Ordinance 032-16RECORD OF ORDINANCES
ordinance No. 32 -16 Passed
AN ORDINANCE AUTHORIZING THE ADOPTION OF A
GENERAL FUND BALANCE POLICY
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WHEREAS, it has been the City of Dublin's (the "City'l practice and stated policy to
prepare the operating budget with the goal of maintaining an actual year -end
General Fund balance equal to 50% of the actual General Fund expenditures; and
WHEREAS, the General Fund balance is intended to provide the City with sufficient
liquidity to support one -time emergency costs and non - recurring shortfalls, and not
be used to fund recurring operating expenses; and
WHEREAS, establishing a minimum General Fund balance is a mechanism the City
can utilize to help insure adequate levels of fund balance to mitigate current and
future risks; and
WHEREAS, the rating agencies the City utilizes, Moody's Investors Service and Fitch
Ratings, monitor and consider the General Fund balance as part of their rating
methodology to determine the City's overall creditworthiness; and
WHEREAS, the rating agencies desire adopted policies as opposed to standard
operating practices; and
WHEREAS, financial decisions that impact the City's credit rating should be taken
into account as one consideration as higher ratings obtained by the City result in
lower costs of borrowing for the City, and thus the taxpayers save money, and
WHEREAS, the City wishes to have a formal policy adopted by Council stating the
City's General Fund Balance Policy; and
WHEREAS, the purpose of the General Fund Balance Policy is to provide guidelines
to Council and the City Administration for establishing, maintaining, and reviewing
the General Fund balance for the City; and
WHEREAS, the General Fund Balance Policy will serve to allow Council and the
Administration to recognize and react to warning indicators of financial stress and set
guidelines for proactive financial management measures.
NOW, THEREFORE, BE IT ORDAINED by the Council of the City of Dublin, State
of Ohio, of the elected members concurring, that:
Section 1. City Council hereby adopts the attached General Fund Balance Policy.
Section 2. This Ordinance shall take effect and be in force upon the earliest date
provided by law.
Attest:
Clerk of Council
2016.
Cityof Du61in
Office of the City Manager
X200 emerald Parkway • Dubiin, OH 43017 -1090
Phone, 614,4104400 • Fax 614.410.4490
io: Members of Dublin City Council
From; Dana L McDaniel, City Manag,�i.�,� .�.���
Date; September 8, X016
Initiated By. Angel L Mumma, Director of Finance
Summary
Rey Ordinance No. 62 -16 — Authorizing the Adoption of a General Fund Baiance
Poiicy
During the i=lrst reading of Ordinance No. 3� -16, City Council expressed a desire to include
language that would provide for deviations from the requirements of the Policy with Council
approval,
Bath a redline and a clean version of the revised Policy is attached for Council consideration,
Recommendation
Staff recommends adoption of the General Fund Balance Policy at the second reading�public
hearing on September 1�, Z016
Attachments
As
Ciryof Dublin
Office of the City Manage°
5200 Emerald Parkway o C�ubfin, CiH 430171090
Phone: 614 °410,4400 o Fax: 614,410,9490
Tv. Members of Dublin City Council
�r�ma Dana t. McDaniel, City Mana
dated August 18, 2016
Initiated 6y. Angel L, Mumma, Director of Finance
Re; Ordinance No, 32 -16 _ An Ordinance Authorizing the Adoption of a General Fund
Balance Policy
Summary
During City Council's 2016 goal setting meeting, held March 10 -11, 2016, staff made a
presentation to Council regarding financial susfiainability and General Fund reserves, As Council is
aware, it has been the City's practice and stated policy to prepare the operating budget with the
goal of maintaining an actual year -end General Fund balance equal to SO percent of the actual
General Fund expenditures, However, no formal policy has been adopted by Council that states
such
The two rating agencies the City utilizes, Moody`s Investors Service and Fitch Ratings, both
consider the General Fund balance as part of their rating methodology to determine the City's
overall credit worthiness While our General Fund balance is very strong and significantly higher
than the general percentage that AaaJAAA rated entities generally have, bath agencies are
specifically looking for adopted policies as apposed to standard operating practices. As such, it
was staff's recommendation during goal setting to formally adapt a General Fund Balance policy°
During the Finance Committee of the Whale meeting held Wednesday, August 10, 2016, staff
presented to City Council a forma(Generai Fund Balance Policy for consideration and requested
adoption at a future Cauncii meeting,
The proposed General Fund Policy articulates the City's practice of maintaining a General Fund
balance of na less than a0 °/o of the Genera! Fund expenditures It also addresses the General
Fund balance that exceeds the 50 °/0 level Staff recommends that at the end of each fiscal year,
to the extent that the General Fund Balance exceeds 75% of the year's General Fund
expenditures, 25% of the amount in excess of 7S% will be transferred to the Capital Improvement
Tax Fund, The use of the transferred funds shall be consistent with the goals and policies of the
Capital Improvement Tax Fund,
Recomn�endatian
Staff recommends adoption of the General Fund Balance Policy at the second readingJpubiic
hearing to be held on September 12, 2016
Attachments
1,
CITY OF DUBLIN, OHIO
GENERAL FUND BALANCE POLICY
I. Purpose
The purpose of this General Fund Balance Policy is to provide guidelines to City Council and the
Administration for establishing, maintaining, and reviewing the General Fund Balance for the City of
Dublin. It is designed to take a proactive approach to financial management in the City and allows
the Administration and City Council to recognize and react to warning indicators of financial stress
and set guidelines for proactive measures.
II. Background
Establishing a minimum General Fund balance is a mechanism that governments can implement to
help insure adequate levels of fund balance are available to help mitigate current and future risks.
A minimum fund balance policy is generally considered a prudent and conservative fiscal policy to
deal with unforeseen situations.
The Government Finance Officers Association (GFOA), is an organization whose mission is to
enhance and promote the professional management of governmental financial resources for the
public benefit. The GFOA recommends governments establish a formal policy that maintains a
minimum unreserved fund balance in the General Fund of no less than two months of regular
general fund operating revenues or regular general fund operating expenditures. The choice of
revenues or expenditures as a basis of comparison may be dictated by what is more predictable in a
government's particular circumstances.
In addition to the benefits of having a formal policy that provides a level of reserve that mitigates
current and future risks, credit rating agencies carefully monitor levels of fund balance and
unreserved fund balance in a government's General Fund to evaluate a government's continued
creditworthiness.
III. Policy
At the time of budget preparation, the annual appropriations shall be adjusted to ensure that the
estimated year -end General Fund balance is no less than 50% of the budgeted General Fund
expenditures.
Throughout any fiscal year, the General Fund balance may be used to fund the cost of capital
improvements in which the ultimate funding source will be a grant or the issuance of notes or long
term bonds. In this instance, the General Fund balance may temporarily fall below the minimum
funding level in anticipation of a future financing. If the funds are to be reimbursed through notes
or bonds, the Administration will work with appropriate legal and financial advisors to assure that
the funds that are to be expended are eligible to be reimbursed through such financings prior to
any expenditures.
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IV. Application
The anticipated year -end General Fund balance will be calculated as part of the budget preparation
process and will be reported to City Council along with the Budget. It will be calculated by taking
the budget year's projected beginning fund balance less appropriations plus anticipated revenue.
The resulting fund balance must comply with the minimum fund balance established in this Policy.
Throughout the course of the fiscal year, any amendments to the appropriations approved by City
Council as part of the annual budget process must comply with the restrictions established in this
Policy, unless such amendment is for an approved purpose as noted in this Policy and approved by
the majority of City Council.
V. Conditions for Use
The General Fund balance is intended to provide the City with sufficient liquidity to support one-
time emergency costs and other non - recurring operating shortfalls such as:
• Natural disaster or other emergency
• Economic recession /depression
• Unexpected decline in revenue
• Unexpected large one -time capital expenditures
The General Fund balance shall not be used to fund recurring operating expenses. An exception
may be made for winding down a program or service which must be eliminated in order to provide
sufficient notice and reduce the impact to the community. This action shall have a definite end date
of not more than one fiscal year.
A majority vote of the City Council will be required to use the General Fund balance in a manner
that would reduce the balance below the 50% minimum requirement.
VI. Replenishment
In the event that the use of the General Fund balance would result in a balance below the 50%
target (other than when paying the costs of capital improvements in which the ultimate funding
source will be grants or the issuance of notes of long term bonds as noted in Section III), City
Council shall approve a plan for replenishment at the same time the use of the balance is approved.
If feasible, replenishment to bring the General Fund balance back to the minimum 50% level should
occur within the following fiscal year.
VII. Excess fund balance
At the end of each fiscal year, to the extent that the General Fund Balance exceeds 75% of the
actual expenditures for the year, the Director of Finance will transfer 25% of the amount in excess
of 75% to the Capital Improvement Tax Fund. Upon the recommendation by the City Manager, City
Council may elect to transfer an amount in excess of 25 %. The use of the transferred funds shall be
consistent with the goals and policies of the Capital Improvement Tax Fund.
VIII. Reporting and Review Provisions
As part of the annual operating budget review process, the Director of Finance shall provide a
report to City Council containing 1) the projected year -end General Fund balance for the current
fiscal year and 2) the proposed year -end General Fund balance for the next budget year. The
resulting fund balance must comply with the minimum fund balance established in the scope of this
Policy.
On a monthly basis, the Director of Finance shall provide a report to City Council containing year -to-
date revenues and expenditures, budget versus actual revenues and expenditures, and the current
General Fund balance (as of the last day of the preceding month). These monthly reports will be
followed by quarterly financial updates which will provide a detailed analysis of the activities of the
quarter. The quarterly financial update will also include current and projected year -end General
Fund balances.
The City's General Fund Balance Policy shall be adopted by Ordinance by City Council. City Council
shall review and reaffirm this Policy every three years, or more frequently if recommended by the
Director of Finance, the City Manager, and /or City Council.
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