Hemet Municipal Code Div. 7 Reserve Fund Balance Requirements

The purpose of this division 7 is to enable the city to engage in realistic long-term planning, assist in development of annual budgets, and to guide the city in prudent use of resources and to maintain sound fiscal management policies. This division 7 aims to assist the city in achieving the following objectives:

(1) Build adequate reserves.

(2) Establish sound fiscal reserve policies.

(3) Help the city to reach its short-term and long-term financial obligations.

(4) Establish a periodic review of the city's fund balances and reserves.

(5) Enhance the city's credit rating.

To achieve these purposes and objectives, the city will establish a reserve fund balance account that will allow for funding of emergencies, contingencies, liabilities and planned major capital projects. The goal is to maintain adequate financial reserves so that in times of economic downturns and annual revenue fluctuations, the city can continue to provide essential city services and meet expenditure obligations.

(Ord. No. 1848, § 1, 5-8-12; Ord. No. 1880, § 1, 4-22-14)

For the purposes of this division 7, the following terms shall have the following meanings:

Emergency means, in accordance with section 26-2, the actual or threatened existence of conditions of disaster or of extreme peril to the safety of persons and property within the city caused by such conditions as air pollution, fire, flood, storm, epidemic, riot or earthquake, or other conditions, including conditions resulting from a labor controversy, which conditions are or are likely to be beyond the control of the services, personnel, equipment and facilities of the city, requiring the combined forces of other political subdivisions to combat.

Fiscal emergency means the occurrence of any one or more of the following:

(1) The existence of a default on a debt obligation for more than 30 days;

(2) The existence of a failure for lack of funds to make payment of all payroll to employees of the municipal corporation for more than 30 days or beyond an agreed period of extension;

(3) An increase in the minimum levy of the municipal corporation that results in a reduction in the minimum levies for one or more other subdivisions or taxing districts;

(4) The existence of a condition in which accounts due and payable at the end of the preceding fiscal year, less the year-end balance, exceeded 1/12 of the available revenues during the preceding fiscal year;

(5) The existence of a condition in which the aggregate of deficit amounts of all deficit funds at the end of the preceding fiscal year, less the year-end balance, exceeded 1/12 of the total of the general fund budget for that year and the receipts to those deficit funds other than from transfers from the general fund;

(6) The existence of a condition in which, at the end of the preceding fiscal year, monies and marketable investments in or held for the unsegregated treasury of the municipal corporation, minus outstanding checks and warrants, were less than the aggregate of the positive balances of the general fund and those special funds whose purposes the unsegregated treasury meets, and such deficiency exceeded 1/12 of the total amount received into the unsegregated treasury during the preceding fiscal year.

Economic stabilization means the stabilizing of the delivery of city services during periods of operational deficits resulting from deferral of federal, state, or county remittance; the imposition of unexpected unfunded mandates; or unexpected and drastic downturns in the economy. Stabilization is regarded as a specified purpose only if the circumstances or conditions that signal the need for stabilization (a) are identified in sufficient detail and (b) are not expected to occur routinely.

(Ord. No. 1848, § 1, 5-8-12; Ord. No. 1880, § 1, 4-22-14)

The city will maintain spendable and unrestricted general fund reserves equaling at least 40 percent of current general fund expenditures. Expenditures of funds generated by the "City of Hemet Transactions and Use Tax Ordinance" in chapter 74, article V of this Code shall not be considered "general fund expenditures" for the purpose of calculating this reserve requirement. Use of these reserves is allowable only when one of more of the following conditions exist:

(1) The city council has declared the existence of either an "emergency" or "fiscal emergency."

(2) Funds are to be set aside for the purpose of stabilizing the delivery of city service during periods of operational budget deficits resulting from the conditions as described in the definition above "economic stabilization."

(3) Other reserve designations. The city council may at any time designate specific fund balance levels for future development of one-time projects which it has determined to be in the best long-term interests of the city.

(Ord. No. 1848, § 1, 5-8-12; Ord. No. 1880, § 1, 4-22-14; Ord. No. 1932, § 1, 7-11-17; Ord. No. 2016, § 1, 8-8-23)