ 26,625,944$ (27,813,339)$ 2,862,566$ 16,475,007$
Capital Improvement Funds
Street Projects 2,493,951 7,898,224 (10,392,176) - -
Park & Trail Projects 1,289,243 521,015 (1,802,838) - 7,420
Facility Projects 186,699 370,000 (521,698) - 35,000
Administrative & Tech Projects 838,253 255,000 (1,093,253) - -
Total Capital Improvement Funds 4,808,146 9,044,239 (13,809,966) - 42,420
Total All Funds 22,470,548$ 35,670,183$ (41,623,305) 2,862,566$ 16,517,427
Total Fund Activity Summary
FY 2018/19
4/10/2018
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ATTACHMENT C
CITY OF SARATOGA
INTRODUCTION SECTION
1
FISCAL MANAGEMENT POLICY STATEMENTS
With both a general management philosophy and Council goal to practice fiscal responsibility, the City of
Saratoga’s conservative and cautious financial management is achieved through responsible, sustainable,
and enforceable fiscal policies and internal controls to ensure prudent and efficient use of resources. These
policies and controls represent long-standing accounting, budgeting, debt, investment, and reserve
principles and practices, and are the foundation upon which the City maintains its fiscal s tability.
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 approval standards a t a more specific level are
incorporated into the budget document for annual adoption by Council. Currently this includes the Fund
Balance Reserve Policy and the Capital Project Process Policy which follows this section. Other Council
defined policies will be added as directed/approved.
The Summary Fiscal Management Policy Statements in this document are organized into the following
categories:
General Financial Principles
Appropriations and Budgetary Control
Auditing and Financial Reporting
Capital Improvement Plan
Development Related Financial Policies
Expenditures and Purchasing
Fixed Assets and Infrastructure
Internal Service Funds
Long-Term Debt
Revenues
Risk Management Policies
Treasury Management
GENERAL FINANCIAL PRINCIPLES
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 Counci l for review and approval, and administrative and
operational level functions approved by the City Manager.
Proposed revisions to the Fiscal Management Policy Statements and Council Policies are provided to
Council at the annual Council Retreat. Council members are to provide comments and concerns
regarding revisions to the Mayor or City Manager at least two weeks prior to the budget study session
to clarify or include on the agenda.
The City’s primary long-term financial goals are 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.
Formatted: Header distance from edge: 0.35"
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ATTACHMENT C
CITY OF SARATOGA
INTRODUCTION SECTION
2
Financial information shall be provided in a relevant, thorough, and timely manner, to effectively
communicate the City’s financial status to the Council, citizens, employees, and all other interested
parties.
Financial stability goals and judicious responsiveness shall be the foundation upon which proactive and
advantageous financial decisions are made, and which guide the City’s response to local, regional, and
broader economic changes through the years.
The City shall undertake, adopt, and integrate new initiatives or programs in a cautious, well planned
manner to support the City’s long-term ability to maintain its essential services at the same level and
quality required by its citizens.
The City Council’s financial 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 will seek out, apply for, and effectively administer federal, state, local, foundation, business,
and private grants which address the City’s current priorities and policy objectives.
APPROPRIATIONS AND BUDGETARY CONTROL
The City Council shall adopt an annual balanced operating budget and the first year of an integrated
five-year capital improvement plan budget by June 30th of each year, to be effective for the following
fiscal year running from July 1st through June 30th. Balanced budgets present budgeted sources in excess
of budgeted uses. Budgeted “Sources” include Revenues, Transfers In, and Appropriated Uses of Fund
Balance. Budgeted “Uses” include Expenditures and Transfers Out. Operating and Capital Budgets are
to align with the City’s long-term financial goals.
Each year the Finance & Administrative Services Department 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
at the Annual Council Retreat (scheduled in late January or early February) to assist Council with
formulating direction for long-range fiscal planning, Operating Budget development, and capital
funding appropriations.
Budgets are prepared on the same basis of accounting used for financial reporting: governmental fund
types (General, Special Revenue, and Debt Service) are budgeted according to the modified accrual basis
of accounting; proprietary funds (Internal Service Funds) and fiduciary funds 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. Council may also approve the use of long -term debt for operational
liabilities if they deem it fiscally prudent.
With funding for other committed reserves already in place, a minimal base amount of $500,000 is to
remain in the Unassigned Fund Balance Reserve at year-end to provide a buffer for unanticipated
operational shortfalls and unforeseen needs in the following fiscal year.
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ATTACHMENT C
CITY OF SARATOGA
INTRODUCTION SECTION
3
The Capital Budget is funded with both prior year surplus funding and dedicated capital funding
resources. Dedicated funding sources include Gas Tax (HUTA) revenues, road impact assessment
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 comprehensive,
allowing for the annual operational and capital improvement goals to be completed. With effectively
managed revenue streams and efficient use of resources, fiscal year-end operational budget surpluses
are 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 budget shall comply with the annual determination of the City’s appropriation limit calculated
in accordance with Article XIIIB of the Constitution of the State of California and adopt an annual
resolution to this effect.
The City Manager is authorized to implement the City’s workplan as approved in the adopted budget.
Within a specific fund, the City Manager has the discretion to adjust appropriations between categories,
departments, programs, and projects as needed to im plement the adopted budget, provided no change
is made to the total appropriation amount provided for any one fund. An example would be to backfill
a vacant salaried position with a contract service, therefore shifting funds from wage and benefit
appropriations to an operating expense expenditure within the General Fund appropriation. 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 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.
In FY 2014/15 CalPERS notified the City that as of 6/30/2015, the City’s Unfunded Accrued Liability
obligation of $7.7 million was to repaid over a thirty (30) year payment plan. Approximately 43% of the
outstanding liability was immediately paid through the use of current yea r net operations and
expendable reserve funding.
Council also established an alternative repayment policy to pay the minimum payment amount to be
equal to the amount due at the five-year mark to both lower the overall total long-term cost of the
liability while maintaining fiscal stability into the future. However, because CalPERS revised their UAL
estimates significantly as a result of actuarial changes and further investment losses, this UAL number
grew significantly, necessitating an increase in the annual UAL excess contribution amount from
$500,000 to $750,000 effective FY 2017/18.
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ATTACHMENT C
CITY OF SARATOGA
INTRODUCTION SECTION
4
The City Council appropriates $50,000 annually to a ‘Council Discretionary account’ for Council to use
for unplanned expenditures. Council direction and consensus approval is required to utilize these
funds. Unexpended budget appropriations are carried forward into the following fiscal year.
Parks and Recreation Services are essential elements in meeting the City’s goal to enhance and promote
quality of life in the community. The Recreation Department provides activities, programs, classes, and
rental facilities to the entire Saratoga community, from infants to seniors, through various services.
While services that innately benefit individuals would typically be 100% funded through user fees,
Council recognizes the general community benefit of providing recreation services and established
Recreation Department activities would instead function under a minimum cost recovery goal of 65%.
This calculation is comprised of total program revenues and expenditures for the General Fund’s
Recreation Services, Teen Services, and Facility Rentals programs, as all share the use of the building,
equipment, staff, and purpose, and are therefore intrinsically connected in the analysis.
The Community Development Department strives to attain full cost recovery plus a $100,000 annual
stipend for advanced planning updates, in recognition that development and building services are
provided primarily for individual and monetary benefit rather than for the community’s benefit. Total
department revenues in excess of total department expenses (net gain) are added to the reserve at year
end, and up to one-third of the reserve fund balance may be used to offset a net loss at year end.
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 reports 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.
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, to
receive an award for meeting GFOA’s financial reporting standards.
Regularly scheduled external Financial Reports include (but are not limited to) the following:
State required Annual Cities Report and Annual Streets Report completed in conjunction with
the year-end close
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
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ATTACHMENT C
CITY OF SARATOGA
INTRODUCTION SECTION
5
Regularly scheduled internal Financial Reports include (but are not limited to) 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 PLAN
A five year Capital Improvement Plan (CIP) is updated annually in conjunction with the operating
budget. The CIP reflects the current and changing needs of the community as well as enhancements
to improve the quality of the community. The first year of the CIP is adopted to authorize
appropriations.
The CIP is categorized into programs by project type. The four programs are: Street Improvements,
Park & Trail Improvements, Facility Improvements, and Administrative & Technology Improvements.
All projects within the CIP programs are appropriated, managed, and tracked separately, and each
project’s financial status is reported on a monthly basis in the Treasurers Report.
Project updates are recorded in the annual Capital Budget, with narrative, timeline, and financial
summary information updated with each published budget document.
Capital improvements that specifically benefit a select group of users and/or are fee -for-service based
are to be financed through user fees, service charges, special assessments and taxes, or development
impact fees.
The City shall identify and dedicate capital improvement related funding directly to the CIP and to
maximize the use of grant funding for capital improvement projects.
Grants, insurance, or other reimbursement funding is to be returned to the expenditure’s funding
source, unless otherwise directed by Council. For instance, Hillside Reserve funded projects that
receive insurance reimbursement payments are to be returned to the Hillside Reserve, and grant
reimbursements for projects funded through the CIP Reserve are to be returned to the CIP Reserve
when payment is received.
After completion of the prior year’s audit and the General Fund’s priority funding requirements are
met, the remaining net operations are moved into the Capital Project Reserve at year end. Use of the
Capital Project Reserve for the subsequent fiscal year is reviewed and preliminary direction given by
consensus of the City Council at the Annual Council Retreat. Final CIP funding direction is provide
through the budget adoption.
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 guidelines shall be reviewed by Council for final CIP Budget direction each
fiscal year:
$200,000 – Annual Infrastructure Maintenance & Repairs (for Sidewalk , Storm Drains, Curb &
Gutter, and Bridge Maintenance)
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ATTACHMENT C
CITY OF SARATOGA
INTRODUCTION SECTION
6
$50,000 – Roadway Safety and Traffic Calming
$50,000 – Risk Management and Mitigation Projects
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 due to funding requirements; they also
contribute toward this goal. The ARM&R project was originally established with a $1 million minimum
annual funding goal from dedicated Gas Tax Revenue and Solid Waste Services contract assessed
Vehicle Impact Fees. However, after decreases in the PCI, Council has established a new goal of $2
million annually with the FY 2016/17 budget. Council is to consider this goal in conjunction with
funding requests during the CIP budget discussion each year. This project shall encompass roadway
repairs, resurfacing, and rehabilitation projects, traffic light, curb and gutter, and other miscellaneous
repairs, striping and signage, and assorted street materials and supplies.
DEVELOPMENT RELATED FINANCIAL POLICIES
The Development Reserve was established to provide stability for multi -year development related
services. The reserve is funded by Community Development Department revenues in excess of expenses
at fiscal year-end. The reserve is available for use in those years where a shortfall occurs; when
development revenues fall below development expenses. Use of the reserve for operational support is
limited to a maximum of 1/3 of the reserve balance in any given fiscal year; with any budgeted use of
the reserve automatically rescinded up to the amount development revenues are sufficient to cover
General Fund net operations. The reserve may also be utilized for other development related uses, such
as funding development software upgrades or special projects, per Council direction. Additional
information on this Development Reserve is located in the Fund Balance Reserve Policies section.
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 run for 10 years and are automatically renewed unless the farmer or rancher cancels
it. The City does not limit the number of Williamson Act contracts entered into each year.
The Mills Act is State-sponsored legislation granting local governments the authority to enter into an
agreement with property owners to allow reduced property tax payments in return for the restoration
and continued maintenance of their historic property. Since the agreement reduces property tax
assessment, the City receives a smaller share of property tax revenue in comparison to a property that
is assessed at market value. 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, or
with Council approval, budget adjustments, or service reductions.
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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 records retention policy and schedule.
Services, supplies, and fixed asset purchases exceeding $25,000 must be authorized by the City
Council, unless purchase is specifically called out in the adopted budget or excluded under the
Purchasing Policy.
The 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 at year-end, the departments shall evaluate and implement corrective actions as needed, and
notify Council if services will be impacted.
FIXED ASSETS AND INFRASTRUCTURE
Individual 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 repair
extends the useful life of the asset.
The City will sustain a long-range fiscal perspective through the use of a five-year Capital Improvement
Plan designed to maintain the quality of City infrastructure, including streets, sidewalks, curbs and
storm drains, lighting, building, parks, and trees, and through Internal Service Fund programs to both
maintain and replace City building infrastructure, fixtures, and equipment, vehicles, and public works
and technology 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, with emphasis placed on completion of
GASB 34 requirements.
Infrastructure management systems are to be developed and maintained to provide long range
financial and operational planning. These shall include 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 the eventual replacement
needs.
Information Technology software, hardware, and auxiliary equipment and systems are to be maintained
through the Operating Budget’s Internal Service Replacement Fund, whereas annual appropriations in
the Information Technology Services operating budget or departmental program budgets are to fund
ongoing license, maintenance, and security costs.
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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 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.
Each Internal Service Fund will set recovery charges at rates sufficient to meet all operating expenses,
depreciation, and fund balance reserve policy objectives.
LONG-TERM DEBT
The City shall seek to maintain a high credit rating through sound financial practices as a foundational
financial practice, and to maximize borrowing costs.
The City does not incur debt for operations or capital improvements except under extraordinary
circumstances and with citizen support. Under these circumstances the City will seek voter approval
for General Obligation (GO) Bond Debt for major infrastructure rehabilitation.
Long-term Financing Debt is typically incurred for capital improvements or special projects that cannot
be financed from current or dedicated revenues, or for large liabilities resulting in significant financial
impacts. In principal, long-term debt is to be used only if the debt service requirements do not
negatively impact the City’s ability to meet future operating, capital, and cash reserve policy
requirements.
Through City Council approval, the City may function as a bonding conduit for special assessment
districts. This may occur when a neighborhood or area is seeking to improve private or cooperatively
owned infrastructure, such as private roads or water system cooperatives. 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;
include financing payment terms at a manageable level; and, does not extend beyond functionally
appropriate payment terms.
The City will monitor all forms of debt in conjunction with budget development throughout the year,
and will report concerns and remedies if necessary to the City Council.
The City will ensure compliance with bond covenants, providing financial information to reporting
parties as necessary.
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The City will comply with Government Code Section 43605 limitations on de bt, which limits general
obligation indebtedness to an aggregate 15% of the assessed value of all real and personal property of
the City.
REVENUES
The City will encourage a stable revenue system to offset short-run fluctuations in any one revenue
source, in part through balancing revenue fluctuations to related operational fluctuations. This
concept is applied in Community Development as net operational funding is held in reserve and
utilized to fund operational expenses as needed.
Designated and legally restricted tax and revenue funding sources will be accounted for in the
appropriate funds. General taxes and revenues not allocated by law or some other contractual
agreement to other funds are accounted for in the General Fund. Dedicated Capital Project revenues
are to be directly accounted for in the appropriate capital project fund, within a designated project.
A master schedule of User Fees is reviewed and presented to Council on an annual basis to adjust fees
to an appropriate level. Operating departments shall review services and the existing fees to ensure
discretionary services (not specifically waived or modified) reflect direct and reasonable indirect costs
of providing such services.
The City typically establishes user charges and fees at levels that recover the direct and indirect activity
cost of providing a service or product. The City also considers market rates and charges levied by
other municipalities of similar size for like services in establishing rates, fees, and charges. A s some
services have partial cost recovery objectives (such as Recreation classes and facility rentals), cost
recovery ratios will vary in accordance with policy objectives.
The City will follow an aggressive policy of collecting local taxes and revenues due to the City through
persistent follow-up procedures, and external resources as necessary.
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.
RISK MANAGEMENT POLICY
The City is insured for up to $25 million of general liability, auto, and property damage claims through
a Joint Powers Association insurance cooperative up to $5 million, and an excess insurance provider
for claims in excess of this, up to $20 million. The City is self-insured for the first $25,000 for general
liability and auto claims; property damage up to $5,000 and third party auto claims up to $10,000.
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 a third party administrator.
The City’s role in managing both its risk management and workers comp programs is to be preventative
in nature which is accomplished through careful monitoring of losses, working closely with the third
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party administrator, proactively addressing infrastructure maintenance and potential risks, and by
designing and implementing safety programs to minimize risk and reduce losses.
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 de mands of the City and
conforming to all state and local statutes governing the investment of funds.
Finance staff shall exercise due diligence to comply with the Investment Policy. The City currently
practices conservative and cautious investment practices by limiting its investments to the State’s Local
Agency Investment Fund (LAIF). Certificates of Deposits and high grade investment vehicles may also be
utilized under the Investment Policy, however the Finance Committee will provide oversight, review and
direction on any decisions to move a portion of the City’s available funds into these other permitted
investments. Administrative Services Department’s Finance Division shall prepare a monthly report to
the City Council that has sufficient detail to present the financial condition of the City at month end, the
cash and investments balance by fund, and fund balances by fund type.
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FUND BALANCE RESERVE POLICIES
Prudent financial management dictate 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: the General Fund, Special Revenue Funds, Capital Project Funds,
and Debt Service Funds.
For “Non-Governmental Funds”, equity classifications are classified as “Net Position” with sub-
classifications of Restricted or Unrestricted Net Position. A third component of a Non-Governmental Fund’s
equity is “Net Investment in Capital Assets,” which for Saratoga refers to the non -monetary portion of equity
such as vehicles and equipment, net of depreciation. Non-Governmental Fund types include Proprietary
Funds (Enterprise and Internal Service Funds) and Fiduciary Funds.
GOVERNMENTAL FUND TYPE RESERVE CLASSIFICATIONS
The Governmental Reserve classifications are defined as follows, which includes the applicable reserves that
fall into the classification.
Non-Spendable Fund Balance
Represents resources that are inherently non -spendable from the vantage point of the current period. The
City does not presently hold Non-Spendable Reserve funds.
Restricted Fund Balance
Represents fund balance that is subject to external enforceable legal restrictions. The City maintains the
following restricted fund balances under this designation:
General Fund: Environmental Services Fund Balance Reserve
Special Revenue Funds: Landscape & Lighting Assessment Districts Fund Balances
Debt Services Fund: Library General Obligation Bond Debt Service Fund
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Capital Project Funds
a) Park in Lieu Funds
b) Highway User Tax Allocation Fund (Gas Tax)
c) Capital Project Grant Funds
Committed Fund Balance
Represents fund balance constrained by limitations the government imposes upon itself at its highest level
of decision making and remains binding unless removed in the same manner. The City maintains the
following fund balances under this designation:
General Fund: Hillside Stability Reserve
General Fund: Facility Replacement Reserve
Capital Improvement Plan Funds: Capital Improvement Project Fund Balance Reserve
Assigned Fund Balance
Represents fund balance identified by Council for an intended use; however as no legal obligations exist,
the funds may be re-designated and utilized for another purpose if Council chooses. The 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: Development Services 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).
a. For the Hillside Stability Reserve, loan repayment shall be made in annual contributions of
$100,000 until reserve balance reaches the $1 million reserve goal.
b. 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 un foreseen emergency or extraordinary costs related to hillside
degradation, inclusive of slide prevention and mitigation, slide repair, and associated drainage and
roadwork.
Use of the reserve requires an analysis be prepared and presented to Council for approval, or in the event
of a landslide requiring immediate emergency work, the Public Works Director may direct use of up to 10%
of the reserve to make emergency repairs and mitigate further damage until Council takes action. Reserve
funding is to be 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 the amount
of $100,000 each fiscal year until the $1,000,000 reserve cap i s reached.
Facility Replacement Reserve
The Facility Replacement Reserve is established to accrue funding for the major rehabilitation or
replacement of City Facilities (buildings/structures). Eligible uses of this reserve include both direct funding
of public facility improvements, and the servicing of related debt. Small facility building replacements,
major facility renovations, and down payment contributions toward a large facility replacement in
conjunction with bond measure funding are examples of intended Facility Replacement Reserve uses.
An initial contribution of $300,000 was established in FY 2012/13 with Council’s recommendation to
continue funding at this level, as a priority use of year-end net operations funding. Effective FY 2016/17,
Council’s direction is to increase the annual year-end contribution amount to $500,000, as funding is
available. Council has set a goal to fund the Facility Replacement Reserve to a level equal to 1/3 of the City’s
insured value over the next 20 years (by FY 2036/37) as a fiscally responsible pra ctice to maintain city
infrastructure In principle, Saratoga does not pursue bond money to fund capital improvements, however,
replacing high cost facility infrastructure requires a long-term funding plan that may or may not be
attainable through annual contributions. Therefore, the Facility Replacement Reserve demonstrates both
the City’s good faith funding effort and financial stewardship for future bond measures if needed, as well
as accumulating funding for a down payment on replacement 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.
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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.
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 avoi d
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 credi t 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.
Beginning with the FY 2016/17 budget, the Working Capital Reserve is maintained at $1 million (reduced
from $2 million), and the Fiscal Stabilization Reserve in maintained at $2.5 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
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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 Stabilizations
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 This funding shifts provides a focused but
flexible more accurate reserve funding purpose and utilization structure.
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 increases 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 resoluti on 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 $2.5 million Fiscal Stabilization Reserve funding level will be assessed on an annual basis
to ensure this funding level is sufficient in light of operational reserves and utilization needs.
Development Services Reserve
Under the Unassigned Fund Balance classification, the Development Services Reserve provides fiscal stability
and funding accountability for the Community Development Department’s planning and building programs.
Development projects are often multi-year activities in which revenues may be collected in one year, while
project expenditures may extend over several years.
In total, this reserve represents accumulated excess planning and building net operation funds from years
when development revenues exceeded development expenditures. The reserve funds are utilized in years
when planning and building program expenditures exceed revenues, thereby acting as an overall funding
stabilizer for multi-year development activities.
Use of reserve funding for operational support is restricted to 1/3 or the reserve balance in any given fiscal
year, with Council approval. Budgeted use of the Development Reserve is to be rescinded if and to the point
where development revenues are sufficient to cover General Fund net operations at year-end. In addition,
the Council may direct reserves be utilized for specific development related uses, such as for development
software upgrades or special projects.
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 as needed. Year-end reconciling allocations to and from the reserve are approved
though Council’s budget resolution adoption each fiscal year, with the liability and resulting reserve
amounts determined as part of the year-end close process.
Council Discretionary Reserve
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Under the Unassigned Fund Balance classification, the Council Discretionary Reserve represents unspent
funds from the Council’s annual appropriation. The reserve provides a mechanism to roll forward remaining
Council Discretionary Funds as reserve funds are immediately re -appropriated into the following fiscal year.
This allows Council the flexibility to take advantage of unforeseen opportunities or needs without the
restriction of fiscal year boundaries. Use of the reserve funding requires Council majority approval. The
reserve exists at year-end only when there are remaining unspent Council Discretionary funds at the end of
the fiscal year.
Other Unassigned Reserve
The ‘Other Unassigned Reserve’ represents accumulated net operations not yet allocated to other fund
balance reserves, and by definition, fall into the Unassigned Fund Balance classification.
Other fund’s accumulated net operations are typically accounted for in an undefined reserve account in the
fund – and typically titled ‘Fund Balance Reserve’. As other funds are structured for specific uses or
commitments, the fund balance, by its distinctiveness, already has a directed purpose, whereas the General
Fund is used for multiple and general operational purposes thereby requiring a distinction of purpose for
each reserve. Council may utilize reserve funding at budget adoption or by adoption of a budget adjustment
resolution during the course of the year. Reserve funding is replenished from year-end net operations, as
available.
SPECIAL REVENUE FUND RESERVES
Landscape & Lighting Assessment District Funds
Assessment District Funds are Special Revenue Funds, which is a type of governmental fund. As a
governmental fund, the Landscape and Lighting Assessment District Funds comply with GASB 54 fund
balance classifications, and by nature of the fund’s purpose, fund balance reserves are classified as
restricted reserves.
Special Revenue Funds account for and report the proceeds of specific revenue sources that are restricted
or committed to specified purposes (other than for debt service or capital projects.) For the City, Landscape
& Lighting Assessment District Special Revenue Funds were established to account for each individual
assessment district; thereby each fund has its own separate fund balance reserve.
Each district’s fund balance reserve should be sufficient to provide working capital to cover operational
expenses through the first half of assessment receipts in January, therefore equitable to approximately one -
half of a district’s annual expenditure budget. The second half of receipts are rece ived in June. Some
districts may include capital improvement projects in addition to ongoing regular maintenance resulting in
fund balance increasing over the years to accumulate sufficient resources for the improvement projects.
As each district’s situation is different, a district’s maximum fund balance shall be determined by the Public
Works Director.
Requests for use of the reserve are approved by Council through budget adoption or by a Council approved
budget adjustment resolution throughout the year. The reserve is replenished from the Fund’s net
operations in subsequent years.
DEBT SERVICE FUND RESERVES
Library General Obligation (GO) Bond Debt Fund
The Library General Obligation (GO) Bond Debt Fund is a Debt Service Fund established to account for the
financial resources accumulated for principal, interest, and cost of issuance expenditures associated with
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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.
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 com ply with GASB 54 fund balance classifications. Because
Council has directed the fund’s appropriated funding be spent on specific capital improvement projects,
the Capital Project Fund Balance Reserve is classified as Committed Fund Balance.
Budgeted capital improvement project funding is determined by the scope of work approved by Council,
and remains assigned for that use until completed or reassigned by Council. Fund Balance amounts
represent the total remaining funds in the individual projects at ye ar-end. As Fund Balance amounts are
determined by the amount of project completion at year-end, they cannot be standardized for minimum or
maximum amounts. Fund Balance is re-appropriated to the capital projects in the following fiscal year for
the work to be completed.
Street Improvement Projects Funds
Street Improvement Project Funds provide for a safe and functional roadway and pedestrian street system.
Each Street Improvement Fund (CIP Street Fund, CIP Grant Fund, and Gas Tax Fund) has multiple 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
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Park & Trail Improvement Project Funds provide for capital improvements to the City’s neighborhood and
city parks and plaza, the sport fields, bike and pedestrian trails, and open space areas throughout the City.
Each of the Park & Trail Improvement Funds (CIP Park & Trail Fund, CIP Tree Fund, and the CIP Park & Trail
Grant Fund) have multiple projects which roll up into the overall fund balances, but remain designated for
use by project.
The CIP Park & Trail Fund receives annual funding from Park-In-Lieu fees, occasional subventions,
reimbursements and contributions, and transfers in from other funds. The Tree Fund receives revenue from
tree fines and transfers from other funds upon Council direction. The CIP Grant Fund receives federal,
state, local and occasional private grants which vary in source and amount from year-to-year. Typically, CIP
Grant Funds have a negative fund balance as project work is conducted beforehand and then reimbursed
from expenditure invoices.
Year end fund balance represents the remaining unexpended project fun ds (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 maintenan ce and improvements of the City-owned
buildings and structures throughout the City. Each of the Facility Improvement Funds (CIP Facilities Fund
and the Facility Grant Fund) have multiple projects which roll up into the overall fund balances, but remain
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, or technology based systems, processes, or functions. Each of the
Administrative & Technology Improvement Funds (CIP Admin & Tech Improvement Fund and the Admin &
Tech Grant Fund) have multiple projects which roll up into the overall fund balances, but remain designated
for use by individual project.
The CIP Administrative & Technology Improvement Fund typically receives funding from a General Fund
transfer as administrative and technology improvement focused grants are limited. If grants are received,
projects typically have a negative fund balance as project work is conducted beforehand and then
reimbursed from expenditure invoices.
Year end fund balance represents the remaining unexpended project funds (net of any negative CIP Grant
Fund Balance) which are subsequently re -appropriated by Council into the following budget year through
budget adoption.
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INTERNAL SERVICE FUND RESERVES
Overview
Internal Service Funds are established to provide centralized cost centers for shared expenses and services
in order to efficiently track costs and manage resources. Costs are then allocated back to the operational
programs based on usage to more accurately determine cost of services.
The City’s Internal Service Funds include the two Insurance funds: Risk Management and Workers
Compensation, four Service/Support funds: Office Support, IT Services, Vehicle & Equipment Maintenance,
and Building Maintenance Funds, and three Equipment Replacement funds: the Vehicle & Equipment
Replacement Fund, the Office Technology Equipment Replacement Fund, and the Building FF&E (Furniture,
Fixture, & Equipment) Replacement Fund.
As each fund is accounted for as a separate entity, operational revenues less expenditures result in either a
positive or negative fund balance at any given point in time – Internal Service Funds are similar to the
separate checking and saving accounts a person may use for different purposes. At year end, each fund’s
net balance is represented as the “Fund Balance Reserve”.
The intent of the Internal Service Funds Reserves is to hold appropriate levels of reserves to support cash
flow needs and minimize interfund loans, not to accumulate funds in excess of expected ongoing
operational costs. Reserve levels are determined by the specific operational needs of the program, but
typically will fall within 25 – 50% of annual budgeted expenditures.
Internal Service Funds are a type of Proprietary Fund; therefore GASB 54 fund balance classification (for
Governmental Fund types) does not apply. Instead, Internal Service Fund’s financial statement reports are
presented similar to private-sector businesses and use “Restricted” and “Unrestricted Net Position” to define
net operational balances (equity/fund balance reserves).
Unrestricted Net Position allows reserve funding to be used (with Council approval) within the general scope
of the fund’s purpose. Restricted Net Position reserves are limited to a specific use, narrower than the
stated purpose of the fund. For example, grant funding provided for a defined use, as in remaining funds
from a Risk Management Training Grant within the Liability/Risk Management Fund, must be used for
qualified training purposes. Most Internal Service Funds reserves are held in the Unrestricted Net Position
category.
Liability /Risk Management Reserve Fund
The Liability/Risk Management Fund’s Unrestricted Net Position reserve supports cash flow needs and
minimizes interfund loans. Appropriate levels are maintained through service chargebacks to the
programs, based on operational risk factors. Most claims are covered under the insurance risk pool JPA.
The City is self-insured for up to $25,000 per General Liability and City Vehicle Auto Liability occurrence,
and up to $5,000 for Property Damage and 3rd Party Auto Liability. Non-covered claims are paid fully by the
City.
The Liability/Risk Management program receives funding from allocations charged to covered departments,
from grant funding, and from claim reimbursements. At year end, unspent funding flows into Unrestricted
Net Position or Restricted Net Position for specific purposes. Requests for use of reserve balance are
approved by Council through budget adoption or by a Council approved budget adjustment resolution
during the year. The reserve is replenished from the Fund’s net operations in subsequent years.
Workers Compensation Fund
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The Workers Com pensation Fund’s Unrestricted Net Position reserve supports cash flow needs and
minimizes interfund loans. Appropriate levels are maintained through service chargebacks to the programs,
based on operational risk factors. The purpose of the Workers' Compensation program is to provide
insurance benefit coverage for employee work-related illness and/or injuries through its membership in a
shared risk pool. The risk pool provides coverage up to $250,000, and excess insurance provides coverage
over this amount up to $10 million.
The Workers Compensation program receives funding from allocations charged to covered departments,
from grant funding, and from claim reimbursements. At year end, unspent funding flows into Unrestricted
Net Position, or Restricted Net Position for 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. The reserve is replenished from the Fund’s net operations in subsequent years.
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Office Support Fund
The Office Support program provides a centralized cost center for administrative office support expenses,
including photocopy machine leases, postage machines, shared office machines, and the associated
maintenance and repair services, postage, paper, and copier supplies. For efficiency, office support costs
are managed collectively and charged back to departmental programs on a use -basis allocation.
Accumulated net operations are held in the Office Support Fund for working capital cash flow.
The reserve is funded from the allocations charged to covered 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. 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 covered 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.
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 man ufacturer’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.
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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 covered departments and represents accumulated
funding, less amounts expended for asset replacement. At year end, unspent funding is held in Unrestricted
Net Position. The reserve is to be maintained at a level sufficient to provide replacement funding of vehicles
and equipment in accordance with replacement schedules.
Requests for use of the reserve are approved by Council through budget adoption or by a Council approved
budget adjustment resolution throughout the year. The reserve is replenished from the Fund’s net
operations in subsequent years.
Office Technology Equipment Replacement Fund
The Office Technology Equipment Replacement Fund accounts for accumulated funding over an asset’s
lifespan to be used for the replacement of office technology based equipment such as desktop computers
and monitors, laptops and tablets, network infrastructure, and various other related equipment.
Replacement costs are charged back to the departments based on assigned equipment costs. Initial
purchases are paid for through a department’s operational budget. If the purchased item is for ongoing
use, the Office Equipment Replacement program appropriates an annual allocation for the replacement of
the equipment based on the asset’s cost and years of life.
The reserve represents accumulated funding, less amounts expended for replacements. The reserve shall
be funded to provide replacement funding in accordance with replacement schedules. Funding for the
reserve comes from the allocations charged to covered departments. Requests for use of the reserve are
approved by Council through budget 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.
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CIP PROJECT PROCESS POLICY
This procedural policy defines how a project moves through the CIP Budget Funding process: from the
initial project idea, through project development, nomination, and project approval process, and if
successful, into the Capital Budget as a funded project.
The CIP project development stage of the policy takes different tracks, depending upon whether the project
idea is staff driven or Council nominated. These two paths are discussed separately below, until the tracks
converge for CIP project assessment preparation.
STAFF PROJECT DEVELOPMENT
1. CIP Project Initiation
As a function of staff’s day-to-day work, infrastructure improvements and large-scale repairs and
maintenance are identified as potential capital improvement projects. These are often highly -visible
tangible public assets such as street repaving, or park and trail improvements. However, many CIP
projects are less noticeable, including facility roof repairs, tree planting, or ADA enhancements.
Projects may also be administrative or technology improvements, and hence invisible to the general
public, such as code updates/revisions, process improvements, software implementations, or economic
vitality programs.
Staff is to discuss the CIP project idea with the appropriate staff or City 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 nomination
process. After receiving initial approval, staff moves into the idea development stage.
2. Idea Development
To move the idea forward, staff will need to analyze and articulate the project’s scope, political impacts,
priority factors, resource requirements, and any other relevant considerations.
a. Project Scope – Scope may include the description, project size and location parameters, project
purpose, and goals or deliverables, such as products, services or results. Project justifications and
assumptions should support the project’s purpose and definition, and may include cost-benefit
analysis, risk assessments, funding availability, or even community desirability factors.
The scope should clearly state if a project is to be funded and/or completed in phases rather than
as a singular body of work. If the project is ongoing infrastructure maintenance or a program
project, this too should also be clearly noted. In some cases, project scope may be defined by
exclusions – statements about what the project will not accomplish or produce. Additionally,
constraints or restrictions may identify project limitations.
Project Scope defines a commitment to produce a body of work or end-product with the resources
provided under the stated assumptions. The written scope helps to manage expectations and
provide clarity to the involved parties, reduce confusion and failure, prevent scope creep, and
provide transparency to the community.
b. Political Considerations - Knowledge of historical information, which attests to the necessity of
Council/staff communication is of vital importance in project development. Determine whether
this project has come up for consideration before, or why was it not completed previously. Are
there lessons to be learned from a past project proposal?
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Another consideration includes knowing whether a project might be controversial. Is there a
segment of the community strongly opposed to, or strongly supportive of this specific project? Wi ll
this project prompt demand for further funding or resources? Have similar projects been
completed in another part of the city? Determine why this project should be considered a priority
over others, and whether the project’s cost or benefits would be supported by the community.
c. Priority Factors - Project priority is an important consideration in the CIP approval decision factor.
Council’s role is to determine which projects are of higher priority than others since there will never
be enough money or resources to do every project. Decision criteria may include factors such as:
Health and Safety Issues
Imminent failure of structure/system
Short-term cost of repair vs. long-term cost of replacement
Availability of external or dedicated funding
Efficiencies
Federal or State mandates
Business or community support
Impacts if project is not completed
A project’s priority is also affected by the severity of the criteria. For instance, a project that falls
under the “Imminent Failure of Structure/System” criteria may be an extremely dangerous situation
in need of immediate repair, or low danger of minor importance and simply remedied by removal.
Another example would occur with Federal or State mandated projects. There may be little impact
as to whether the mandate is met, or there may be severe fines for lack of timely completion. As a
result, project priority is based on the overall assessment of the circumstances; many factors
contribute to priority decisions and Council cannot rely upon a clear hierarchical order upon which
to base their decisions.
d. Project Resources - In the City’s project development discussions, resources typically refer to
financial funding. However, resources may also refer to staff time, equipment and materials,
community/stakeholder participation or support, space requirements, information technology
services, or some other type of support or contribution.
Funding plays a critical role in project development. In many cases, lower priority projects may be
approved ahead of higher priority projects simply because there is designated funding available for
the lower priority projects. The ability to bring designated funding (such as a grant award) with a
project proposal greatly increases the likelihood that the proposed project is approved. Overall,
projects that request undesignated Capital Project Reserve funding are more competitive due to
funding limitations and the number of projects competing for the same pot of funds.
An additional component of project resource considerations are the unstated resources (identified
above) required in project construction or implementation. For instance, staff time is limited and
time spent working on one project prevents staff time being spent on another project. Project
timing and staff time requirements are therefore an important component of the project that
Council may wish to review.
e. Other Considerations - There are numerous other factors not mentioned above that are also taken
into consideration when assessing a project idea. For example, can the City afford the ongoing
operating budget increases to maintain or implement the project? Does the project contribute
toward economic vitality? Are there environmental concerns? Does it enhance the community’s
art, education, or cultural resources? Does the project provide operational efficiencies or cost
savings? Are there risk management or legal liability issues? Possibly the project requires
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development be staged in phases? Is there strong community interest in this project? Each project
will differ, meaning analysis is specific to the circumstances, and diligent research and thought
should be put into developing project scope and justification.
In summary, the overall goal of idea development is to identify, quantify, and assess the project
comprehensively. This effort is intended to ensure that a proposed project 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 is to propose the project idea to the City Manager for approval. If approved, the project is moved
onto the CIP Project Candidate List. Staff is to notify the Administrative Services Director of the
project’s approval and provide pertinent project information.
Staff will prepare written narratives with project scope, justification, fiscal impacts, cost estimates,
timelines, etc. as necessary for Council Retreat assessment package.
CITY COUNCIL PROJECT DEVELOPMENT
Council Members are often the recipients of residents’ suggestions for capital project work. Depending
on the topic, Council Members can take these opportunities to: 1) educate the residents on why a project
may not be feasible; or 2) provide residents with information on how to 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 Capital Project Candidate List is to be recorded in the City Council minutes, and
acted upon as a follow-up item. City Manager will notify Council Member of project nomination (to
clarify/verify understanding of project scope and of the assignment to a staff member. Staff member
will complete Candidate List step requirements, including: preparation of project scope narrative and
justification, fiscal impacts, cost estimates, timelines, etc. as required for Council Retreat assessment
package.
CIP PROJECT ASSESSMENT
1. Assessment Package
In preparation for the annual Capital Project Assessment, Finance will consolidate the CIP Project
Candidates, along with proposed changes to current CIP projects, and the current year’s CIP Unfunded
Project List into an assessment package for Council’s review. The Capital Project Assessment review
provides a forum to assess all projects at one time. These assessment package will include:
● A review of available funding
● Existing projects in the current year’s CIP
● Proposed changes to existing projects
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● The current CIP Unfunded List
● Proposed changes to projects on the CIP Unfunded List
● New projects on the CIP Candidate List
● Review of requests in conjunction with funding sources
2. Council RetreatCapital Project Assessment
The City Council’s review of the assessment package Capital Project Assessment is to be held annually,
prior to the start of the budget development cycle, typically at the Council Retreat Meeting that occurs
in late January or early February. During the assessment review, In addition to reviewing the assessment
package, the Council will review available funding and all project requests.current projects with no
encumbrances on available funds to determine if the project will continue in the following fiscal year.
In their review, Council may request revisions to a project’s scope, funding, or other component.
However, changes that redefine a proposed project must be Council’s consensus direction. As projects
are assessed, they are either:
● Rejected
● Accepted, or
● Modified and Accepted
At the conclusion of the assessment review, Council will prioritize accepted projects and designate
project funding. Projects placed on the Funded List will be brought forward to the upcoming Budget
Study Session. The remainder will be placed on the CIP Unfunded Project List.
NOTE: Rejected project ideas may be nominated for another attempt to become an approved project in
the following year(s), but must again go through the project development and assessment process.
3. Budget Study Session
Updated CIP funding availability and project revisions will be reviewed a final time with Council. Council
will conduct a final assessment and provide consensus direction to staff for inclusion in the upcoming
Proposed Budget Hearing to be held in May.
CIP Project Funding
1. Proposed Budget Hearing
The final Proposed Capital Budget with the recommended project funding will be brought to the City
Council Budget Public Hearing in May. Council is to provide any final comments or direction for budget
adoption.
2. Budget Adoption
The Operating and Capital Budgets are brought to Council in June with all final direction incorporated
into the final summaries. Council is to adopt the budget at this time, with budget funding effective on
July 1st of that year.
3. Funding Process Follow-up
Approved CIP projects that do not receive funding allocations will be assigned to the next budget year’s
CIP Unfunded List. The list will be included in the budget document, and assessed again during the
following year’s Capital Project Nomination and Assessment Process. The new CIP Unfunded List has a
life span of one budget cycle.
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CAPITAL IMPROVEMENT PLAN
BUDGET
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CAPITAL IMPROVEMENT PLAN OVERVIEW
The City of Saratoga’s FY 2017/18 – 2021/22 Capital Improvement Plan (CIP) represents 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, facilities, and other infrastructure. Generally CIP improvements are major
expenditures that have a multi-year life, and result in becoming City assets.
As a city is comprised of diverse infrastructure, the CIP is structured under four separate program areas in
which projects are categorized by infrastructure type. This includes: Streets Program; Parks & Trails
Program; Facilities Program; and an Administrative & Technology Improvement Program. The discrete
program areas allow for further sub-classifications of projects the City is undertaking, and the tracking of
resources expended for these purposes. The four programs are structured as follows:
Streets Program – includes projects which develop and maintain the City’s roadway system to provide
safe and efficient traffic flows while minimizing traffic movement and noise through residential
neighborhoods; street lighting for traffic safety at intersections and throughout public streets;
infrastructure development and maintenance of street surfaces, storm drain systems, curbs, gutters
and sidewalks; bridges and retaining walls; and roadway landscaping to maintain the quality
streetscapes of the Saratoga community.
Gas Tax revenues, Road Maintenance and Rehabilitation Account funds, and Refuse Impact Fees are
dedicated funding sources for the Streets Program, with total revenues of approximately $2 million per
year. Funding for projects may also come from prior year General Fund savings, from development
projects requiring mitigation of impacts, from partnerships with other jurisdictions, or from federal,
state, and local grants as either part of statewide initiatives or through grant applications based on
specific City projects.
Parks & Trails Program - includes projects to develop and improve parks and sport fields, park
structures, trails, the city plaza park, and various citywide tree planting and maintenance. Dedicated
funding for the Parks Program includes a Park Development Fee collected when a development project
subdivides property, and from Tree Fines collected from un-permitted tree removals. Funding may also
come from prior year General Fund savings, from grants and park bond funds, and from donations.
Park projects may, on occasion, include community volunteer services for minor construction and clean -
up projects.
Facility Program - includes projects for purchasing, constructing or making capital repairs to City
buildings, structures, and equipment. City buildings include the Civic Center and Chamber/Theater
Building, the Senior/Community Center and auxiliary structures, the Corporation Yard and structures,
the North Campus, the Historical Buildings including the Saratoga Museum, the McWilliams House, the
Book-Go-Round. Funding is not specifically designated for this capital program; allocations generally
come from General Fund prior year savings or grant funds applied to qualified improvements, such as
Community Development Block Grant funds for ADA improvements.
Administrative & Technology Improvements Program – includes projects which provide operational
efficiencies and improvements in the administration of City services. Administrative & Technology
Improvement Projects typically include major expenditures for new systems or system upgrades, new
technology equipment or services, and one-time and/or multi-year administrative projects such as
converting a decades-long accumulation of microfiches, building plans, and legal documents; the
development of business and community incentives; the implementation of ri sk management
programs, and for non -recurring operational improvement projects. Revenue for administrative
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projects may come from the City’s Internal Service Replacement Funds, from grants, or from
prior year General Fund savings.
CAPITAL PROGRAM GUIDELINES
The standard definition of a Capital Improvement Plan (CIP) project is for construction, acquisition,
rehabilitation, or non-routine maintenance work that generally costs $25,000 or more with a minimum
useful life of 5 years at a fixed location. The City also includes projects under $25,000 in the CIP if they
qualify as staged or ongoing improvement projects, or if they are significant multi-year projects.
Additionally, non-infrastructure projects may be included in the CIP under the Administrative & Technology
programs if they are one-time, operational efficiency, technology, or multi-faceted administrative projects.
The CIP endeavours to identify all funded capital improvements planned for completion within the next five
years, with cost estimates based on current year dollars. Project estimates are updated each year based
upon current design specifications and bid prices. Equipment, operation, and maintenance costs incurred
as an outcome of CIP projects are to be identified and included in the operating budget.
Under direction from the City Manager, the Public Works Department takes the lead in the preparation of
most street and park projects for consideration in the current Capital Improvement Plan, and the Recreation
and Facilities Department takes the lead in most Facility Program projects. Capital Administrative &
Technology projects typically are recommended by the City Manager, Administrative Services, or
Community Development departments as they represent non-infrastructure projects. The CIP Procedure
Process Policy guides proposed projects through a proposal preparation and review process, including a
review by the Planning Commission; to ensure projects are consistent with the City’s General Plan prior to
Council’s final budget review. The entire Capital Budget is presented to the City Council for final review at
the Budget Hearing in May, with budget approval scheduled in June.
This summary overview of the CIP budget reflects the City’s capital projects plan and estimated project
status as of the year end. The CIP schedules reflect estimated unexpended fund balance at the beginning
of the fiscal year, the estimated funding to be received during the fiscal year (by category), and the full
appropriation of all available funds to allow for either completion of projects or large encumbrances for
multi-year projects .
The Capital Improvement Plan also includes a number of unfunded capital projects which were brought to
the Planning Commission and approved for conformance with General Plan guidelines. These planned
projects will be brought to Council for budget approval at a later time, when resources becomes available.
Water Access Policy: Park and/or facility improvement projects over $150,000 should include installation
of a water fountain/bottle filing station if there is no water fountain/bottle filing station at that location.
Additionally, installation of a water fountain/bottle filling station should be considered to be included as
part of plumbing improvement projects at City parks or facilities that do not already have a water
fountain/bottle filing station.
The following summary schedules and graphs illustrate program budgets by project category and by fund
for the four CIP Programs, and a list of unfunded projects.
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Results of CIP Funding Prioritization
FY 2018/19
Attachment - D
FY 2018/19 CIP Funding CIP - Reserve Park In-lieu
Risk
Management
Total Discretionary CIP Funding 1,229,380 295,279 204,412
CIP Allocation
Annual Infrastructure Repairs 200,000 - -
Annual Retaining Wall M&R 200,000 - -
Annual Park, Trails, Grounds, & Medians M&R 100,000 - -
Annual Roadway Safety & Traffic Calming 50,000 - -
Annual Risk Management 50,000 - -
Fruitvale Ave & Allendale Ave Improvements 250,000 - -
Quarry Park Walkway Clearing 50,000
Park & Trail Safety Improvements - 43,000 -
Quito/Pollard Roads Safety Improvements - 75,000 -
Senior Center Entrance Remodel 50,000 - -
Accessibility Assessment - - 75,000
Big Basin Way Turnaround 135,000 - -
Hakone Gardens Infrastructure Improvements - 120,000 -
Senior Center Electrical Panel 40,000 - -
Community Center Stage Renovation - - 90,000
Community Development Lobby Remodel 150,000 - -
Total:1,225,000 288,000 165,000
Remaining CIP Funds 4,380 7,279 39,412
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CIP Funding Allocation Schedule
FY 2018/19
Attachment - D
FY 2018/19 CIP Funding CIP - Reserve Park In-lieu
Council
Discretionary
Risk
Management Gas Tax Grants Other Total
Street Projects
9111-003 - Annual Street Resurfacing (PMP)695,729 - - - 2,007,895 - - 2,703,624
9121-001 - Roadway Safety & Traffic Calming 165,514 - - - - - - 165,514
9122-006 - Prospect Road Improvements 201,755 - - - - 3,660,942 - 3,862,697
9122-007 - Citywide Signal Upgrades - - - - 99,759 392,000 - 491,759
9122-008 - Big Basin Way Turnaround 135,000 - - - - - - 135,000
9122-010 - Fruitvale/Allendale Intersection Imps 250,000 - - - - - - 250,000
9141-005 - Annual Infrastructure Imps 319,158 - - - - - - 319,158
9142-005 - Saratoga Avenue Sidewalk - - - - - 71,281 - 71,281
9142-014 - Big Basin Way Sidewalk Repairs - - - - 20,990 163,000 - 183,990
9142-015 - El Camino Grande Storm Drain 353,724 - - - - - - 353,724
9142-017 - Storm Drain Capture Devices 17,000 - - - - - - 17,000
9142-019 - Village Crosswalk & Sidewalk Rehab 44,000 - - - - 338,000 - 382,000
9142-020 - Quito Road Sidewalk Improvements 42,630 - - - - - - 42,630
9152-001 - Fourth Street Bridge Widening 100,000 - - - - 485,922 - 585,922
9152-002 - Quito Road Bridges 197,189 - - - 7,085 302,735 - 507,009
9153-003 - Annual Retaining Wall M&R 222,125 - - - - - - 222,125
9171-002 - Quito Road Electrical Undergrounding - - - - - - 98,744 98,744
Total: Street Projects 2,743,824 - - - 2,135,729 5,413,880 98,744 10,392,177
Parks & Trails Projects
9211-001 - Parks, Trails, Grounds, Medians Repl 152,002 - - - - - - 152,002
9211-002 - Tree Replanting Program - - - - - - 64,043 64,043
9211-010 - Park & Trail Safety Improvements - 43,000 - - - - - 43,000
9219-002 - Quito/Pollard Road Open Space Imps - 75,000 - - - - - 75,000
9222-004 - Hakone Gardens Infrastructure Imps 120,000 - - - - - - 120,000
9222-007 - Hakone Gardens Koi Pond Imps 149,322 110,000 - - - - - 259,322
9226-004 - Quarry Park Walkway Clearing - 50,000 - - - - - 50,000
9274-001 - Joe's Trail at Saratoga De Anza 33,997 - - - - 168,824 - 202,821
9274-002 - Guava/Fredericksburg Ct - Railroad 123,720 - - - - - - 123,720
9277-004 - Village to Quarry Park Walkway 34,303 100,000 - - - - - 134,303
9278-001 - Saratoga-to-the-Sea Trail 313,627 - - - - 265,000 - 578,627
Total: Parks & Trails Projects 926,971 378,000 - - - 433,824 64,043 1,802,838
Parks & Trails Projects
9321-016 - CDD Lobby Remodel - - 150,000 - - - - 150,000
9322-001 - Civic Theater Improvements - - - - - - 75,528 75,528
9331-008 - CC/SC Electric Panel Upgrade 150,600 - - - - - - 150,600
9331-009 - Community Center Stage Renovation - - - 90,000 - - - 90,000
9333-007 - Senior Center Entrance Remodel 50,000 - - - - - - 50,000
9372-001 - Library Building Exterior Maintenance - - - - - 5,570 - 5,570
Total: Parks & Trails Projects 200,600 - 150,000 90,000 - 5,570 75,528 521,698
Administrative Projects
9412-004 - Document Imaging 25,230 - - - - - - 25,230
9413-002 - City Intranet 16,949 - - - - - - 16,949
9415-001 - CDD Technology Management - - - - - - 102,776 102,776
9415-002 - TRAK-iT System Upgrade 25,633 - - - - - - 25,633
9442-001 - LLD Initiation Match Program 50,000 - - - - - - 50,000
9442-002 - Horseshoe LLD Beautification Program - - - - - - 25,000 25,000
9443-002 - Citywide Accessibility Assessment - - 75,000 - - - - 75,000
9451-002 - General Plan Update 480,515 - - - - - - 480,515
9452-003 - Village Vision 87,738 - - - - - - 87,738
9491-001 - Risk Management Project Funding 204,412 - - - - - - 204,412
Total: Parks & Trails Projects 890,477 - 75,000 - - - 127,776 1,093,253
Grand Total: All Projects 4,761,872 378,000 225,000 90,000 2,135,729 5,853,274 366,091 13,809,966
39