City of Culver City, California
City Council Agenda Item Report
Meeting Date: 06/25/2007 Item Number: A-1
AGENDA ITEM: Adoption of a Resolution Revising City Council Policy
Statements No. 5001 Mission Driven Budgeting and No. 5002 Financial Policy and
Rescinding Resolution 95-R005.
Contact Person/Dept.: Marlee Chang,
City Controller
Phone Number: (310) 253-6011
Fiscal Impact: Yes [] No [x] General Fund: Yes [] No []
Public Hearing: [] Action Item: [X] Attachments: [X]
Public Notification:
Master Notification (06/20/07)
Department Approval:
Marlee Chang (6/14/07)
City Attorney Approval:
Carol Schwab (by H. Iker) (06/14/07)
City Controller Approval:
Marlee Chang (6/20/07)
City Manager Approval:
Jerry B. Fulwood (06/14/07)
RECOMMENDATION:
Staff recommends the City Council adopt the Resolution revising City Council Policy
Statements related to Budget and Finance. The recommended revised policies
include Mission Driven Budgeting and the City’s Financial Policies.
BACKGROUND/DISCUSSION:
In conjunction with the preparation of the City’s two-year budget, staff also updated
the existing financial policies. The Mission Driven Budgeting policy was established to
streamline the City’s Budget process, promote prudent management of City funds,
and encourage innovation and cost effective solutions to city service needs. It also
provides flexibility of budget management to the operating departments. The updated
financial policy is intended to establish a comprehensive set of guidelines for use by
the City Council and City staff on decision-making that has a fiscal impact.
The updated Mission Driven Budgeting policy reflects minor language changes, and
the substance of the policy remains the same. The Financial Policy, however, was
updated to include various financial related issues which were not in the current policy
and that will provide more comprehensive guidelines. Staff developed the policy
based on surveying other cities’ policies and also reviewing financial policy models
recommended in the publication from Government Finance Officers Association
(GFOA). The intent was to set up frame work for the City’s financial related policy for
the new fiscal year, and for when the City’s new Chief Financial Officer is hired. It will
be reviewed and modified/updated as needed.
City of Culver City, California
City Council Agenda Item Report
The following are highlights of the changes in the Financial Policy:
The current policy of calculating the General Fund Reserve Policy was based
on the projected General Fund revenues. The revised policy is recommended
to be based on the projected General Fund expenditures excluding debt
service, fund transfer, and encumbered funds, and the purpose is to clearly
describe how the General Fund Reserve percentage is calculated.
The revised policy includes additional sections:
o Financial Reporting Policies
o Operational Management Policies
User Fees and Charges and Development Impact Fees
Grant Management
Revenue Collection Policy
Financial Management Policies
o Cash Management Investment
Capital Improvement Project Policies
Debt Management Policies
o Issuance of Debt
o Credit Rating
Internal Service Funds
o Self Insurance Fund
o Equipment Replacement Fund
Enterprise Funds
o Refuse Fund
o Sewer Fund
o Transportation Fund
It should be noted that on February 17, 2000, the City Council discussed Culver City
Financial Matters including revenues, expenditures, fund balance, capital projects,
replacement funds, and related financial or budgetary policies. Staff researched and
found the minutes of the meeting which indicate the following: “The City Council
agrees that the City reserves will be maintained at or above a figure equal to 25% plus
a 5% cushion of the General Fund. The reserve balance will be updated quarterly.
Also, if the reserve balance drops below 30%, efforts will be taken to get it back to
30% within one yea.” However, no record was found of this revised policy’s adoption
by resolution.
Tonight, staff is presenting to you an updated comprehensive set of financial policies
which includes the above noted policy for official adoption.
City of Culver City, California
City Council Agenda Item Report
FISCAL IMPACT:
This is to implement Best Management Practices. The adoption of the City Council
Policies has no fiscal impact.
ATTACHMENTS:
Resolution (including policies)
MOTION:
That the City Council:
Adopt the Resolution revising City Council Policy Statements No. 5001 - Mission
Driven Budgeting, and No. 5002 - Financial Policies and rescinding Resolution No. 95-
R005.
MEETING DATE: 6/25/07
AGENDA ITEM: Presentation and Adoption Of Revised City Council Policies:
Policy # 5001 Mission Driven Budgeting and Policy # 5002 Financial
Policy.
ATTACHMENTS
Pages
1. Resolution 2007-R 1 —2
a. Revised Council Policy 5001 — Mission Driven Policy 3 — 5
b. Revised Council Policy 5002 — Financial Policy 6 — 14
2. Existing Council Policy 5001 — Mission Driven Budgeting 15 — 18
3. Existing Council Policy 5002 — Financial Policy 19 — 23
4. Council Policy 5002 — Financial Policy as included in Budget
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RESOLUTION NO. 2007-R
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CULVER CITY, CALIFORNIA, ADOPTING CITY
COUNCIL POLICY STATEMENT 2007- RELATED TO
MISSION DRIVEN BUDGETING AND CITY COUNCIL
POLICY STATEMENT 2007- RELATED TO
FINANCES AND RESCINDING RESOLUTION 95-R005.
WHEREAS, on June 25, 2007 at a regularly scheduled meeting of the City
Council, the City Council discussed two proposed policies related to the City's Budgeting
and Financing Operations; and
WHEREAS, the proposed policies embody best management practices and
the City Council's conservative approach to management and planning related to the
taxpayers' funds entrusted to the City Council; and
WHEREAS, through adoption of the policies attached hereto as Exhibits "A"
and "B," the City Council desires to set policy for use by staff in implementing the City's
annual budget approved by the City Council and other related financial items; and
WHEREAS, such policies replace existing City Council Policy Statements No.
5001 and 5002.
NOW, THEREFORE, the City Council of the City of Culver City, California,
DOES RESOLVE as follows:
1. The City Council hereby adopts City Council Policy Statement No.
2007- , entitled, "Mission Driven Budgeting" and City Council Policy Statement No.
2007- entitled "Financial Policies" which City Council Policy Statements are attached
hereto as Exhibits "A" and "B" respectively to this resolution.1|1010101010101010 10
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2_ City Council Policy Statement No. 2007- and 2007- shall be
effective on July 1, 2007.
3. The City Manager is hereby authorized to format this policy statement in a
format consistent with other City Council Policy Statements and shall include the final
version of this City Council Policy Statement with other adopted City Council Policy
Statements.
4. The City Manager shall distribute this City Council Policy Statement to
interested parties, which include, but are not limited to: Interested members of the Public,
City Commissioners, and City Staff.
5. Resolution No. 95-R005 is hereby rescinded.
APPROVED and ADOPTED this day of June 2007.
ALAN CORLIN, MAYOR
City of Culver City, California
ATTEST: APPROVED AS TO FORM:
CHRISTOPHER ARMENTA, City Clerk CAROL A. SCHWAB, City Attorney
-2-CITY OF CULVER CITY
COUNCIL POLICY STATEMENT
General Subject: Budget
Specific Subject: Mission Driven Budgeting
Policy Number 5001
Date Issued 1/23/95
Date Revised 6/25/07
Effective Date 1/24/95
Resolution No. 95-R005
PURPOSE:
To streamline the City's budget process, promote prudent management of City funds
and encourage innovation and cost effective solutions to city service needs.
DEFINITION:
Mission Driven Budgeting focuses on planning and evaluation, accountability, and
financial management. It integrates principles of management-by-objectives, program
budgeting, and performance reporting, and emphasizes the allocation of resources
based on agreed upon missions and work programs.
STATEMENT OF POLICY:
The Mission Driven Budget is intended to be an effective management tool by
encouraging good management, innovation, prudent money management, and by
streamlining the budget review process. It emphasizes strategy development over line
item review. The use of the Mission Driven Budgeting assists in meeting Culver City's
goals of financial stability, maintenance of services, and the promotion of innovative
and creative management solutions to City problems.
BENEFITS OF THE MISSION DRIVEN BUDGET PROCESS
Citizens
1. Efficient government.
2. The City organization is responsive to community needs.
3. The budget system precludes deficit spending.
3Council
1. Council budget review is streamlined.
2. System insures that balanced budgets are brought to Council.
3. Council can devote more time and energy to policy issues.
Staff
1. Streamlines administrative review.
2. Fosters departmental innovation.
3. Encourages departments to efficiently deliver services.
4. Reduces competition and encourages cooperation among departments.
5. Encourages departments to review and streamline their operations for
greater efficiency.
ASSUMPTIONS
With the implementation of Mission Driven Budgeting, several assumptions are made.
The assumptions are:
1. The City Council has determined that the current array of City services is
reasonable.
2. Each department's existing on-going funding level provides the starting point for
implementation for the following budget cycle.
3. Residential/commercial and outside regional growth impact may not affect all
City departments equally.
4. Generally inflation impacts all departments equally.
5. As a Mission Driven system, performance expectations and service objectives of
all departments need to be clearly established and understood.
6. Elected officials provide policy direction. The City Manager and Executive
Management then have the flexibility to administer operations within that overall
policy framework.
7. Council will approve and maintain a balanced budget during the fiscal year.BUDGET MECHANISM
The essential components of Mission Driven Budgeting are:
1. The annual base budget allocation shall be based on CPI change and adjusted
to conservative estimates of recurring General Fund revenues.
2. Proposals for program growth as a result of measurable workload/client
increases beyond the base budget allocation shall be reviewed/recommended
separately by the management team contingent on availability of funds.
3. Excess of CPI costs for current services (i.e. salaries/benefits, utilities, supplies,
etc.) are not intended to cause an increase in the formula. Affected departments
would be expected to use accumulated savings.
4. The management team may further recommend additional/revised budget needs
as appropriate, noting impacts to service levels.
5. Significant new/restored City programs require City Council appropriation of new
money - outside the base budget allocation.
6. Any change in budget methods (i.e. redistribution of Workers Compensation cost
allocation) shall be incorporated in allowable budget adjustments to avoid any
unanticipated impact on departmental budgets.
APPROPRIATION CONTROL
Appropriation control shall be established at the full division or project level which would
allow the departments some flexibility in using the funds within their respective budgets
and save a considerable amount of administrative time processing the excessive
budget transfer requests. Only transfers between personnel, operating and capital
categories must be reviewed and approved by the City Manager or his/her designee.
Such a policy serves to reduce administrative time and cost subject to the following
policy criteria:
1. Position controls remain unchanged. Departments and Divisions will require City
Manager and City Council approval for any new, substitute or reclassified
positions. (Underfill/overfill of positions within the same class would be allowable
within budget limitations.) Except as provided annually by the City Manager and
City Council, a modified hiring freeze continues in effect.
2. Purchase of capital equipment shall require a specific budget appropriation. Any
changes and/or capital additions shall require City Manager approval and a
transfer identifying the source of funding.
3. Significant changes in department or division operations affecting service or
service levels different from what was agreed to in the adopted budget shall have
the prior approval of the City Manager and as appropriate by the City Council.CITY OF CULVER CITY
COUNCIL POLICY STATEMENT
General Subject: Finance
Specific Subject: Financial Policies
Policy Number 5002
Date Issued 1/23/1995
Date Revised 6/25/2007
Effective Date 7/1/2007
Resolution No.
PURPOSE:
To establish a comprehensive set of financial policies for the City that will serve as a
guideline for operational and strategic decision making related to financial matters.
STATEMENT OF POLICY:
The following financial policies are intended to establish a comprehensive set of
guidelines for use by the City Council and City staff on decision-making that has a fiscal
impact. The goal is to maintain the City's financial stability in order to be able to
continually adapt to local and regional economic changes. Such policies will allow the
City to maintain and enhance a sound fiscal condition. This policy should be
implemented in conjunction with associated subsidiary policies, i.e. Mission Driven
Budgeting Policy (5001), Purchasing Policy, Investment Policy, Grants Policy, etc.
This financial policy will be reviewed annually to ensure that it remains current. The
policy will be included as part of the City's annual Adopted Budget. The City's
comprehensive financial policies shall be in conformance with all state and federal laws,
generally accepted accounting principles (GAAP) and standards of the Governmental
Accounting Standards Board (GASB) and the Government Finance Officers Association
(GFOA).
LONG-TERM FINANCIAL PLANNING
1. The City shall seek a balance in the overall revenue structure between more
stable revenue sources (e.g. Property Tax and Utility Taxes) and economically
sensitive revenue sources (e.g. Sales Tax and Transient Occupancy Tax).
When new revenue sources are proposed, they should be designed to achieve a
desirable balance_
2. The City shall encourage the economic development of the community as a
whole in order to provide stable and increasing revenue streams. It should be
the City's goal to not only attract new businesses but also to retain successful
businesses in the City. Objectives of the revenue strategy should also include:
avoiding an over reliance on revenue from any one particular industry;
recruitment and retention efforts to ensure a balance of revenue sources;ensuring compatible uses; encouraging business synergies; and promoting the
growth of amenities and ancillary services to support business districts and
established industries.
3. The City shall develop and maintain methods for the evaluation of future
development and related fiscal impacts on the City budget.
4. The City shall develop and implement a five-year infrastructure, facilities and
equipment maintenance/replacement plan, which shall be updated annually and
included in the City's Comprehensive Financial Plan. From this plan a
maintenance and replacement schedule will be developed and followed.
5. The City shall develop and implement a financial plan to address its funding
needs for issues like deferred maintenance and unfunded liabilities, which will be
included in the City's Comprehensive Financial Plan.
OPERATING BUDGET POLICIES
1. The City Manager shall prepare and present a proposed two-year budget to the
City Council within all statutorily prescribed deadlines. The City Council will
adopt the first year budget with conceptual approval of the second year budget.
A public hearing will be conducted in June of each year to adopt the budget.
2. A Budget Resolution will be adopted by the City Council annually, which
describes the budget amendment process and also specifies budget amendment
authority.
3. All departments will participate in the responsibility of meeting the City's financial
policy goals and ensure the City's long-term financial health. Budget control is
maintained at the department level.
4. It is the City's policy to adopt a balanced budget where operating revenue is
equal to, or exceeds, operating expenditures. In the event a balanced budget is
not attainable, and the cause of the imbalance is expected to last for no more
than one year, the planned use of reserves to balance the budget is permitted.
In the event that a budget shortfall is expected to continue beyond one year, the
planned use of reserves must be developed as part of a corresponding strategic
financial plan to close the gap through revenue increases and/or expenditure
decreases.
5. The operating budget shall serve as the annual financial plan for the City. It shall
serve as the City's management plan for implementing goals and objectives of
the City Council, City Manager and departments. The budget shall provide staff
the resources necessary to accomplish City Council determined service levels.
6. During the annual budget development process, the existing base budget should
be thoroughly examined to assure removal or reduction of any services or
programs that could be eliminated or reduced in cost.7. The annual review process should include an assessment to determine if funds
are available to operate and maintain proposed capital facilities and other public
improvements. If funding is not available for operations and maintenance costs,
the City will delay construction of new projects.
8. Any year-end operating surpluses will revert to unappropriated balances for use
in maintaining reserve levels set by policy and will be available for capital
projects and/or one-time General Fund expenditures upon approval of the City
Council.
9. Where practical, the City's annual budget will include performance measures of
workload, efficiency, and effectiveness.
10. The City's Comprehensive Financial Plan (Plan) is a long-term picture of the
City's finances and will be updated annually as part of the annual budget
development. The Plan shall include forecasted expenditures and revenues of
at least five (5) years for each fund; however, a ten (10) year forecast is
preferred. The update will include an analysis of any substantial discrepancies
of previous projections.
Revenues:
1. The City will estimate annual General Fund revenues using an objective,
analytical process; specific assumptions will be documented and maintained.
Budgeted revenues will be estimated conservatively using accepted standards
and estimates provided by the state, other governmental agencies, and/or
reliable economic forecasters when available.
2. Specific revenue sources will not be dedicated for specific purposes, unless
required by law or Generally Accepted Accounting Principles (GAAP). All non-
restricted revenues will be deposited in the General Fund and appropriated
through the budget process.
3. On-going revenues will fund on-going expenditures and a diversified and stable
revenue system will be developed and maintained to protect programs from
short-term fluctuations in any single revenue source.
Appropriations:
1. The City shall, to the extent possible, pay for current year expenditures with
current year revenues. Where authorized activities/equipment remain
incomplete and/or unpurchased, revenues and/or fund balance may be carried
forward at the City Manager's direction to the next fiscal year to support such an
activity/purchase.
2. The City shall avoid budgetary procedures which rely on financial strategies that
defer payment of current operating expenses to future years.3. Department Heads are responsible for ensuring department expenditures stay
within the department's budgeted appropriation.
4. The City Manager will notify the City Council immediately of the necessity to
increase any departmental appropriation; a budget amendment needs to be
approved by a 415 th vote of the City Council prior to such over-expenditure.
GENERAL FUND RESERVE POLICY
1. It is a goal of the City to maintain a general operating reserve of, at a minimum,
25% of projected General Fund operating expenditures for each fiscal year and
an additional 5% for emergency situations (excluding debt service, fund
transfers, and encumbered funds). These reserves are designed to be used in
the event of a significant financial emergency. Should the General Fund reserve
fall below 30%, the City will implement measures to restore the reserve
percentage to 30% in the following fiscal year.
2. Inter-fund loans and loans by and between the City and its component units
(including, but not limited to, the Culver City Redevelopment Agency) will be
considered as a part of the reserve calculation. The loans must have a term of
less than five years and a call provision of no more than 90 days,
3. The City shall establish, at the beginning of each fiscal year, an "appropriated
reserve" to provide funding for special projects/programs approved by City
Council after the annual budget is adopted, for unanticipated expenditures of a
nonrecurring nature, or to meet unexpected increases in current service delivery
costs. The amount of this reserve will be approved annually by the City Council.
4. A portion of any uncommitted fund balance in excess of 30% of annual revenues
resulting from the previous fiscal year's operations should be committed to
capital improvement projects or should be used to retire existing debt, fund
future liabilities or potential legislative impacts, establish or replenish equipment
replacement funds, and/or establish or replenish deferred maintenance funds.
5. One-time funds should not be used to fund ongoing City programs. Any one-time
revenue receipt during the fiscal year should be recognized and recorded in a
"non-recurring revenue source" category. One-time revenue windfalls include:
sales of city-owned real estate, CalPERS rebates, lump sum (net present value)
savings from debt restructuring, litigation settlement, unexpected revenues, and
other similar sources of revenue as designated by the City Council.
6. The City should establish and maintain a designated reserve fund for any
anticipated future expenses that will require a certain level of steady funding
source, i.e. unfunded future retiree medical cost and pension cost. It is prudent
to set aside these funding needs each year in order to maintain City's financial
stability.FINANCIAL REPORTING POLICIES
Accounting Standards:
1. The City's accounting and financial reporting systems shall be maintained in
conformance with all state and federal laws, generally accepted accounting
principles (GAAP) and standards of the Governmental Accounting Standards
Board (GASB) and the Government Finance Officers Association (GFOA). The
City will make every attempt to implement all changes to governmental
accounting practices at the earliest practicable time.
Annual Audit:
1. An annual audit will be performed by an independent public accounting firm with
an audit opinion to be included with the City's published Comprehensive Annual
Financial Report (CAFR).
2. The independent firm will be selected through a competitive bidding process at
least once every five years. The contract will be for an initial period of three
years with two additional one-year options at the City Council's discretion. The
Budget & Finance subcommittee and City Manager will review the qualifications
of prospective firms and make a recommendation to the City Council. The audit
contract, and any extensions, will be awarded by the City Council.
OPERATIONAL MANAGEMENT POLICIES
1. The City shall endeavor to avoid committing to new spending for operating or
capital improvement purposes until an analysis of all current and future cost
implications relating to those programs and projects is completed.
2. All departments will participate in the responsibility of meeting policy goals and
ensuring long-term financial health. Future service plans and program initiatives
will be developed to reflect current policy directives, projected resources and
future service requirements.
3. Departmental requests for increases in staffing will be thoroughly analyzed; only
those that meet adopted program initiatives and policy directives will be
considered. To the extent feasible, personnel cost reductions will be achieved
through attrition.
User Fees and Charges and Development Impact Fees:
1. All non-enterprise user fees and charges will be examined or adjusted annually
to determine the direct and indirect cost of service recovery rate. Where direct
services to users can be measured, the City shall consider use of appropriate
fees, charges or assessments rather than general tax funds.
2. User fees and charges for specialized services shall be established at a level
related to the cost of providing such service except where the City Council has
determined there is a public benefit to subsidize the service with tax based
/0revenue. The acceptable recovery rate and any associated changes to user fees
and charges will be approved by the City Council following public review.
3. The City shall identify the costs associated with new development as a basis for
establishing development impact fees. The long-term benefit of the development
to the City should be considered in establishing such fees.
Grant Management:
1. The City shall actively pursue federal, state and other grant opportunities when
deemed appropriate. Before accepting any grant, the City shall thoroughly
consider the implications in terms of ongoing obligations that will be required in
connection with acceptance of said grant.
2. The term of Grant funded positions should be clearly identified and presented to
the City Council for approval. It is mandatory to disclose if General Fund
revenues will be needed to fund a position after the Grant expires.
3. Grant funding will be considered to leverage City funds. Inconsistent and/or
fluctuating grants should not be used to fund ongoing programs. Programs
financed with grant monies will be budgeted in separate cost centers, and the
service program will be adjusted to reflect the level of available funding. In the
event of reduced grant funding, City resources may be substituted only after all
program priorities and alternatives are considered.
4. All externally mandated services for which funding is available shall be fully
costed out, including overhead, to allow for complete reimbursement of
expenses.
Revenue Collection Policy:
1. The City will pursue revenue collection and auditing to assure that monies due
the City are accurately received in a timely manner.
2. The City will seek reimbursement from the appropriate agency for State and
Federal mandated costs whenever possible.
3. The City should centralize accounts receivable/collection activities so that all
receivables are handled consistently.
4. Accounts receivable management and diligent oversight of collections from all
revenue sources are imperative_ Sound financial management principles include
the establishment of an allowance for doubtful accounts. Efforts should be made
to pursue the timely collection of delinquent accounts. When such accounts are
deemed uncollectible, they should be written-off from the financial statements.
FINANCIAL MANAGEMENT POLICIES
1. Staff shall keep City Council apprised of financial opportunities available to the
City and shall develop appropriate recommendations.
//2. All requests for City Council action shall include an analysis of the immediate
and future fiscal impact of such action. No appropriation for new or expanded
programs or staffing levels shall be approved without identifying the amount and
source of available funds.
3. All externally mandated services for which funding is available shall be fully
costed out, including overhead, to allow for complete reimbursement of
expenses.
Cash Management Investment:
1. Cash and investment programs will be maintained in accordance with California
Government Code Section 53600 et seq. and the City's adopted investment
policy and will ensure that proper controls and safeguards are maintained.
Pursuant to State law, the City, at least annually, revises, and the City Council
affirms, a detailed investment policy.
2. Reports on the City's investment portfolio and cash position will be developed
and presented to the City Council on a quarterly basis, in conformity with the
California Government Code.
3. City funds will be managed in a prudent and diligent manner with emphasis on
safety, liquidity, and yield, in that order.
CAPITAL IMPROVEMENT PROJECT POLICIES
1. A five-year Capital Improvement Plan must be developed and updated annually,
including anticipated funding sources. Capital improvement projects are defined
as infrastructure or equipment purchases or construction which result in a
capitalized asset and have a useful (depreciable) life of two years or more.
2. The capital improvement plan will identify, where applicable, current operating
maintenance costs and funding streams available to repair and/or replace
deteriorating infrastructure and to avoid significant unfunded liabilities.
3. The City should develop and implement a post-implementation evaluation of its
infrastructures condition on a specified periodic basis, estimating the remaining
useful life, and projecting replacement costs.
4. The City shall actively pursue outside funding sources for all Capital
Improvement Projects. Outside funding sources, such as grants, shall be used
to finance only those Capital Improvement Projects that are consistent with the
five-year Capital Improvement Project and local governmental priorities, and
whose operating and maintenance costs have been included in future operating
budget forecasts.
/15. Capital improvement lifecycle costs will be coordinated with the development of
the Operating Budget. Future operating, maintenance and replacement costs
associated with new capital improvements will be forecasted, matched to
available revenue sources, and included in the Operating Budget. Capital
project contract awards will include a fiscal impact statement disclosing the
expected operating impact of the project and when such cost is expected to
occur.
6. The City must carefully seek and analyze the appropriate type of financing
instrument appropriate for financing capital projects. Several options are
available — general obligation debt, fee-supported debt, fund reserves, etc. All
debt financing mechanisms shall be carefully considered and analyzed for fiscal
benefit and cost effectiveness. Long-term borrowing shall be restricted to
projects too large to be financed from current revenues (pay-as-you-go). Where
possible, special assessment, revenue or other self-supporting bonds shall be
used in lieu of general obligation bonds.
DEBT MANAGEMENT POLICIES
Issuance of Debt:
1, The City will not use long-term debt to pay for on-going operations. The use of
bonds or certificates of participation will only be considered for significant capital
and infrastructure improvements.
2. New debt issues, and refinancing of existing debt, must be analyzed for
compatibility within the City's overall financial planning within the Comprehensive
Financial Plan. The review shall include, but not be limited to, cash flow analysis
and the maintenance of the City's bond rating. Annual debt service shall not
produce an adverse impact upon future operations.
3. Debt financing should not exceed the useful life of the infrastructure
improvement with the average (weighted) bond maturities at or below twenty
years.
4. A ratio of current assets to current liabilities of at least 2 to 'I will be maintained
to ensure the City's ability to pay short-term obligations (i.e. current
assets/current liabilities 2).
Credit Rating:
1. The City will seek to maintain and, if possible, improve its current bond rating(s)
in order to minimize costs and preserve access to credit.
2. It is the City's goal to maintain an AAA/Aaa credit rating from all three major
rating agencies. The factors that contribute to a high rating include the City's
financial management practices, low debt levels, budgetary and fiscal controls,
and accountability. To support this policy, the City will continue to maintain its
position of full financial disclosure and proactive fiscal planning.
/3INTERNAL SERVICE FUNDS
Self Insurance Fund:
1. The Self-insurance fund pays for insurance premiums, benefit and settlement
payments, and administrative and operating expenses. It is supported by
charges to other City funds for the services it provides. These annual charges
for service shall reflect the five-year historical experience and shall be set to
equal the annual expenses of the fund.
2. Self-insurance reserves (Liability and Workers' compensation) will be maintained
at a level which, together with purchased insurance policies, adequately
indemnify the City's property, liability, and health benefit risk. A qualified
actuarial firm shall be retained on an annual basis in order to recommend
appropriate funding levels, which will be approved by Council. The City shall
endeavor to maintain reserves equal to 30% of the net present value of such
future liabilities, with no less than $2 million to cover potential swings in working
capital.
Equipment Replacement Fund:
1. The City shall maintain a fund with a sufficient balance for replacement of
vehicles, equipment (including technology and communication equipment)
2. Vehicle replacement will be accomplished through the use of an amortization
methodology structure. The rates will be revised annually to ensure that charges
to operating departments are sufficient for operation and replacement of vehicles
and other capital equipment (fleet, computers, phones, copiers, etc.).
Replacement costs will be based upon equipment lifecycle financial analysis.
ENTERPRISE FUNDS (Includes Sewer Fund, Refuse Fund and Transportation
Fund)
All Enterprise Funds user fees will be examined annually to ensure that they
recover all direct and indirect costs of service, provide for capital improvements
and maintenance, and maintain adequate reserves.
2. Rate increases shall be approved by the City Council following formal noticing
and a public hearing_ Rate adjustments for Sewer Fund operations will be based
on five-year financial plans unless the City Council directs otherwise.CITY OF CULVER CITY
COUNCIL POLICY STATEMENT Policy Number 5001
General Subject: Budget Date Issued 1/23/95
Specific Subject: Mission Driven Budgeting Effective Date 1/24/95
Resolution No. 95-R005
PURPOSE:
To streamline the City's budget process, promote prudent management of City funds and
encourage innovation and cost effective solutions to city service needs.
STATEMENT OF POLICY:
The Mission Driven Budget is intended to be an effective management tool by encouraging good
management, innovation, prudent money management, and by streamlining the budget review
process. The budget process emphasizes strategy development in place of line item review. The
use of the Mission Driven Budgeting could help meet Culver City's goals of financial stability,
maintenance of services, and the promotion of innovative and creative management solutions to
City problems.
BENEFITS OF THE NEW BUDGET PROCESS
Citizens
1. Efficient government.
2. The City organization is responsive to community needs.
3. The budget system precludes deficit spending.
Council
I. Council budget review is streamlined.
2. System insures that balanced budgets are brought to Council.
3. Council can devote more time and energy to policy issues.Staff
I. Streamlines administrative review.
2. Fosters departmental innovation.
3. Encourages departments to efficiently deliver services.
4. Reduces competition and encourages cooperation among departments.
5. Encourages departments to review and streamline their operations for greater
efficiency.
ASSUMPTIONS
With the adoption of Mission Driven Budgeting, several assumptions need to be made. The
assumptions are:
I. The City Council has determined that the current mix of City services is reasonable as
dictated by current budget constraints.|109| The current level of departmental services is considered to be a base starting point for
implementation of the budgeting system.
3. Residential/commercial and outside regional growth impact may not affect all City
departments equally.
4. Generally inflation impacts all departments equally.
5. As a Mission Driven system, performance expectations and service objectives of all
departments need to be clearly established and understood.
6. Elected officials provide policy direction. The CAO and Department Heads then have the
flexibility to administer operations within that overall policy framework.
7. Council will approve and maintain a balanced budget during the fiscal year.
BUDGET MECHANISM
The essential components of Mission Driven Budgeting are:
1. The annual base budget allocation shall be based on CPI change and adjusted to
conservative estimates of reoccurring general fund revenues.
2. Proposals for program growth as a result of measurable workload/client increases beyond
the base budget allocation shall be reviewed/recommended separately by the management
team contingent on availability of funds.
/63. Excess of CPI costs for current services (i.e. salaries/benefits, utilities, supplies, etc.) are
not intended to cause an increase in the formula. Affected departments would be
expected to use accumulated savings.
4. The management team may further recommend additional/revised budget needs noting
impacts to service levels as appropriate.
5. Significant new/restored City programs require Council appropriation of new money -
outside the base budget allocation.
6. Depai intents receiving approval to market specific services which generate measurable
new revenues shall have the resulting net revenues counted as "savings" generated by that
department.
7. All departments to receive a proportional share of savings from new general revenues
(beyond CPI and growth criteria).
8. Fifty percent department savings may be carried over and used in future years by the
departments upon approval from the CAO's office and concurrence by the City Council
for larger expenditures.
Any year-end shortfall in general revenues is first deducted from department
savings.
The "first" 2% salary/benefit savings contribution expected from all general fund
departments shall also be deducted.
Need to separate true savings from unspent funds for services/programs funded,
but not provided.
Savings to be reduced by carryover requests for pending capital purchases and/or
incomplete programs.
Savings may be used for temporary employees or programs as funding is one time.
Primary use is expected to be for needed capital items or to help departments
stave off budget shortfalls.
Windfalls don't count.
Forty percent of the savings are recommended to be allocated to the capital improvement
and acquisition fund to help finance future City capital improvement needs. The
remaining ten percent are proposed to be allocated to an Innovation Loan Fund to help
finance cost saving opportunities by City departments.
9. Any change in budget methods (i.e. redistribution of utility costs) shall be incorporated in
allowable budget adjustments to avoid any advance impact on departmental budgets.
/7APPROPRIATION CONTROL
Appropriation control shall be established at the full division or project level which would allow
the departments some flexibility in using the funds within their respective budgets and save a
considerable amount of administrative time previously spent processing most transfers. Only
transfers between personnel, operating and capital categories would be required. Such a policy
could serve to reduce administrative time and cost subject to the following policy criteria:
Position controls remain unchanged. Departments and divisions would still require CAO
and Council approval for any new, substitute or reclassified positions. (Underfillioverfill
of positions within the same class would be allowable within budget limitations.) Except
as provided annually by the CAO and City Council, a modified hiring freeze continues in
effect.
2. No transfers of salary and benefit monies to other department/division accounts would be
allowed unless the department has achieved its "salary savings" commitment for the year.
3. Purchase of capital equipment shall require a specific budget appropriation. Any changes
and/or capital additions shall require CAO approval and a transfer identifying the source
of funding.
4. Significant changes in department or division operations affecting service or service
levels different from what was agreed to in the adopted budget shall have the prior
approval of the CAO and as appropriate the City Council.
5.
Except for identified capital and recognized seasonal expenditures, a department/division
budget that consistently exceeds what would be considered a "normal spending pattern"
shall revert back to line item appropriation control as determined by the Chief
Administrative Officer.
NOTE: A "normal spending pattern" would be defined as being the rate of spending
comparable to the same time period in previous fiscal year.CITY OF CULVER CITY
COUNCIL POLICY STATEMENT Policy Number 5002
General Subject: Budget Date Issued 1123/95
Specific Subject: Financial Policies Effective Date 1/24/95
Resolution No. 95-R005
PURPOSE:
To establish long and short range financial policies for the City.
STATEMENT OF POLICY:
A. LONG-TERM PLANNING
1. The City shall seek a better balance in the overall revenue structure between stable
and economically sensitive revenues. When new revenue sources are proposed,
they should be designed to achieve the desirable balance.
2. The City shall enhance the economic development of the community as a whole
through prudent long-range financial planning to encourage desirable businesses
to locate in the City of Culver City.
3, The City shall develop and maintain methods of forecasting future revenues and
expenditures. These methods shall project the Citys future revenues and
expenditures through a variety of methods including but not limited to forecasts of
the economy and future development of the City. Each year, the City will update
revenue and expenditure projections for the next four fiscal years to include
current information; a revised fiscal forecast will be submitted to City Council
during the budget process.
4. The City shall develop and maintain a projection of capital improvement needs for
the next five years based on General Plan, Specific Plans, and on City Council
approved projects consistent with projected revenue and expenditure constraints.
Future planning should consider periods of revenue surplus and shortfall and
adjust future programs accordingly. Planning for Capital Improvement Projects
shall also consider operating and maintenance cost impacts.
5. The City shall develop and maintain methods for the evaluation of future
development in the City and the related fiscal impacts on the City budget.6. The Staff shall keep City Council apprised of financial opportunities available to
the City and shall develop appropriate recommendations.
7. The City shall avoid using one time revenues to subsidize an ongoing imbalance
between operating revenues and expenditures unless a five-year forecast shows no
continuance of structural operating deficits.
8. The City shall develop and implement a financial plan to address its unfunded
liabilities.
9. Cost analysis of salary increases shall be based on direct salary plus City share of
fringe benefits and pay for time not worked; and be projected over at least a five-
year period.
B. REVENUE
1. The City will estimate annual General Fund revenues using an objective,
analytical process; specific assumptions will be documented and maintained. In
instances where there is uncertainty as to assumptions, conservative revenue
projections shall be provided.
2. The City shall annually, project revenues for the current and following four years,
re-evaluating each existing and potential revenue source. These revenue
projections and their assumptions shall be included in a forecast submitted to the
City Council during the annual budget process.
3. The City shall prepare quarterly reports which discuss revenue projections in light
of actual receipts, and shall provide new projections, as appropriate.
4. The City shall identify basic tax-provided services and will establish user fees and
charges for services provided in excess of basic services and/or to non-taxpaying
users.
5. Where direct services to citizens can be measured, the City shall consider use of
appropriate fees, charges or assessments rather than general tax funds.
206. User fees and charges for specialized services shall be established at a level
related to the cost of providing such service except where the City Council has
determined there is a public benefit to subsidize the service with tax based
revenue.
7. Annually the City will review the cost of activities supported by user fees to
identify the impact of inflation and other cost increases. Fees shall be adjusted
where appropriate to reflect these increases.
8. Enterprise funds (refuse/sewer/transit) shall be fully supported from their own
revenue sources. This support shall include covering indirect costs such as
General Fund services and annual depreciation.
9. The City shall identify the costs associated with new development as a basis for
establishing development impact fees. The long-term benefit of the development
to the City should be considered in establishing such fees.
C. APPROPRIATION
1. The City shall, to the extent possible, pay for current year expenditures with
current year revenues. Where authorized activities/equipment remain incomplete
and/or unpurchased, revenues and/or fund balance may be carried forward at the
Chief Administrative Officer's direction to the next fiscal year to support such an
activity/purchase.
2. The City shall avoid budgetary procedures that balance current expenditures at the
expense of meeting future years' expenses.
3. The City shall develop and implement a five year infrastructure, facilities and
equipment maintenance/replacement plan, which shall be updated annually. A
further goal shall be the development of a maintenance plan for all infrastructure,
facilities and equipment over their expected life.
4. Department Heads shall be held accountable for assuring that department
expenditures stay within the department's budget appropriation, and through the
Chief Administrative Oficcer will notify the City Council immediately of the
necessity to overexpend any department appropriation, prior to such
overexpenditure.
5. All requests for City Council action shall include an analysis of the immediate and
future fiscal impact of such action. No appropriation for new or expanded
programs or staffing levels shall be approved without identifying the amount and
source of available funds.
2/6. All externally mandated services for which funding is available shall be fully
costed out, including overhead, to allow for complete reimbursement of expenses.
D. CAPITAL IMPROVEMENTS
The Capital Improvement Program is budgeted on a multi-year basis. Monies
shall be allocated to projects when they become available regardless of the fiscal
year in which construction will actually take place. The annual expenditure
increment for any Capital Improvement project shall be contained within the
appropriate annual budget categories.
2. The budget shall contain an annual allocation and an additional four-year revenue
projection and needs analysis which specifies the revenue sources and allocation
schedule for individual projects. This five-year plan shall be updated annually.
3. Unexpended capital project budgets shall be carried forward to future fiscal years
to complete the intent of the original budget, contingent upon reappropriation by
the City Council.
4. The City shall actively pursue outside funding sources for all projects for the CIP
funding. Outside funding sources, such as grants, shall be used to finance only
those Capital Improvement Projects that are consistent with the Five Year CIP and
local governmental priorities, and whose operating and maintenance costs have
been included in future operating budget forecasts.
5. Use of Bonds and/or Certificates of Participation to fund capital improvements
shall be considered when it is cost effective or necessary to do so to meet a public
need. Long-term borrowing shall be restricted to projects too large to be financed
from current revenues. Where possible, special assessment, revenue or other self-
supporting bonds shall be used in lieu of general obligation bonds.
E. FUND BALANCE/RESERVE
1. The City shall maintain a reserve in the General Fund for cash flow, emergencies
and economic uncertainties at a minimum of 10% of projected General Fund
expenditures for each fiscal year.
2. The City shall establish, at the beginning of each fiscal year, an "appropriated
reserve" to provide funding for special projects which are approved after the
annual budget is adopted, for unanticipated expenditures of a nonrecurring nature,
or to meet unexpected increases in current service delivery costs. The amount of
this reserve shall be established annually by the City Council.
Z3. A portion of any uncommitted fund balance from the previous fiscal year should
be committed to capital improvement projects.
4. One-time funds should not be used for ongoing City programs. Such monies
should be committed to Capital Improvement Projects or other one-time
programs.
5. The City shall maintain a fund with a sufficient balance for eventual replacement
of vehicles, equipment and facilities.
Z3APPENDIX B
CITY OF CULVER CITY
COUNCIL POLICY STATEMENT
General Subject: Budget
Specific Subject: Financial Policies
Policy Number
Date Issued 2/17/00
Effective Date 2/17/00
Resolution No.
PURPOSE:
To establish long and short-range financial policies for the City.
STATEMENT OF POLICY:
A. LONG-TERM .PLANNING
The City shall seek a better balance in the overall revenue structure between
stable and economically sensitive revenues. When new revenue sources are
proposed, they should be designed to achieve the desirable balance.
2_ The City shall enhance the economic development of the community as a
whole through prudent long-range financial planning to encourage desirable
businesses to locate in the City of Culver City.
3. The City shall develop and maintain methods of forecasting future revenues
and expenditures. These methods shall project the City's future revenues and
expenditures through a variety of methods including, but not limited to,
forecasts of the economy and future development of the City_ Each year, the
City will update revenues and expenditure projections for the next four fiscal
years to include current information; a revised fiscal forecast will be
submitted to City Council during the budget process.
4. The City shall develop and maintain a projection of capital improvements
needs for the next five years based on General Plan, Specific Plans, and on
City Council approved projects consistent with projected revenue and
expenditure constraints. Future planning should consider periods of revenue
surplus and shortfall and adjust future programs accordingly. Planning for
Capital Improvement Projects shall also consider operating and maintenance
cost impacts. 5. The City shall develop and maintain methods for the evaluation of future
development in the City and the related fiscal impacts on the City budget.
• 6. The Staff shall keep City Council apprised of financial opportunities available
to the City and shall develop appropriate recommendations.
7. The City shall avoid using one-time revenues to subsidize an ongoing
imbalance between operating revenues and expenditures unless a five-year
forecast shows no continuance of structural operating deficits.
8. The City shall develop and implement a financial plan to address its
unfounded liabilities.
9. Cost analysis of salary increases shall be based on direct salary plus City share
of fringe benefits and pay for time not worked; and be projected over at least a
five-year period.
B. REVENUE|1010|1. The City will estimate annual General Fund revenues using an objective,
analytical process; specific assumptions will be documented and maintained.
In instances where there is uncertainty as to assumptions, conservative
revenue projections shall be provided.
The City shall annually, project revenues for the current and following four
years, re-evaluating each existing and potential revenue source. These
revenue projections and their assumptions shall be included in a forecast
submitted to the City Council during the annual budget process.
3. The City shall prepare quarterly reports, which discuss revenue projections in
light of actual receipts, and shall provide new projections, as appropriate.
4. The City shall identify basic tax-provided services and will establish user fees
and charges for services provided in excess of basic services and/or to non-
taxpaying users.
5. Where direct services to citizens can be measured, the City shall consider use
of appropriate fees, charges or assessments rather than general tax funds.
6. User fees and charges for specialized services shall be established at a level
related to the cost of providing such service except where the City Council has
determined there is a public benefit to subsidize the service with tax based
revenue.
7. Annually the City will review the cost of activities supported by user fees to
identify the impact of inflation and other cost increases. Fees shall be
adjusted where appropriate to reflect these increases.
444Enterprise funds (refuse/sewer/transit) shall be fully supported from their own
revenue sources. This support shall include covering indirect costs such as
General Fund services and annual depreciation.
9. The City shall identify the costs associated with new development as a basis
for establishing development impact fees. The long-term benefit of the
development to the City should be considered in establishing such fees.
C. APPROPRIATION
The City shall, to the extent possible, pay for current year expenditures with
current year revenues. Where authorized activities/equipment remain
incomplete and/or unpurchased, revenues and/or fund balance may be carried
forward at the Chief Administrative Officer's direction to the next fiscal year
to support such an activity/purchase.
2. The City shall avoid budgetary procedures that balance current expenditures at
the expense of meeting future years' expenses.
3_ The City shall develop and implement a five-year infrastructure, facilities, and
equipment maintenance/replacement plan, which shall be updated annually.
A further goal shall be the development of a maintenance plan for all
infrastructure, facilities and equipment over their expected life.
4. Department Heads shall be held accountable for assuring that department
expenditures stay within the department's budget appropriation, and through
the Chief Administrative Officer will notify the City Council immediately of
the necessity to over expend any department appropriation, prior to such over
expenditure.
5. All requests for City Council action shall include an analysis of the immediate
and future fiscal impact of such action. No appropriation for new or expanded
programs or staffing level shall approve without identifying the amount and
source of available funds.
6. All externally mandated services for which funding is available shall be fully
costed out, including overhead, to allow for complete reimbursement of
expenses.
D. CAPITAL IMPROVEMENTS
The Capital Improvement Program is budgeted on a multi-year basis. Monies
shall be allocated to projects when they become available regardless of the
fiscal year in which construction will actually take place. The annual
expenditure increment for any Capital Improvement project shall be contained
within the appropriate annual budget categories.
"462. The budget shall contain an annual allocation and an additional four-year
revenue projection and needs analysis, which specifies the revenue sources
and allocation schedule for individual projects. This five-year plan shall be
updated annuall y.
3. Unexpended capital project bud gets shall be carried forward to future fiscal
years to complete the intent of the original budget, contingent upon
reappropriafion by the City Council.
4. The City shall actively pursue outside funding sources for all project for the
CIP funding. Outside funding sources, such as grants, shall be used to finance
only those Capital Improvement Projects that are consistent with the Five-
Year CIP and local governmental priorities, and whose operating and
maintenance costs have been included in future operating budget forecasts.
5_ Use of Bonds and/or Certificates of Participation to fund capital
improvements shall be considered when it is cost effective or necessary to do
so to meet a public need. Long-term borrowing shall be restricted to projects
too large to be financed from current revenues. Where possible, special
assessment, revenue, or other self-supporting bonds shall be used in lieu of
general obligation bonds.
FUND BALANCE/RESERVE
The City shall maintain a reserve in the General Fund for cash flow,
emergencies, and economic uncertainties at a minimum of 25% of projected
General Fund revenues for each fiscal year. The City's target Fund Balance
percentage is at least 30% of annual revenues. Should the General Fund
Balance percentage fall below 30%, in the following fiscal year, the City
should take measures to bring the Fund Balance percentage back to 30%.
The City shall establish, at the beginning of each fiscal year, an appropriated
reserve" to provide funding for special projects which are approved after the
annual budget is adopted, for unanticipated expenditures of a nonrecurring
nature, or to meet unexpected increases in current service delivery costs. The
amount of this reserve shall be established annually by the City Council.
3, A portion of any uncommitted fund balance in excess of 30% of annual
revenues resulting from the previous fiscal year's operations should be
committed to capital improvement projects or should be used to replenish or
establish replacement funds.
4. One-time funds should not be used for ongoing City programs. Such monies
should be committed to Capital Improvement Projects or other one-time
programs.
5. The City shall maintain a fund with a sufficient balance for eventual
replacement of vehicles, equipment, and facilities.
446