Loading...
HomeMy WebLinkAboutAgenda CC 04.13.2009 WorkshopNotice of Meeting of the Governing Body of the City of Georgetown, Texas APRIL 13, 2009 The Georgetown City Council will meet on APRIL 13, 2009 at 4:00 P.M. at the Council Chamber at 101 E. 7th Street If you need accommodations for a disability, please notify the city in advance. Policy Development/Review Workshop - A Graffiti Ordinance and Initiative -- David Morgan, Police Chief B Presentation and possible direction to staff regarding acquiring and implementing a new Customer Aided Dispatch and Records Management System for Public Safety to replace the current systems, which are outdated and are becoming unreliable -- Patrick Hurley, Public Safety Technical Services; David Morgan, Police Chief; Micki Rundell, Director of Finance and Administration C Workshop presentation and discussion on revisions to the Fiscal and Budgetary Policy for the 2009/10 budget cycle -- Micki Rundell, Director of Finance and Administration Executive Session In compliance with the Open Meetings Act, Chapter 551, Government Code, Vernon's Texas Codes, Annotated, the items listed below will be discussed in closed session and are subject to action in the regular session. D Sec.551.071: Consultation with Attorney 1. Advice from attorney about pending or contemplated litigation and other matters on which the attorney has a duty to advise the City Council, including this week's agenda items 2. Mark Shelton v. City of Georgetown, et al;Cause No. A07CA063; in the United States District Court for the Western District of Texas, Austin Division 3. First Citizens Bank & Trust Company v. City of Georgetown,Cause No. D-1-GN-08-02325, 53rd Judicial District, Travis County, Texas 4. Discussion of legal issues related to payment obligations for the Public Utility Improvements under the "Development Agreement with Forestville Associates, a Maryland General Partnership, regarding development of Wolf Ranch" dated September 11, 2003 Adjournment Certificate of Posting I, Sandra Lee, City Secretary for the City of Georgetown, Texas, do hereby certify that this Notice of Meeting was posted at City Hall, 113 E. 8th Street, a place readily accessible to the general public at all times, on the _____ day of _________________, 2009, at __________, and remained so posted for at least 72 continuous hours preceding the scheduled time of said meeting. __________________________________ Sandra Lee, City Secretary City of Georgetown, Texas April 13, 2009 SUBJECT: Graffiti Ordinance and Initiative -- David Morgan, Police Chief ITEM SUMMARY: Presentation by Chief David Morgan of Georgetown Police Department's graffiti initiative. FINANCIAL IMPACT: SUBMITTED BY: David Morgan, Chief of Police Cover Memo Item # A City of Georgetown, Texas April 13, 2009 SUBJECT: Presentation and possible direction to staff regarding acquiring and implementing a new Customer Aided Dispatch and Records Management System for Public Safety to replace the current systems, which are outdated and are becoming unreliable -- Patrick Hurley, Public Safety Technical Services; David Morgan, Police Chief; Micki Rundell, Director of Finance and Administration ITEM SUMMARY: The City of Georgetown established the current Computer Aided Dispatch (CAD) in 1997, and although the City has kept up with all system upgrades, the advances in technology and changes in industry standards over the last 12 years have rendered these systems archaic, and in some cases, obsolete. The City is proposing a phased, 12 month project, in conjunction with the new 2009/10 budget year, to acquire and implement the new Public Safety CAD system. The evaluation for replacement of the system began by looking at existing 9-1-1 vendors to see if they offered a fully integrated CAD/RMS system. None of the vendors offered a fully integrated solution, therefore, focus groups were conducted and business case needs were addressed to determine our overall needs. The field was narrowed to two possible candidates in OSSI and New World. Site visits were conducted and evaluated. SPECIAL CONSIDERATIONS: OSSI is the current software provider for the City of Round Rock and is currently being evaluated by the County as their CAD solution. The potential to have all of the law enforcement agencies in the County using the same software would be beneficial to the citizens. FINANCIAL IMPACT: Funds for this project are anticipated to be included in the 2009/10 budget and will be either funded with excess General Fund cash on hand (if available) or bond funded. SUBMITTED BY: Micki Rundell, Director of Finance and Administration Cover Memo Item # B City of Georgetown, Texas April 13, 2009 SUBJECT: Workshop presentation and discussion on revisions to the Fiscal and Budgetary Policy for the 2009/10 budget cycle -- Micki Rundell, Director of Finance and Administration ITEM SUMMARY: Annually, as part of the budget process, the Fiscal and Budgetary Policy is reviewed and updated for the upcoming budget year. This policy was initially written in 2001, and has been updated since then. The policy provides guidelines that will ensure the long-term viability of the City, as well as, daily operations. The policy requires all funds to be self-sufficient and provide adequate reserves and times coverage for all outstanding debt. Recommended revisions for 2009/10 include: Special Purpose Funding Update the policy for changes approved by City Council at their January 27, 2009 meeting which includes new funding guidelines of $5 per capita for Social Services, as well as, Children’s and Youth Program Funding, with that target being attained through population growth. This amount would be adjusted by CPI, with the 2008/09 funding amounts being the base line ($311,331 for Social Services & $88,718 for Children’s and Youth Program Funding) Previous funding level was 1% General Fund operating budget for Social Services, and 1/4% of General Fund operating budget for Children’s and Youth Program Funding. Public Art Funding has been revised to state that Public Art will be funded on a year to year basis depending on the availability of funds at the discretion of the City Manager. Previously, Public Art was funded at 1/4% of the General Fund operating budget Budget Contingency Plan Incorporates changes including the use and replenishment of Contingency Reserve Funds that Council authorized in November 2008, expanding the reporting requirements to the City Council. Requires a quarterly report to City Council on the internal control program and results. Other minor grammatical or wording changes. The Policy will be formally adopted as part of the 2009/10 Annual Operation Plan, planned for late August. FINANCIAL IMPACT: SUBMITTED BY: Micki Rundell, Director of Finance and Administration ATTACHMENTS: Fiscal & Budgetary Policy Presentation Redline copy of DRAFT Fiscal & Budgetary Policy Cover Memo Item # C FISCAL AND BUDGETARY POLICY UPDATE 2009/10 Review & Proposed Revisions April 13, 2009 Item # C Agenda „ Historical overview „ Policy Compliance „ Policy Areas ‰ Proposed revisions for 2009/10 Item # C Historical Overview „ Developed the Fiscal and Budgetary Policy ‰ Adopted in 2001/02 ‰ Updated and revised all financial policies and practices ‰ Based on recommended “BEST PRACTICES” by Gov’t Finance Officers Association (GFOA) „ Included plan to eliminate “WTTB” ‰ Scenario H - fully implemented in 2003/04 „ Review and update annually as part of the budget process Item # C The History of Scenario “H” „ “WTTB” – What it takes to balance „ Balanced General Fund with unsubstantiated transfers or subsidies from the Utility Funds ‰ Practice began in early 1990’s ‰ As much as 33% of operations funded by WTTB „ Rating agencies recommended eliminating WTTB „ “Scenario H” 3 year plan to eliminate $3.1M General Fund operating shortfall ‰ Combination expense reduction and revenue increases Item # C Policy Compliance „ CURRENT REVENUES MUST FUND ON- GOING EXPENSES „ Non-recurring expenses funded from excess Fund Balance, or other 1-time revenue source. Item # C Policy Compliance „ Requires 1.5 times coverage ratio for all funds with debt service requirements ‰ Excess operating revenue net of operating expenses must exceed annual debt payment by 150% of debt payment ‰ Utility funds required by bond ordinance ‰ Applies to GO debt repaid through self-supporting fees „ GTEC, Stormwater & Airport Funds Item # C Policy Area Review Proposed Changes for 2009/10 Item # C I. Policy Purpose „ Provides “fiscal discipline” „ Achieve and maintain long-range stable and positive financial condition „ Provide guidelines for day-to day planning and operations of City’s financial management „ Identifies fund structure & basis for accounting Item # C II. Operating Budget „ Links to City’s comprehensive plan „ Preparation and adoption „ Quarterly reports to Council „ Assigns control and accountability of funds ‰ Transfers > $20K within a department require City Manager approval „ Designates annual Council Discretionary funds at $25,000 ‰ Previously $50,000 Item # C III. Revenue Management „ Defines “conservative” revenue projection philosophy „ Property Tax budgeted at effective M&O rate + needed I&S rate ‰ Budgeted increases only relate to debt service „ User-based fees and service charges „ Utility Rates reviewed annually ‰ Rate study conducted at least every 3 years Item # C III. Revenue Management (con’t) „ Administrative allocations ‰ Allocation methods reviewed annually by the City’s external auditors „ Return on Investments (ROI) to the General Fund from utilities operating revenue ‰ 8% - Water-Wastewater-Electric-Stormwater „ Franchise Fees - 2% operating revenues Item # C IV. Expenditure Policies „ Social Service & Youth Program Funding - funding level set at $5.00 per capita ‰ Can be adjusted by inflation ‰ Funding level will be achieved through growth „ No reduction from previous year’s funding levels „ Funds allocated 83% Social Services / 17% Youth Programs „ Based on 2008/09 funding: ‰ $311,331 for Social Services ‰ $88,718 for Youth Programs ‰ Includes ability to “cap” funding if needed due to budget contingency or compliance issues ‰ Allows unallocated funding for social service/children’s programs to be redistributed between either program Item # C IV. Expenditure Policies „ Social Service & Youth Program Funding - funding level set at $5.00 per capita ‰ Previously funded: „ 1% General Fund on-going operating budget for Social Services „ 1/8% General Fund on-going operating budget for Youth & Children’s Programs Item # C IV. Expenditure Policies (con’t) „ Public Art Funding - ‰ Funding on year to year basis depending on availability of funds „ Determined by City Manager „ Funding priority for “matching” funds from organizations and sponsors ‰ Unspent funds reallocated in next year ‰ Council approves expenses based on recommendation of City’s Arts & Culture Advisory Board „ Previously funded ¼% General Fund operating budget Item # C IV. Expenditure Policies (con’t) „ Bad debt limitations ‰ Write off Utility Debt > 1 Year as “Uncollectible” „ Purchasing policy ‰ Follows state law „ 5% local vendor preference ‰ Contracts > than $15,000 approved by Council ‰ $25,000 Council approval for materials ‰ Formal bids greater than $50,000 „ Matches state law „ Prompt payment to vendors Item # C V. Budget Contingency Plan „ Establish guidelines for managing revenue shortfalls ‰ Immediate actions include freezing hiring of new positions ‰ Delay all “non-essential” spending ‰ City Manager reports conditions to Council „ Determines use of “Contingency Reserves” ‰ Outlines replenishment if used „ Service level reductions addressed by Council ‰ Includes workforce reductions Item # C VI. Capital Improvement Program „ Preparation - update 5-year CIP schedule ‰ Includes estimated operational impacts ‰ Identifies Annexation related projects for potential funding alternatives if needed ‰ Provides exception for timing of Economic Development related CIP ‰ GUS Advisory Board reviews Electric & Water Svcs CIP ‰ GTAB reviews Streets and Stormwater Drainage CIP „ Funding must be identified prior to CIP contract being approved ‰ Resource availability reviewed by Finance ‰ All utility contracts over $50,000 are reviewed by GUS Advisory Board prior to Council approval Item # C VII. Capital Maintenance „ Deferred maintenance increases future capital costs „ Includes PMIS standards for street maintenance for GASB 34 Modified Approach „ On-going capital maintenance is included in departmental operating budget „ Internal Service Funds - “lease” equipment back to departments ‰ Establishes an unscheduled repair reserve Item # C VIII. Accounting & Financial Reporting „ Outside audit annually of all City accounts ‰ Accountable directly to City Council „ Prepare Comprehensive Annual Financial Report (CAFR) ‰ GFOA standard Item # C IX. Asset Management „ Investment Policy ‰ Reviewed annually ‰ Conforms to all legal requirements „ “Public Funds Investment Act” ‰ Quarterly reports to City Council „ Fixed Assets ‰ Capitalization criteria - $5,000 Item # C X. Debt Management „ Considered for capital improvements which benefit future citizens and includes: ‰ General Obligation Bonds ‰ Revenue Bonds ‰ Certificates of Obligation ‰ Self-supporting debt ‰ Internal borrowings ‰ Short-term borrowing - Public Property Financial Contractual Obligations (PPFCO) Item # C X. Debt Management (con’t) „ Debt coverage ratio - 1.5 times ‰ Refers to the number of times the debt service payment would be covered by excess operating revenues, net of operating expense „ Bond reimbursement resolutions ‰ Used for cash management and project timing ‰ Bonds that have a direct impact on property taxes must be issued within the term of the authorizing Council „ Provides exception for delays and market conditions ‰ Revenue bonds for approved capital projects within legislative requirements for timing „ Currently 18 months Item # C XI. Other Funding Alternatives „ Provides guidelines on alternative funding for new projects ‰ Grants „ Documents grant funding process with Council ‰ Use of Reserve Funds „ Used for debt management purposes ‰ Developer Contributions „ Links to development regulations ‰ Leases ‰ Impact Fees „ Reviewed at least every 3 years Item # C XII. Financial Conditions, Reserves & Stability Ratios „ City will maintain a 1 to 1 operating coverage ‰ On-going revenues fund on-going expenses „ Prohibits use of deferrals, short-term loans or one-time revenue sources to balance the budget Item # C XII. Financial Conditions, Reserves & Stability Ratios (con’t) „ Requires minimum 75 days citywide operating “contingency” reserves ‰ Tourism Fund - 60 days – ($75,000) ‰ General Fund – 90 days „ 2008/09 = $6.5 million ‰ Water Services Fund -90 days ‰ Stormwater Drainage Fund – currently $150,000 ‰ Airport Fund - currently $150,000 ‰ Total Reserve for 2008/09 = $14.5 million Item # C XII. Financial Conditions, Reserves & Stability Ratios (con’t) „ Ratios & Trend Analysis ‰ Financial indicators with acceptable levels „ General Fund includes: ‰ Fund balance/Equity ‰ Working Capital ‰ Current Ratio ‰ Debt Ratio ‰ Track trends and compare to other like communities Item # C XIII. Internal Controls „ Written procedures reviewed annually „ Internal Audit Program managed by Finance Department to detect potential Fraud ‰ Departmental Audits – reviews processes to ensure protection of City assets ‰ Employee & Transaction Audits – individual discrepancies are identified „ Petty Cash, Travel & Credit Cards ‰ Results reported to Council each quarter „ Responsibility of Division Directors to maintain costs within their departments. Item # C XIV. Staffing „ Provide adequate staffing for efficient operations ‰ Explore workload allocation alternatives before adding staff „ Cost of Living Adjustment (COLA) ‰ Sustain employee compensation levels ‰ Acceptable level recommended by City Manger & approved by City Council „ Pay for Performance ‰ Council may fund a one-time incentive bonus ‰ Funded through one-time available resources Item # C Area for discussion ‰ Finalize public art funding policy Item # C Next Steps „ Provide direction and policy changes ‰ Action item on April 14,2009 agenda to approve policy „ Budget prepared within policy guidelines „ Policy formally adopted by ordinance as part of the annual budget Item # C QUESTIONS? Item # C 42 City of Georgetown Fiscal and Budgetary Policy Adopted September 9, 2008 I. PURPOSE The City of Georgetown is committed to financial management through integrity, prudent stewardship, planning, accountability, full disclosure and communication. The broad purpose of the Fiscal and Budgetary Policies is to enable the City to achieve and maintain a long-term stable and positive financial condition, and provide guidelines for the day-to-day planning and operations of the City’s financial affairs. Policy scope generally spans areas of accounting and financial reporting, internal controls, both operating and capital budgeting, revenue management, investment and asset management, debt management and forecasting. This is done in order to: A. Demonstrate to the citizens of Georgetown, the investment community, and the bond rating agencies that the City is committed to a strong fiscal operation; B. Provide precedents for future policy-makers and financial managers on common financial goals and strategies; C. Fairly present and fully disclose the financial position of the City in conformity to generally accepted accounting principals (GAAP); and D. Demonstrate compliance with finance-related legal and contractual issues in accordance with the Texas Local Government Code and other legal mandates. These policies will be reviewed and updated annually as part of the budget preparation process. The budgeted funds for the City of Georgetown include: Governmental Funds: General Fund which accounts for all financial resources except those required to be accounted for in another fund, and include basic governmental services, such as Police, Fire and Parks functions among others. Sanitation services is included in the General Fund for 2008/09. Special Revenue Funds (SRF) account for specific revenues that are legally restricted for specified purposes. The City currently budgets 12 SRF Funds and includes Tourism, Parkland Dedication, Library Donations, Animal Services Donations, and Street Maintenance Sales Tax. Debt Service Fund is used to account for the payment of general long-term debt principal and interest. Attachment number 2 Page 1 of 23 Item # C 43 Capital Project Funds are used to account for the acquisition or construction of major capital facilities other than those financed by enterprise activities. Proprietary Funds: Internal Service Funds account for good or services provided by one internal department to another. The City uses this system to recognize full cost for fleet replacement and maintenance, facility maintenance and computer replacement and maintenance. Enterprise Funds include the City’s “business like” activities including all the utility funds and the airport. Basis of Accounting and Basis of Budgeting The City’s accounts and budgets for all Governmental Funds using the modified accrual basis of accounting. This basis means that revenue is recognized in the accounting period in which it becomes available and measurable, while expenditures are recognized in the accounting period in which they are incurred. Because the appropriated budget is used as the basis for control and comparison of budgeted and actual amounts, the basis for preparing the budget is the same as the basis of accounting. Exceptions to the modified accrual basis of accounting include: • Encumbrances, which are treated as expenditures in the year they are encumbered, not when expended. • Grants, which are considered revenue when awarded, not received. • Principal and interest on long-term debt, which are recognized when paid. General government funds include the general fund, special revenue funds, debt service fund and general capital project funds. Proprietary Funds, which include the enterprise and internal service funds are accounted and budgeted using the full-accrual basis of accounting. Under this method, revenues are recognized when they are earned and measurable, while expenses are recognized when they are incurred regardless of timing or related cash flows. The basis for preparing the budget is the same as the basis of accounting except for principal payments on long-term debt and capital outlay which are treated as budgeted expenses. Exceptions include: • Depreciation which is not budgeted • Non-budgeted accruals such as compensated absences Attachment number 2 Page 2 of 23 Item # C 44 II. OPERATING BUDGET Budgeting is an essential element of the financial planning, control and evaluation process of municipal government. The “operating budget” is the City’s annual financial operating plan. The annual budget includes all of the operating departments of the general fund, proprietary funds, debt service funds, special revenue funds, and capital improvement funds of the City. A. Comprehensive Plan – The 2030 Plan is written from a perspective of some twenty years into the future. It expresses what we envision and desire our community to be in the year 2030, and it reflects on all that we have accomplished since we launched the revision of our Comprehensive Plan in 2006. The Plan utilizes a Vision Statement to guide the desired outcomes for the community. B. Preparation – The Charter (Section 6.02) requires “a proposed budget prepared by the City Manager and submitted to the City Council at least thirty days prior to the end of the fiscal year. The budget shall be adopted not later than the twenty-seventh day of the last month of the fiscal year. No budget will be adopted or appropriations made unless the total estimated revenues, income and funds available shall be equal to or in excess of such budget or appropriations, except otherwise provided”. Therefore, the budget will be presented to the City Council no later than the 1st day of August to provide the City Council time to adopt the budget in the required time frame. 1. Proposed Budget – A proposed budget shall be prepared by the City Manager with participation of all the City’s Division Directors within the provision of the Charter and the Vision Statement of the 2030 Plan. a) The budget shall include four basic segments for review and evaluation: • Revenues • Personnel Costs • Operations and Maintenance • Capital and other non project costs b) The budget review process will include City Council participation in the development of each segment and allow for citizen participation in the process, and will allow for sufficient time to address policy and fiscal issues by the City Council. c) A copy of the proposed budget will be filed with the City Secretary when it is submitted to the City Council. A copy will also be available at the Georgetown Public Library for citizen review. 2. Adoption – Upon finalization of the budget appropriations, the City Council will hold a public hearing, and subsequently adopt by Ordinance the final budget as amended. The budget will be effective for the fiscal year beginning October 1st. The Annual Budget document will be submitted annually to the Government Finance Officers Association (GFOA) for evaluation and consideration for the Distinguished Budget Presentation Award. Attachment number 2 Page 3 of 23 Item # C 45 C. Balanced Budget – The goal of the City is to balance the operating budget with current revenues, whereby, current revenues would match and fund on-going expenditures/expenses. Excess balances in the operating funds from previous years would then be used for non-recurring expenditures/expenses or as capital funds. The Charter (Section 6.04) requires that an operating deficit created in any fiscal year shall be paid off and discharged during the following year. In practice, deficit has been interpreted to mean City funds as a whole. The City Council may choose from time to time to allow individual funds to have a negative balance as long as Operating Reserve requirements for the City as a whole are maintained. D. Planning – The budget process will be coordinated so that major policy issues are identified prior to the budget approval date. This will allow City Council adequate time for consideration of appropriate decisions and analysis of financial impacts. E. Reporting – Summary financial reports will be presented to the City Council quarterly. These reports will be in a format appropriate to enable the City Council to understand the overall budget and financial status. The City Manager will also present a mid-year report to the City Council within 60 days following the end of the second fiscal quarter that updates the status of projects and related financial goals set forth in the budget. F. Control and Accountability – Each Division Director, appointed by the City Manager, will be responsible for the administration of his/her departmental budget. This includes accomplishing the Goals and Objectives adopted as part of the budget and monitoring each department budget for compliance with spending limitations. Division Directors may transfer funds up to $20,000 within the operations and maintenance or capital line items within a departmental budget category without additional approval. All transfers within the Personnel line items require approval of the Director of Finance and City Manager. All other transfers of appropriation or budget amendments require either City Council or City Manager approval as outlined in Section IV.B. G. Budget Amendments – The Charter (Section 6.04) provides a method to amend for budget amendments and emergency appropriations. The City Council may authorize with a majority plus one vote, an emergency expenditure as an amendment to the original budget. This may be done in cases of grave public necessity to meet an unusual and unforeseen condition that was not known at the time the budget was adopted. In practice, this has been interpreted to include revenue-related expenses within the enterprise funds and timing differences on capital improvement projects. The following criteria will be used in evaluation of budget amendments: • Is the request necessary? • Why was the item not budgeted in the normal budget process? • Why can't a transfer be done within the Division to remedy the condition? The Director of Finance and Administration must certify availability of revenues or funding sources prior to adoption. Attachment number 2 Page 4 of 23 Item # C 46 The City will amend the budget at year end, if needed, for revenue based expenditures that exceeded budgeted amounts due to increased revenue and recognize any grant funded expenditures for grants received after the budget was adopted or last amended. The City will also amend the budget if necessary as part of the Mid-Year Review process for any capital project timing adjustments from prior year, as well as, any other known adjustments needed and approved at that time. H. Contingency Appropriations – The budget may include contingency appropriations within designated operating department budgets. These funds are used to offset expenditures for unexpected maintenance or other unanticipated expenses that might occur during the year. Currently, the City maintains contingency appropriations for insurance deductibles, unexpected legal expenses and equipment repairs. I. Council Discretionary Account – The budget may contain appropriated funds to be used at the discretion of the City Council. Actual expenditure of these funds is specifically approved by the City Council on an item by item basis. The Council Discretionary Account for 2008/09 is $25,000, included in the General Fund. III. REVENUE MANAGEMENT A. Characteristics – The City will strive for the following optimum characteristics in its revenue system: 1. Simplicity – The City, where possible and with out sacrificing accuracy, will strive to keep the revenue system simple in order to reduce compliance costs for the taxpayer or service recipient. 2. Certainty – A knowledge and understanding of revenue sources increases the reliability of the revenue system. The City will understand its revenue sources and enact consistent collection policies to provide assurances that the revenue base will materialize according to budget. 3. Equity – The City shall make every effort to maintain equity in its revenue system; i.e., the City should seek to minimize or eliminate all forms of subsidization between entities, funds, services, utilities, and customer classes, and ensure an on-going return on investment for the City. 4. Revenue Adequacy – The City should require there be a balance in the revenue system; i.e., the revenue base will have the characteristics of fairness and neutrality as it applies to cost of service, willingness to pay, and ability to pay. 5. Realistic and Conservative Estimates - Revenues will be estimated realistically, and conservatively, taking into account the volatile nature of various revenue streams. 6. Administration – The benefits of a revenue source should exceed the cost of levying and collecting that revenue. Attachment number 2 Page 5 of 23 Item # C 47 7. Diversification and Stability – A diversified revenue system with a stable source of income shall be maintained. This will help avoid instabilities in two particular revenue sources due to factors such as fluctuations in the economy and variations in the weather. B. Other Considerations – The following considerations and issues will guide the City in its revenue policies concerning specific sources of funds: 1. Cost/Benefit of Incentives for Economic Development – The City will use due caution in the analysis of any incentives that are used to encourage development. A cost/benefit (fiscal impact) analysis will be performed as part of the evaluation. 2. Non-Recurring Revenues – One-time or non-recurring revenues should not be used to finance current ongoing operations. Non-recurring revenues should be used only for non-recurring expenditures and not for budget balancing purposes. 3. Property Tax Revenues – All real and business personal property located within the City will be valued at 100% of the fair market value for any given year based on the current appraisal supplied by the Williamson County Appraisal District. Conservative budgeted revenue estimates result in a projected ninety-eight percent (98%) budgeted collection rate for current ad valorem taxes. Two percent (2%) of the current ad valorem taxes will be projected as the budget for delinquent ad valorem tax collection. For budgeting purposes, the City will forecast the proposed property tax rate using the effective maintenance & operations (M&O) rate plus the interest & sinking (I&S) rate needed to fund tax supported debt service. Increases to the M&O rate will be deliberated and determined by the City Council. Proposed tax revenue will be budgeted at a 98% collection rate. 4. Interest Income – Interest earned from investments will be distributed to the funds in accordance with the equity balance of the fund from which the monies were provided to be invested. 5. User-Based Fees and Service Charges – For services associated with a user fee or charge, the direct or indirect costs of that service will be offset by a fee where possible. The City will review fees and charges no less than once every three years to ensure that fees provide adequate coverage for the cost of services. The City Council will determine how much of the cost of a service should be recovered by fees and charges. 6. Enterprise Fund Rates – The City will review and adopt utility rates as needed to generate revenues required to fully cover operating expenses, meet the legal requirements of all applicable bond covenants, and provide for an adequate level of working capital. Utility rates will be reviewed annually as part of the budget process. An external rate study will be conducted every 3 years to review rate methodology and ensure revenues will meet future needs. Attachment number 2 Page 6 of 23 Item # C 48 Additionally, enterprise activity rates will include transfers to and receive credits from other funds as follows: a) General and Administrative Charges – Administrative costs should be charged to all funds for services of general overhead, such as administration, finance, customer billing, legal and other costs as appropriate. These charges will be determined through an indirect cost allocation following accepted practices and procedures and reviewed annually by the City’s external auditors. b) Payment for Return on Investment – The intent of this transfer is to provide a benefit to the citizens for the ownership of the various utility operations they own. • In-Lieu-of-Franchise-Fee. This transfer, currently 2% of operating revenues, is consistent with the franchise rates charged to investor owned utilities franchised to operate within the City. • Return on Investment. The return on investment (ROI) transfer is currently calculated at 8% of operating revenues for all utilities except sanitation. 7. Intergovernmental Revenues – All potential grants will be examined for matching requirements and must be approved by the City Council prior to making application of the grant. It must be clearly understood that operational requirements (on-going costs) set up as a result of a grant program could be discontinued once the term and conditions of the program have been completed. 8. Revenue Monitoring – Revenues as they are received will be regularly compared to budgeted revenues and variances will be investigated, and any abnormalities will be included in the quarterly report to the City Council. IV. EXPENDITURE POLICIES A. Appropriations – The point of budget control is at the department level budget for all funds. The Charter (Section 6.03) provides that any transfer of appropriation between funds must be approved by the City Council and that the City Manager, without City Council approval, is authorized to transfer appropriations between departments, within the same operational division and fund. The City Manager may also authorize transfer of salary adjustment monies between funds that are budgeted in a citywide account. B. Personnel Costs – Costs related to salaries and benefits are budgeted at 100% total costs, assuming open positions are filled throughout the fiscal year. New positions that are added during the budget process may have staggered hire dates with appropriate costs reflected in the budget. Attachment number 2 Page 7 of 23 Item # C 49 1. Vacancy Factor – General Fund appropriations will include a vacancy factor equal to 1% of total General Fund salaries and related benefits to offset salary savings within the budget. The vacancy factor will be budgeted as a negative expense within the General Government Department of the General Fund. For 2008/09 the Vacancy Factor equals $(210,400). 2. Benefit Payout Reserve - The City will establish a benefit payout reserve equal to 15% of the accrued benefit liability for employees who are currently meet eligible to retirement. Only terminating employee benefit expenses may be paid from this reserve. This reserve shall be funded as an offset to the vacancy factor. For 2008/09, $82,500 is budgeted for this reserve. C. Special Purpose Funding – In order to support community assistance programs, the City designates specific funding for special purposes, including Social Services, Children’s Programs, and Public Art. The City reserves the ability to cap this special purpose funding when necessitated by budget contingency or compliance issues, such as revenue shortfalls, or other reasons as determined by City Council. 1. Social Service Funding and Children’s and Youth Program Funding –The City has targeted funding for these programs to be $5.00 per capita, which may be adjusted to offset the effects of general inflation based upon CPI. If previous funding levels are higher than the targeted amount, and to avoid significant reductions in levels of funding, the City Council shall seek to attain this target chiefly through population growth. Funding for these programs will be split 83% for social services and 17% for youth funding. These funds will be allocated and paid according to the City Council’s guidelines for Social Service and Children’s and Youth Program Funding. The funding level for 2009/10 is $311,331 for Social Service Funding and $88,718 for Children’s and Youth Program Funding, both of which are the same as in the previous year. Any given year, unallocated funds in either the social Services Fund or the Children’s and Youth Program Funds can be allocated to the other fund, in an amount not to exceed the estimated increase for the following year in the fund receiving the transfer. 2. Public Art Funding - The City will annually allocate funding for Public Art on a year to year basis depending on the availability of funds in an amount to be determined at the discretion of the City Manager. Funding priority will be given to projects that include a matching donation, including contributions from local organizations and sponsors. Any unspent funds will accumulate and be reallocated in the following budget year. Disbursement of these funds will be determined by the City Council at the recommendation of the City’s Arts & Culture Advisory Board. Every effort will be made to include public art funding in future City facilities whose primary purpose is for public use. These projects will include a reasonable allowance for public art that fits the scope and purpose of the building so long that it Attachment number 2 Page 8 of 23 Item # C 50 does not negatively impact the project cost beyond the original budget. In the event there is cost savings in the construction of City Facilities, the City Council may consider utilizing that savings on the purchase of public art for the facility. D. Purchasing – All City purchases of goods or services will be made in accordance with the City’s current Purchasing Policy and with State law. The City’s Purchasing Policy is more restrictive than State Law is. The City’s Purchasing Policy requires all contracts greater than $15,000 be approved by the City Council. Only materials and other bid items are allowed to be purchased up to the $25,000 limit allowed by State Law without Council approval. The following shows a summary of approval requirements for purchases. APPROVAL REQUIREMENTS FOR PURCHASES Dollar Figure Supervisor or Director Designee Department Director Purchasing Agent City Manager City Council Less than $1,000 (Purchase Order or Credit Card) $1,000 to less than $5,000 (Bid Form) $5,000 to $10,000 $10,000 to less than $25,000 $15,000 or more Professional Service Contracts $25,000 or more Denotes signature approval Council authorization Formal bids are required for all purchases over $50,000 in accordance with State law. E. Prompt Payment – All invoices approved for payment by the proper City authorities shall be paid within thirty (30) calendar days of receipt of goods or services or invoice date, whichever is later in accordance with State law. The City will take advantage of all purchase discounts, when possible. F. Risk Management – The City will pursue every opportunity to provide for the Public’s and City employees’ safety and to manage its risks. The goal shall be to minimize the risk of loss of resources through liability claims with an emphasis on safety programs. Attachment number 2 Page 9 of 23 Item # C 51 V. BUDGET CONTINGENCY PLAN This policy is designed to establish general guidelines for managing revenue shortfalls resulting from local and national economic downturns that adversely affect the City's revenue streams. A. Immediate Action - Once a budgetary shortfall is projected, the City Manager will take the necessary actions to offset any revenue shortfall with a reduction in current expenses. The City Manager may: • Freeze all new hire and vacant positions except those deemed to be a necessity. • Review all planned capital expenditures. • Delay all "non-essential" spending or equipment replacement purchases. The City Manager shall report in a timely manner to the City Council the projected shortfall and the actions taken to resolve it. B. Further Action -. If the actions identified in subsection A are insufficient to offset the projected revenue deficit for the current fiscal year, the City Council may approve the following actions, in the order listed: 1. Apply unspent, unobligated surplus funds from prior fiscal years to fund one-time costs in the current fiscal year budget. 2. Notwithstanding Section XII B.1 of this policy, authorize a reduction in the unobligated fund balance in the General Fund, pursuant to Section XII B.1 of this policy, from 90 to 75 days. 3. Direct other reductions in services, including workforce reductions. C. Replenish Fund Balance - As soon as practicable, without placing undue strain on city services, the City Council shall increase the unobligated fund balance in the General Fund, up to the 90-day amount required in Section XII B.1 of this policy. VI. CAPITAL IMPROVEMENT PROGRAM (CIP) BUDGET The City’s goal is to maintain City facilities and infrastructure in order to provide excellent services to the customers within the community, meet growth related needs, and comply with all state and federal regulations. A. Preparation – The City annually updates and adopts a five-year Capital Improvement Program (CIP) schedule as part of the operating budget adoption process. The plan is reviewed and adjusted annually as needed, and year one is adopted as the current year capital budget. The capital budget will include all capital projects, capital resources, and estimated operational impacts • Needed capital improvements are identified through system models, repair and maintenance records and growth demands. • Economic development projects that have capital infrastructure needs must be reviewed and approved for funding by the City no later than March 1 to be included in the annual CIP process. Any economic development project Attachment number 2 Page 10 of 23 Item # C 52 approved for funding after March 1 will be included in the following year CIP process unless otherwise authorized by City Council. • A team approach will be used to prioritize CIP projects, whereby City staff from all operational areas provide input and ideas relating to each project and its effect on operations. • Citizen involvement and participation will be solicited in formulating the capital budget through neighborhood meetings, public hearings and other forums. • Capital infrastructure necessary to meet the requirements of the City’s Annexation Plan will be identified separately within the CIP plan, so that funding alternatives can be developed if needed. • Georgetown Utility Systems (GUS) Advisory Board will review the Electric, Water and Wastewater plans prior to Council adoption. Georgetown Transportation Advisory Board will review the Streets and Stormwater Drainage plans prior to adoption. B. Control – All capital project expenditures must be appropriated in the capital budget. Availability of resources must be identified and then reviewed by the Finance Division before any CIP contract is presented to the City Council for approval. • All utility contracts and other utility expenditures greater than $50,000 are reviewed by the Georgetown Utility Systems (GUS) Advisory Board prior to presentation to Council. C. Financing Programs – Where applicable, assessments, impact fees, pro rata charges, or other fees should be used to fund capital projects which have a primary benefit to specific identifiable property owners. Recognizing that long-term debt is usually a more expensive financing method, alternative-financing sources will be explored before debt is issued. When debt is issued, it will be used to acquire major assets with expected lives equal or exceeding the average life of the debt issue. • Short-term financing including Capital Leasing and other tax-supported obligations can be used to fund vehicles, computers and other operating equipment provided the impact to the tax rate is minimal. • Caution should be used in replacing assets with short-term, tax-supported obligations due to the repetitive nature of the replacements. The total amount of the I & S (interest and sinking) portion of the tax rate dedicated to fund short-term debt for equipment replacement will not exceed $0.04. The estimated short-term I & S for 2008/09 is $0.02753. VII. CAPITAL MAINTENANCE AND REPLACEMENT The City recognizes that deferred maintenance increases future capital costs. Therefore, a portion of all individual funds with infrastructure should be budgeted each year to maintain the quality within each system. Attachment number 2 Page 11 of 23 Item # C 53 A. Infrastructure Maintenance - On-going maintenance and major repair costs are included as capital expense within the departmental operating budgets. These costs are generally considered system repairs and are not capitalized for accounting purposes. They include such items as street seal coat, water line repairs and other general system maintenance. B. Modified Approach - Pavement Condition Index (PCI) - Governmental Accounting Standards Board Statement # 34 provides for an alternative approach to depreciation for measuring the value of infrastructure assets and the related costs incurred to maintain their service life at a locally established minimum standard. The City has elected to implement this modified approach in maintaining their non-enterprise fund infrastructure assets. In order to adopt this alternative method, the City has implemented an asset management system that determines if the minimum standards are being maintained. This measurement system will be updated at least every 3 years. The City has elected to use this alternative method for reporting its street infrastructure assets. The City uses the CarteGraph PavementView Pavement Management Information System to track the condition levels of each of the street sections. The condition of the pavement is based on the following factors: • Type of Distress • Amount of Distress • Severity of Distress • Deduct Values (function of first three) The Pavement Condition Index (PCI) is a measurement scale is based upon a condition index ranging from zero for a failed pavement to 100 for pavement with perfect condition. The condition index is used to classify pavement in the following conditions: The City’s administrative policy is to achieve an average PCI level of 85. An 85 PCI is considered maintaining the streets in a “good” condition. Staff will prepare a street maintenance budget that meets this target for Council’s consideration during the budget process. C. Internal Service funds – The City currently utilizes internal service funds to maintain and replace existing assets. Assessments are made to the using funds for the use of equipment currently in use and to be purchased during the year. In this way, suitable funds are available for the purchase of operational assets without the issuance of debt. PCI Rating 100 – 85 Good 85 – 45 Fair 45 – 0 Poor Attachment number 2 Page 12 of 23 Item # C 54 1. Fleet Maintenance and Replacement - The City has a major investment in its fleet of cars, trucks, tractors, and other equipment. The City will anticipate replacing existing equipment, as necessary and will establish charges that are assigned to the using departments to account for the cost of that replacement. Vehicle maintenance is also allocated in this manner. 2. Technology – It is the policy of the City to plan and fund the maintenance and replacement of its computer network and other technology systems. The City currently uses a four-year replacement cycle for all desktop computers. 3. Facilities Maintenance – The City has established an on-going maintenance program, which includes major repairs, equipment, as well as contracts for maintaining City facilities. The City has anticipated a useful life of such equipment and established a means of charging those costs to the various departments in order to recognize the City’s continuing costs of maintaining its facilities. Determination for facility repairs is based on useful life of the various elements of the facilities. A proportional cost for each element is expensed within the budget for capital replacement. An additional unscheduled repair reserve equal to 10% value of annual internal service funding is also budgeted. The estimate reserve for 2008/09 equals $126,300. Attachment number 2 Page 13 of 23 Item # C 55 VIII. ACCOUNTING, AUDITING AND FINANCIAL REPORTING A. Accounting – The City is solely responsible for the recording and reporting of its financial affairs, both internally and externally. The Director of Finance and Administration is the City’s Chief Financial Officer and is responsible for establishing the structure for the City’s Chart of Accounts and for assuring that procedures are in place to properly record financial transactions and report the City’s financial position. B. Audit of Accounts – In accordance with the Charter, an independent audit of the City accounts will be performed every year. The auditor is retained by and is accountable directly to the City Council. C. External Reporting – Upon completion and acceptance of the annual audit by the City’s auditors, the City shall prepare a written Comprehensive Annual Financial Report (CAFR) which shall be presented to the City Council within 180 calendar days of the City’s fiscal year end. The CAFR shall be prepared in accordance with Generally Accepted Accounting Principals (GAAP) and shall be presented annually to the Government Finance Officer Association (GFOA) for evaluation and consideration for the Certificate of Achievement in Financial Reporting. D. Internal Reporting – The Finance Department will prepare internal financial reports, sufficient to plan, monitor and control the City’s financial affairs. IX. ASSET MANAGEMENT A. Cash Management and Investments – The City Council has formally approved a separate Investment Policy for the City of Georgetown that meets the requirements of the Public Funds Investment Act (PFIA), Section 2256 of the Texas Local Government Code. This policy is reviewed annually by the City Council and applies to all financial assets held by the City. 1. Statement of Cash Management Philosophy - The City shall maintain a comprehensive cash management program to include the effective collection of all accounts receivable, the prompt deposit of receipts to the City’s depository, the payment of obligations, and the prudent investment of idle funds in accordance with this policy. 2. Objectives – The City’s investment program will be conducted as to accomplish the following listed in priority order: • Safety of the principal invested • Liquidity and availability of cash to pay obligations when due • Receive the highest possible rate of return (yield) consistent with the City’s investment policy. 3. Safekeeping and Custody – Investments may only be purchased through brokers/dealers who meet the criteria detailed in the investment policy, which also addresses internal controls related to investments. Attachment number 2 Page 14 of 23 Item # C 56 4. Standard of Care and Reporting – Investment will be made with judgment and care, always considering the safety of principal to be invested and the probable income to be derived. The Director of Finance and Administration is responsible for the overall management of the City’s investment program and ensures all investments are made in compliance with the investment policy. An investment report, providing both summary and detailed information, will be presented to the City Council quarterly. 5. Authorized Investments – The City can currently invest in the following: • Certificates of Deposit • U.S. Treasury and Agency securities • Investment Pools that meet the requirements of the PFIA • No-load Money Market Mutual Funds • Fully collateralized Repurchase Agreements • Other investments as approved by City Council and not prohibited by law B. Fixed Assets – These assets will be reasonably safeguarded and properly accounted for, and prudently insured. 1. Capitalization Criteria - For purposes of budgeting and accounting classification, the following criteria must be capitalized: • The asset owned by the City. • The expected useful life of the asset must be longer than one year, or extend the life of an identifiable existing asset by more than one year. • The original cost of the asset must be at least $5,000. • The asset must be tangible. • On-going repairs and general maintenance are not capitalized. 2. New Purchases – All costs associated with bringing the asset into working order will be capitalized as part of the asset cost. This will include start up costs, engineering or consultant type fees as part of the asset cost once the decision or commitment to purchase the asset is made. The cost of land acquired should include all related costs associated with its purchase. 3. Improvements and Replacement – Improvements will be capitalized when they extend the original life of an asset or when they make the asset more valuable than it was originally. The replacement of assets components will normally be expensed unless they are a significant nature and meet all the capitalization criteria. 4. Contributed Capital - Infrastructure assets received from developers or as a result of annexation will be recorded as equity contributions when they are received. Attachment number 2 Page 15 of 23 Item # C 57 5. Distributions Systems - All costs associated with public domain assets, such as streets and utility distribution lines will be capitalized in accordance with the capitalization policy. Costs should include engineering, construction and other related costs including right of way acquisition. 6. Reporting and Inventory – The Finance Division will maintain the permanent records of the City’s fixed assets, including description, cost, department of responsibility, date of acquisition, depreciation and expected useful life. Periodically, random sampling at the department level will be performed to inventory fixed assets assigned to that department. Responsibility for safeguarding the City’s fixed assets lies with the department supervisor or manager whose department has been assigned the asset. X. DEBT MANAGEMENT The City of Georgetown recognizes the primary purpose of capital facilities is to provide services to the community. Using debt financing to meet the capital needs of the community must be evaluated according to efficiency and equity. Efficiency must be evaluated to determine the highest rate of return for a given investment of resources. Equity is resolved by determining who should pay for the cost of capital improvements. In meeting demand for additional services, the City will strive to balance the needs between debt financing and “pay as you go” methods. The City realizes that failure to meet the demands of growth may inhibit its continued economic viability, but also realizes that too much debt may have detrimental effects on the City’s long-range financial condition. The City will issue debt only for the purpose of acquiring or constructing capital assets for the general benefit of its citizens and to allow it to fulfill its various purposes as a city. A. Usage of Debt - Long-term debt financing will be considered for non-continuous capital improvements of which future citizens will be benefited. Alternatives for financing will be explored prior to debt issuance and include, but not limited to: • Grants • Use of Reserve Funds • Use of Current Revenues • Contributions from developers and others • Leases • Impact Fees When the City utilizes long-term financing, it will ensure that the debt is soundly financed by conservatively projecting revenue sources that will be used to pay the debt. It will not finance the improvement over a period greater than the useful life of the improvement and it will determine that the cost benefit of the improvement, including interest costs, is positive to the community. Attachment number 2 Page 16 of 23 Item # C 58 The City may utilize the benefits of short-term debt financing to purchasing operating equipment provided the debt doesn’t extend past the useful life of the asset and the potential impact to the tax rate is within policy guidelines. The I & S (interest and sinking) portion of the tax rate can not exceed $0.04 for short-term debt (3-10 years). B. Types of Debt – 1. General Obligation Bonds (GO’s) – General obligation bonds must be authorized by a vote of the citizens of Georgetown. They are used only to fund capital assets of the general government and are not to be used to fund operating needs of the City. The full faith and credit of the City as well as the City’s ad valorem taxing authority back general obligation bonds. Conditions for issuance of general obligation debt include: • When the project will have a significant impact on the tax rate; • When the project may be controversial even through it is routine in nature; or • When the project falls outside the normal bounds of projects the City has typically done. 2. Revenue Bonds – Revenue bonds will be issued to provide for the capital needs of any activities where the capital requirements are necessary for the continuation or expansion of a service. The improved activity shall produce a revenue stream to fund the debt service requirements of the necessary improvement to provide service expansion. The average life of the obligation should not exceed the useful life of the asset(s) to be funded by the bond issue and will generally be limited to no more than twenty (20) years. 3. Certificates of Obligation, Contract Obligations (CO’s) – Certificates of obligation or contract obligations may be used to fund capital requirements that are not otherwise covered either by general obligation or revenue bonds. Debt service for CO’s may be either from general revenues (tax-supported) or supported by a specific revenue stream(s) or a combination of both. Typically, the City may issue CO’s when the following conditions are met: • When the proposed debt will have minimal impact on future effective property tax rates; • When the projects to be funded are within the normal bounds of city capital requirements, such as for roads, parks, various infrastructure and City facilities; and • When the average life of the obligation does not exceed the useful life of the asset(s) to be funded by the issue. Certificates of obligation will be the least preferred method of financing and will be used with prudent care and judgment by the City Council. Every effort will be made to ensure public participation in decisions relating to debt financing. Attachment number 2 Page 17 of 23 Item # C 59 4. Self-supporting General Obligation Debt – Refers to general obligation debt issued for a specific purpose and repaid through dedicated revenues other than ad valorem taxes. The annual debt requirements are not included in the property tax calculation. Both Airport and Stormwater Drainage fund issue this type of debt. The City also issues debt on behalf of the Georgetown Transportation Enhancement Corporation (GTEC) whom then pledges 4B sales tax revenue for the repayment of that debt. 5. Internal borrowing between City funds – The City can authorize use of existing long-term reserves as “loans” between funds. The borrowing fund will repay the loan at a rate consistent with current market conditions. The loan will be repaid within ten (10) years. The loan will be considered an investment of working capital reserves by the lending fund. 6. Short-term borrowing - The City may authorize the issuance of Public Property Finance Contractual Obligations (PPFCO) which are short-term obligations for the acquisition of personal public property, such as equipment. PPFCOs are payable from either ad valorem taxes or another dedicated revenue stream. Each issuance will be assessed to ensure cost effectiveness and the repayment schedule will not exceed the useful life of the asset. Multiple equipment acquisitions can be grouped in a single PPFCO issue in order to develop economies of scale. C. Method of Sale – The City will use a competitive bidding process in the sale of bonds unless conditions in the bond market or the nature of the issue warrants a negotiated bid. In such situations, the City will publicly present the reasons for the negotiated sale. The City will rely on the recommendation of the financial advisor in the selection of the underwriter or direct purchaser. D. Disclosure – Full disclosure of operating costs along with capital costs will be made to the bond rating agencies and other users of financial information. The City staff, with assistance of the financial advisor and bond counsel, will prepare the necessary materials for presentation to the rating agencies and will aid in the production of the Preliminary Official Statements. The City will take responsibility for the accuracy of all financial information released. E. Federal Requirements – The City will maintain procedures to comply with arbitrage rebate and other Federal requirements. F. Debt Structuring – The City will issue bonds with an average life of twenty (20) years or less, not to exceed the useful life of the asset acquired. The structure should approximate level debt service unless operational matters dictate otherwise. Market factors, such as the effects of tax-exempt designations, the cost of early redemption options and the like, will be given consideration during the structuring of long term debt instruments. G. Debt Coverage Ratio – Refers to the number of times the current combined debt service requirements or payments would be covered by the current operating revenues net of on-going operating expenses of the City’s combined utilities (Electric, Water, and Wastewater). The City will maintain a minimum debt service coverage ratio of 1.5 times for these utilities as a whole. The bond ordinances allow the City to forego a debt reserve fund for its utility debt if the coverage is maintained at 1.35 times or better. Debt coverage for 2008/09 is budgeted at 2.79 times Attachment number 2 Page 18 of 23 Item # C 60 coverage. A coverage ratio of 1.5 times will also be required for all funds issuing self-supporting debt. H. Bond Reimbursement Resolutions – The City may utilize bond reimbursements as a tool to manage its debt issues, due to arbitrage requirements and project timing. In so doing, the City uses its capital reserve "cash" to delay bond issues until such time when issuance is favorable and beneficial to the City. The City Council may authorize a bond reimbursement resolution for General Capital projects that have a direct impact on the City's ad valorem tax rate when the bonds will be issued within the term of the existing City Council. In the event of unexpected circumstances that delay the timing of projects, or market conditions that prohibit financially sound debt issuance, the approved project can be postponed and considered by a future council until circumstantial issues can be resolved. The City Council may also authorize revenue bond reimbursements for approved utility and other self-supporting capital projects within legislative limits. Currently revenue bonds must be issued within 18 months after an eligible bond funded project is begun. The total outstanding bond reimbursements may not exceed the total amount of the City’s reserve funds. XI. OTHER FUNDING ALTERNATIVES: When at all possible, the City will research alternative funding opportunities prior to issuing debt or increasing user-related fees. A. Grants - All potential grants will be examined for any matching requirements and the source of those requirements identified. A grant funding worksheet, reviewed by Finance, that clearly identifies funding sources, outcomes and other relevant information will be presented and approved by the City Council prior to any grant application being submitted. It must be clearly understood that any resulting operation requirements of the grant could be discontinued once the term and conditions of the project have been terminated. The City Council must authorize acceptance of any grant funding. B. Use of Reserve Funds - The City may authorize the use of reserve funds to potentially delay or eliminate a proposed bond issue. This may occur due to higher than anticipated fund balances in prior years, thus eliminating or reducing the need for debt proceeds, or postpone a bond issue until market conditions are more beneficial or timing of the related capital improvements does not correspond with the planned bond issue. Reserve funds used in this manner are replenished upon issuance of the proposed debt. C. Developer Contributions - The City will require developers who negatively impact the City's utility capital plans offset those impacts. These policies are further defined within the City's utility line extension policy and other development regulations. D. Leases - The City may authorize the use of lease financing for certain operating equipment when it is determined that the cost benefit of such an arrangement is advantageous to the City. Attachment number 2 Page 19 of 23 Item # C 61 E. Impact Fees - The City will impose impact fees as allowable under state law for both water and wastewater services. These fees will be calculated in accordance with statute and reviewed at least every three years. All fees collected will fund projects identified within the Fee study and as required by state laws. XII. FINANCIAL CONDITIONS, RESERVES, AND STABILITY RATIOS The City of Georgetown will maintain budgeted minimum reserves in the ending working capital/fund balances to provide a secure, healthy financial base for the City in the event of a natural disaster or other emergency, allow stability of City operations should revenues fall short of budgeted projections and provide available resources to implement budgeted expenditures without regard to actual timing of cash flows into the City. A. Operational Coverage – The City’s goal is to maintain operations coverage of 1.00, such that operating revenues will at least equal or exceed current operating expenditures. Deferrals, short-term loans, or one-time sources will be avoided as budget balancing techniques. B. Operating Reserves – The City will maintain reserves at a minimum of seventy-five (75) days (20.83%) of net budgeted operating expenditures. Net budgeted operating expenditure is defined as total budgeted expenditures less interfund transfers and charges, general debt service (tax supported), direct cost for purchased power and payments from third party grant monies. Total reserves for 2008/09 are $14,520,000. 1. General Fund – The unobligated fund balance in the General Fund should equal at least ninety (90) days or 25% of annual budgeted General Fund operating expenditures. 2008/09 reserves are $6.58 million. 2. Tourism Fund – A minimum sixty days (60) or 16.67% of operating expenditures will be reserved within the fund balance. 3. Water and Wastewater Funds – Working capital reserves in these funds should be 25% or ninety (90) days. 4. Other Funds – • Stormwater Drainage Fund - $150,000 • Airport Fund – As funds are available, up to ninety (90) days or 25% of operating expenses (less fuel costs). 5. Electric Fund – The remaining balance to meet the citywide requirement of seventy-five (75) days of reserve funds will be maintained within this fund. For all other non-enterprise funds, the fund balance is an indication of the balance of each particular fund at a specific time. The ultimate goal of each such fund is to have expended the fund balance at the conclusion of the activity for which the fund was established. Attachment number 2 Page 20 of 23 Item # C 62 Reserve requirements will be calculated as part of the annual budget process and any additional required funds to be added to the reserve balances will be appropriated within the budget. Funds in excess of the minimum reserves may be expended for City purposes at the will of the City Council once it has been determined that use of the excess will not endanger reserve requirements in future years. C. Liabilities and Receivables - Procedures will be followed to maximize discounts and reduce penalties offered by creditors. Current liabilities will be paid within 30 days of receiving the invoice. Accounts Receivable procedures will target collection for a maximum of 30 days of service. Receivables aging past 120 days will be sent to a collection agency. The Director of Finance and Administration is authorized to write-off non-collectible, non-utility accounts that are delinquent for more than 180 days, and utility accounts delinquent more than 1 year, provided proper delinquency procedures have been followed, and include this information in the annual report to the City Council. D. Capital Project Funds – Every effort will be made for all monies within the Capital Project Funds to be expended within thirty-six (36) months of receipt. The fund balance will be invested and income generated will offset increases in construction costs or other costs associated with the project. Capital project funds are intended to be expended totally, with any unexpected excess to be transferred to the Debt Service fund to service project-related debt service. E. General Debt Service Funds – Revenues within this fund are stable, based on property tax revenues. Balances are maintained to meet contingencies and to make certain that the next year’s debt service payments may be met in a timely manner The fund balance should not fall below one month or 1/12th annual debt service requirements, in accordance with IRS guidelines. F. Investment of Reserve Funds – The reserve funds will be invested in accordance with the City’s investment policy. Existing non-cash investment would be exempt through retirement of the investment. Attachment number 2 Page 21 of 23 Item # C 63 G. Ratios/Trend Analysis - Ratios and significant balances will be incorporated into both the mid-year and annual reports to the City Council. This information will provide users with meaningful data to identify major trends of the City's financial condition through analytical procedures. The following ratios/balances will be used as key financial indicators: • Fund Balance/Equity: Assets - liabilities FB/E AL (Acceptable level) minimum reserve requirement • Working Capital: Current assets less current liabilities CA - CL AL minimum reserve requirement • Current Ratio: Current assets divided by current liabilities CA/CL AL > 1.00 • Quick Ratio: "Liquid" current assets divided by current liabilities Liquid CA/CL AL > 1.00 • Debt/Assessed AV Taxes Debt divided by assessed Ad Valorem value D/AV AL < 5 • Debt Ratio: Current liabilities plus long-term liabilities divided by total assets CL +LTL/TA AL < 1 • Enterprise Oper Coverage: Operating rev divided by operating expense OR/OE AL > 1.25 • Times Coverage Ratio: Operating revenue less operating expense divided by annual debt service (OR-OE)/DSV AL > 1.5 The City will be to develop minimum/maximum levels for the above ratios/balances through analyzing of City historical trends and future projections. These ratios will also be compared to other similar or regional municipalities for further analysis. XIII. INTERNAL CONTROLS A. Written Procedures – Wherever possible, written procedures will be established and maintained by the Director of Finance and Administration for all functions involving cash handling and/or accounting throughout the City. These procedures will embrace the general concepts of fiscal responsibility set forth in this policy statement. B. Internal Audit Program - An internal audit program will be maintained by the Director of Finance and Administration to ensure compliance with City policies and procedures and to prevent the potential for fraud. Attachment number 2 Page 22 of 23 Item # C 64 1. Departmental Audits – departmental processes will be reviewed to ensure dual control of City assets and identify the opportunity for fraud potential, as well as, to ensure that departmental internal procedures are documented and updated as needed. 2. Employees or Transaction Review. - Programs to be audited include Petty Cash, City Credit Card accounts, time entry, and travel. All discrepancies will be identified, and the employee’s Division Director will be notified. The City Manager will also be notified depending on the seriousness of the infraction. 3. Results of all internal audits will be provided to City Council on a quarterly basis. C. Division Directors Responsibility – Each division Director is responsible for ensuring that good internal controls are followed throughout their department, that all Finance Division directives are implemented and that all independent auditor internal control recommendations are addressed. Departments will develop and periodically update written internal control procedures. XIV. STAFFING The City’s goal as an employer is to attract and retain quality employees who provide excellent, friendly services to our community in an effective and efficient manner. A. Adequate Staffing – Staffing levels will be adequate for the fiscal functions of the City to operate effectively. Workload allocation alternatives will be explored before adding additional staff. B. Cost of Living Adjustment (COLA) - To protect city employees from the effects of general inflation, the City may fund an annual COLA for all regular employees not included in a defined pay plan. The COLA will be based on a three-year rolling average of the Consumer Price Index (CPI) reported by the U.S. Bureau of Labor Statistics for Southern cities pertinent to Georgetown’s population. C. Additional Salary Adjustment - Additional salary adjustments for employees not included in a defined pay plan may be recommended at the discretion of the City Manager. D. Pay for Performance – The City Council may fund a one-time bonus incentive program to aid in retaining quality employees and reward employees for productivity and job performance. This program will be funded with one-time available resources and paid as a lump-sum distribution for performance that exceeds expectations during the review period. Attachment number 2 Page 23 of 23 Item # C City of Georgetown, Texas April 13, 2009 SUBJECT: Sec.551.071: Consultation with Attorney 1. Advice from attorney about pending or contemplated litigation and other matters on which the attorney has a duty to advise the City Council, including this week's agenda items 2. Mark Shelton v. City of Georgetown, et al;Cause No. A07CA063; in the United States District Court for the Western District of Texas, Austin Division 3. First Citizens Bank & Trust Company v. City of Georgetown,Cause No. D-1-GN-08-02325, 53rd Judicial District, Travis County, Texas 4. Discussion of legal issues related to payment obligations for the Public Utility Improvements under the "Development Agreement with Forestville Associates, a Maryland General Partnership, regarding development of Wolf Ranch" dated September 11, 2003 ITEM SUMMARY: FINANCIAL IMPACT: SUBMITTED BY: Jessica Hamilton, City Secretary Cover Memo Item # D