HomeMy WebLinkAbout032156 RES - 07/14/2020 RESOLUTION
AMENDING FINANCIAL BUDGETARY POLICIES ADOPTED BY
RESOLUTION 031821 AND PROVIDING FINANCIAL POLICY
DIRECTION ON PREPARATION OF THE ANNUAL BUDGETS
WHEREAS, the City Council adopted a Financial Policy in July 2019 by Resolution
031821; and
WHEREAS, as a result of this policy, the City achieved its goal for the General Fund
balance and desires now to articulate a strategy to maintain a General fund balance and
to utilize any surplus balance to provide for enhanced financial stability in future years,
and also desires to manage fund balances of the Internal Service Funds, Enterprise
Funds, the Combined Utility Reserve Fund, and Debt Service Reserve Funds; and
WHEREAS, this policy provides an essential guide to direct financial planning and to
maintain and strengthen the City's bond rating; and
WHEREAS, it has been the City's practice to reaffirm its financial policy or to adopt a new
or modified policy annually in conjunction with preparation of the budget and prior to
presenting the Proposed Budget to the City Council.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
CORPUS CHRISTI, TEXAS: •
The Financial Budgetary Policies adopted by Resolution 031821 are amended to read
as follows:
Section 1. Development / Effective Date of Financial Budgetary Policy. This
Financial Budgetary Policy reaffirms and amends the financial policies adopted each
year by the City Council since 1997. The City Manager is directed to prepare each
annual proposed budget in accordance with this policy. The City Council is prepared to
make expenditure reductions that may be necessary to comply with this policy. This
Financial Budgetary policy remains in effect and applies to future annual budget
preparation processes until amended by City Council resolution.
Section 2. Current Revenues/Current Expenditures. General Fund current revenues
and funds available from all sources will equal or exceed current expenditures.
Section 3. General Fund Balance /Working Capital. To ensure that current and future
services or operations are not severely impacted by any economic slowdowns,
emergencies, natural disasters or other unforeseen circumstances, adequate financial
resources will be set aside in the General Fund unassigned fund balance. In the
Government Finance Officers Association's (GFOA) "Best Practice for Determining the
Appropriate Level of Unrestricted Fund Balance in the General Fund (2015)", GFOA
recommends, at a minimum, that general-purpose government, regardless of size,
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maintain an unrestricted budgetary fund balance in their general fund of no less than two
months of regular general fund operating revenues or regular general fund operating
expenditures. Accordingly; it is the goal of the City Council to build and maintain a reserve
in the General Fund unassigned fund balance which totals at least two months (or
approximately 17%) of regular general fund operating expenditures up to 20% of total
annual General Fund appropriations, exclusive of any one-time appropriations. At the end
of the fiscal year, upon completion of the Comprehensive Annual Financial Report, the
amount calculated to be at least two months of regular general fund operating
expenditures up to 20% of total annual General Fund appropriations will be Reserved for
Major Contingencies and set up in a separate account. The City Manager shall report on
the status of compliance with this policy at least annually as part of the budget process.
Uncommitted fund balance in excess of the policy requirement may be recommended for
expenditure by the City Manager. Finally, it is noted that extraordinary situations may
arise in which the timing of external actions out of the City's control may require the use
of the unassigned fund balance. The City Manager shall note these situations to the City
Council as soon as the information is known.
Section 4. Other Committed Fund Balances.
4.1 Internal Service Funds. To ensure that current and future services or operations
are not severely impacted by any economic slowdowns, emergencies, natural disasters
or other unforeseen circumstances, it is the goal of the City Council to build and maintain
an_ reassigned reserve in each Internal Service Fund listed below, of up to five percent
(5%) of the annual Internal Service Fund appropriations, exclusive of any one-time
appropriations. Any amount in excess of five percent (5%) will be returned to the paying
Funds or used for one-time expenditures. Subsection 4.lonly applies to the Information
Technologies Internal Service Fund; Stores Internal Service Fund; Engineering Services
Internal Service Fund; Fleet Maintenance Internal Service Fund; and Facilities
Maintenance Internal Services Fund.
4.2 Group Health Plans. It is a goal of the City to maintain a fund balance in the group
health plans to (1) pay any associated administrative costs and claims run-out based
upon the most recent actuarial study in the event the plan ceases or a change in the third-
party administrator is made; and to (2) hold a reserve for catastrophic claims equaling
10% of projected medical and prescription claims.
4.3 General Liability Fund. It is a goal of the City to maintain a fund balance in the
General Liability Fund (1) to fund long-term liabilities, incurred but not reported expenses
(IBNR), and a risk margin for the adverse development of claims as determined by the
actuarial recommendation and reflected in the Comprehensive Annual Financial Report;
(2) to provide additional protection against significant unexpected claims experience in
the fiscal year as a catastrophic reserve equaling 25% of the average incurred costs of
claims experience over the prior five-year period; and (3) to protect against significant
cost increases in the fiscal year for purchased insurance coverage premiums equaling
25% of the cost for purchased insurance over the prior year.
4.4 Worker's Compensation Fund. It is a goal of the City to maintain a fund balance
in the Worker's Compensation Fund (1) to fund long-term liabilities, incurred but not
reported expenses (IBNR), and a risk margin for the adverse development of claims as
determined by the actuarial recommendation and reflected in the Comprehensive Annual
Financial Report; and (2) to protect against significant unexpected claims experience in
the fiscal year as a catastrophic reserve equaling 25% of the average of incurred costs of
claims experience over the prior five-year period.
4.5 Enterprise Funds. To ensure that current and future services or operations are not
severely impacted by any economic slowdowns, emergencies, natural disasters or other
unforeseen circumstances, it is the goal of the City Council to build and maintain an
unreserved fund balance in each of the Enterprise Funds of a maximum of twenty-five
percent (25%) of the annual Enterprise Fund appropriations, exclusive of debt service
and any one-time appropriations, and anything over that amount shall be designated for
specific purpose(s). Subsection 4.5 only applies to Water, Wastewater, Gas, Stormwater,
Airport, and Marina fund balances.
4.6 Debt Service Reserve Fund. The City will strive to maintain a debt service fund
balance for bonds, certificates of obligation, tax notes, and other debt instruments of at
least two percent (2%) of the annual debt service appropriation(s) for the fiscal year;
provided, however, this requirement shall comply with the provision of Treasury
Regulation 1.148-2(f) which limits the amount of reserve funds that may secure the
payment of debt service on bonds.
Section 5. Liabilities for Other Post-Employment Benefits, Accrued Compensated
Absences and Net Pension Liability. For financial reporting purposes, the City will
record liabilities for Other Post-Employment Benefits, Accrued Compensated Absences
and Net Pension Liability according to guidance of the Governmental Accounting
Standards Board. These liabilities will be funded on a pay-as-you-go basis, and thus will
not be included in the minimum fund balances of the affected funds.
Section 6. Property Tax Rate for Operations and Maintenance. Each proposed annual
budget shall be prepared assuming that the City will be adopting a tax rate necessary to
be in compliance with Section 2 above. Full consideration will be given to achieving the
"no new-revenue maintenance and operations tax rate" for maintenance and operations
when assessed property values decrease, and full consideration will be given to
maintaining the current tax rate when assessed properties values increase, as long as
the-tax-rate does not exceed the "voter approval tax rate" (which is the rate that allows
the City to raise the same amount of maintenance and operation revenue raised in the
prior year, excluding new property, with a 3.5% increase.)
Section 7. Funding Level from General Fund for Street Maintenance. The General
Fund will contribute the higher of 6% of General Fund revenue less grants, industrial
district revenue and any transfer to Residential Streets or $10,818,730 for Street
Maintenance. In addition, the City must include 5% of industrial district revenue in the
Street Maintenance Fund.
Section 8. Funding Level from General Fund for Residential Street
Reconstruction Fund. In order to develop a long-term funding mechanism for capital
improvements related to residential/local streets, implement the following:
1. The City must include 5% of industrial district revenue in the Residential
Street Reconstruction Fund.
2. In Fiscal Year 2020-2021, transfer 1/3 of one percent of the General Fund
revenue less:
• Grants
• Industrial District revenue, and
• Any General Fund transfer to the Residential Street
Reconstruction Fund (i.e. four cents of the property tax
rate)
3. In Fiscal Year 2021-2022, transfer 2/3 of one percent of the General Fund
revenues less:
• Grants
• Industrial District revenue, and
• Any General Fund revenue to the Residential Street
Reconstruction Fund
4. In Fiscal Year 2022-2023, transfer 1% of the General Fund revenues less:
• Grants
• Industrial District revenue, and
• Any General Fund transfer to Residential Streets
Reconstruction Fund
5. At a Special City Election in November 2016 Corpus Christi voters voted to
create a dedicated fund to be used solely for residential street reconstruction
and the city council was authorized each year to levy, assess and collect a
property tax not to exceed six cents ($0.06) per one hundred dollars ($100.00)
of assessed value for the purpose of residential street reconstruction to be
deposited in such fund. Said taxes shall be used solely for the purpose of
residential street reconstruction, including associated architectural,
engineering and utility costs, and shall be implemented gradually at a rate not
to exceed two cents ($0.02) per one hundred dollars ($100.00) of assessed
value per year. For the purposes of this provision, the term "reconstruction"
is defined as removing all or a significant portion of the pavement material and
replacing it with new or recycled materials. The dedicated fund established
by this section may not be used for payment of debt service. The City Council
approved two cents ($0.02) per one hundred dollars ($100.00) of assessed
value for fiscal year 2018-2019 and two cents ($0.02) per one hundred dollars
($100.00) of assessed value for fiscal year 2019-2020 for the purpose of
residential street reconstruction. Due to the COVID-related economic
downturn the final two cents will not be added in FY 2020-2021 but will be
considered in FY 2021-2022.
Section 9. Funding of Texas Municipal Retirement System (TMRS) Contributions.
It is a goal of the City Council to maintain the fully funded contribution rate to TMRS to
fund the general City employees' and sworn police officers' pension.
Section 10. Funding of Corpus Christi Fire Fighters' Retirement System (CCFFRS).
Whereas, pursuant to a Special Task Force appointed by the City Manager, it is a goal of
the City to, over time, adequately fund the CCFFRS so that its funding ratio is in line with
the funding ratio of TMRS for general City employees and sworn police officers.
Section 11. Priority of City Services. The City Council recognizes the need to provide
public services which support the continued growth of the local economy and personal
income growth to insure an adequate financial base for the future.
Section 12. Operating Contingencies. The City Manager is directed to budget up to
$500,000 per year as an operating contingency as part of General Fund expenditures in
order to further insulate the General Fund unreserved fund balance from unforeseen
circumstances. Up to 2% of annual appropriations for operating contingencies may be
budgeted, as deemed necessary, in enterprise, internal service, and special revenue
funds of the City.
Section 13. Multi-year Budget Model. Whereas many of the City's fiscal goals require
commitment and discipline beyond the one year considered within the City's fiscal year,
the City will also consider adoption of business plans necessary for the accomplishment
of City short term or long term goals. These business plans will be presented and
recommended to the City Council in the proposed annual operating budget and shall be
used for development of future budget recommendations as necessary to accomplish
these goals. The City shall also maintain business plans and/or rate models for
enterprise operations. Preparation of the annual budget will include model for years two
and three, with specific revenue and expenditure assumptions and with respect to the
debt horizon.
Section 14. Cost Recovery. The City may recover costs in the General Fund by charging
other funds for administrative costs incurred to support their operations. The City shall
attempt to pursue and maintain a diversified and stable revenue stream for the General
Fund in order to shelter finances from short term fluctuations in any one revenue source.
In order to meet the requirements outlined herein, every effort will be made to base rates
on a cost of service model, so costs incurred for certain services are paid by the
population benefiting from such services.
Section 15. Quarterly Financial Reporting and Monitoring. The City Manager shall
provide interim financial performance reports and updates to the City Council on a
quarterly basis. These interim reports must include detailed year to date revenue and
expenditure estimates, as well as explanations for major variances to budget. The format
of the quarterly report must be relatively consistent with the adopted budget. Quarterly
financial reports shall include a summary of fund balances for each fund and a statement
regarding compliance with these financial policies, where applicable.
Section 16. Use of Nonrecurring Revenue.The City shall endeavor to use nonrecurring
revenue to fund one-time expenditures. Nonrecurring revenue may include items such as
sale of fixed assets, court settlements, or revenue collection windfalls.
Section 17. Debt Management The City Manager shall adhere to the Debt management
Policy adopted by Resolution 028902 on December 14, 2010 and reaffirmed by
Resolution 029321 on December 13, 2011.
Section 18. Capital Improvement Plans/Funding. The City Manager shall provide
quarterly updates to the City Council on Capital Improvement Projects and post these
updates on the City website. The annual Capital Improvement Plan (CIP) shall follow a
similar cycle as the Operating Budget. As part of the annual capital budget process, the
City shall update its short and long-range capital improvement plans. Due to the limited
amount of available funds, the CIP serves to establish a priority for the many necessary
projects. Therefore, the CIP will be updated annually in order to incorporate the changing
priorities, needs and funding sources. As part of a concerted effort to improve financial
flexibility, the City shall pursue pay-as-you-go funding for maintenance-type capital costs
to the extent possible. The CIP is a necessary tool in the capital planning process, and
shall be organized as follows:
1. ANNUAL CAPITAL BUDGET: This is the first year of the short-range CIP and
shall be fully funded. All approved projects must have corresponding funding
resources identified by individual project. Projects added to the approved annual
Capital Budget shall require City Council approval.
2. SHORT RANGE CIP: A schedule of capital expenditures to be incurred over
the current annual Capital Budget plus two (2) additional years. The short-range
plan projects must have programmed funding with corresponding funding
resources identified by individual project. Any projects that include projected
increases to operating costs for programmed facilities will be notated. A review
of all CIP encumbrances will be done annually. Any encumbrance that does not
represent a true commitment will be returned to reserves.
3. LONG RANGE CIP: The long-range plan extends for an additional seven years
beyond the short range, for a complete plan that includes ten years. The long-
range CIP projects must have realistic planned funding tied to the projects.
Section 19. Expenditures. Within the limitation of public service needs, statutory
requirements and contractual commitments expenditures included in the operating
budget shall represent the most cost-efficient method to deliver services to the citizens of
Corpus Christi. Efforts to• identify the most cost-efficient method of service delivery shall
continue during the fiscal year after the operating budget is adopted and may be
implemented during the fiscal year as necessary and of benefit to the public.
Section 20. Line Item Budget Review Process. During the preparation of the City's
operating budget, City staff shall perform a line item budget review of departmental
budgets.
Section 21. State Hotel Occupancy Tax (SHOT) and Hotel Occupancy Tax (HOT)
Fund. A SHOT Fund was created for the Fiscal Year (FY) 2015-16 budget as a result of
the Texas 84th Legislature's (2015) House Bill (HB)1915 that allowed Corpus Christi and
three other Texas cities to retain 2% of the state hotel occupancy taxes collected by the
cities to be reinvested for beach maintenance and restoration. The expenditures in this
Fund shall not be used to offset expenditures for Gulf Beach maintenance currently paid
for out of the local HOT Fund. The funding for Gulf Beach maintenance in the local HOT
Fund shall not fall below the lesser of$1,825,088 or 15% of HOT revenue (not including
the Convention Expansion portion) budgeted. This amount will be in addition to any
expenditures budgeted for Gulf Beach Maintenance in the SHOT Fund.
Section 22. Drought Surcharge Exemption Fund. Beginning in Fiscal Year 2018-2019
The Drought Surcharge Exemption Fees collected from large-volume industrial
customers pursuant to Ordinance 031533 shall be dedicated for development of a
drought-resistant water supply and shall not be used for operation and maintenance costs
of any water supply, treatment facility or distribution system. The Drought Surcharge
Exemption Fees paid to the City will be accounted for and reserved in a separate Drought
Surcharge Exemption Fund and used only for capital costs to develop and/or acquire an
additional drought-resistant water supply including but not limited to, payment of debt for
an allowable capital project.
Section 23. Budget Controls. Budgetary compliance is an important tool in managing
and controlling governmental activities, as well as ensuring conformance with the City's
budgetary limits. Budgetary controls, levels at which expenditures cannot legally exceed
appropriated amounts, are established within individual funds. The City utilizes an
encumbrance system of accounting as one mechanism to accomplish effective budgetary
controls. Encumbrances at year end which represent a true commitment are generally
added to the budget.
PASSED AND APPROVED on the l 0\V\day of 3-0 , 2020:
Joe McComb A
Roland Barrera AIL
Rudy Garza
Paulette M. Guajardo
`
Gil Hernandez ,('
Michael Hunter ,A.
Ben Molina
Everett Roy -�_
Greg Smith
ATTEST: CITY OF CORPUS CHRISTI
•
V#L.e.e.00F-trIVA"teN
Reb cca Huerta J•- cComb
City Secretary ay,,r
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