Pismo Beach Municipal Code Ch. 3.14 General Fund Committed Funds

The purpose of this policy is to establish general guidelines for the establishment, maintenance and use of a general fund reserve. This reserve will generate investment income, provide a margin of safety and stability to protect the city from exposure to catastrophic events and economic impacts, and provide flexibility to pursue emergent opportunities. (Ord. O-2015- 003, § 1, 2015)

The general fund reserve policy requires that a minimum balance of 25% of the general fund operating expenditure budget be maintained in any given year. The 25% level is based on the city's dependence on the tourism industry, the large capital and cash flow intensive budget, potential major unanticipated costs from an earthquake or other major disaster, and vulnerability if the state confiscates key revenues. This amount would allow the city to maintain normal operations for three months. The reserve balance should be reported to council annually with fund transfers to be made annually prior to the closing of the fiscal year. (Ord. O-2015-003, § 1, 2015)

A. Emergencies: In the event of an emergency or disaster such as earthquakes, fires, floods, tsunamis, or other such emergencies as determined in the discretion of the council, the reserve may be used to temporarily fund recovery costs. It is understood that all aide assistance options will be sought to fund recovery efforts or reimbursement of the general fund reserve for fronting of recovery costs.

B. Economic downturns: In the event of an economic downturn, the reserve may be used to temporarily fund operating expenditures while expenditure reductions are implemented.

C. Decreased revenues: In the event that revenues are taken by another government entity such as the state holding back on or altering tax disbursements or loss of sales tax receipts of a one-time nature, or there is a drop in projected/actual revenue of more than 5% of the general fund adopted revenue budget, the reserve may be used to fund expenditures. In the event the decreased revenues are ongoing, expenditure reductions shall be considered by the council.

D. Capital acquisitions and cash flow needs: If there is a large capital and cash flow intensive budget requiring more than five hundred thousand dollars or 3% of the general fund operating budget, the reserve may provide temporary cash flow relief. A repayment plan shall be established, and shall be financially feasible based on the city's long-term financial forecast. Alternative financing options shall be presented to council for consideration along with the use of the general fund reserve.

E. Emergent opportunities: Up to one-third of the general fund reserve balance may be used to finance opportunities that directly benefit the city in a variety of ways. These include, yet are not limited to, creating, enhancing, or preserving revenue streams, or otherwise strengthening the city's financial performance. (Ord. O-2015-003, § 1, 2015)

Whenever general fund reserve funds are used, the reserve shall be replenished as soon as possible. Up to 50% of available general fund unassigned fund balance may be allocated to the general fund reserve annually until the reserve is restored to 25% of adopted budget operating appropriations. (Ord. O-2015-003, § 1, 2015)

City Facility Reserve Policy

The purpose of this policy is to establish general guidelines for the establishment, maintenance and use of a city facility reserve. This reserve will generate investment income, provide funding to protect the city from exposure to general liabilities associated with use of city buildings and facilities, and support improvements to city buildings and facilities. (Ord. O-2015-003, § 1, 2015)

The city facility reserve policy requires that five hundred thousand dollars be set aside for improvements to city buildings and facilities, particularly if funds are not available in a given fiscal year. The reserve balance should be reported to council annually with fund transfers to be made annually prior to the closing of the fiscal year. (Ord. O-2015-003, § 1, 2015)

In the event that funds are not available such as an emergency, economic downturn, decreased revenues, or cash flow needs as determined in the discretion of the council, the reserve may be used to fund improvements over one hundred thousand dollars necessary for accessibility improvements, safety improvements, improvements to protect the city from exposure to general liabilities associated with use of city buildings and facilities, or other unanticipated infrastructure improvements to city buildings and facilities. (Ord. O-2015-003, § 1, 2015)

Whenever city facility reserve funds are used, the reserve shall be replenished as soon as possible. Up to five hundred thousand dollars of available general fund unassigned fund balance may be allocated to the city facility reserve annually until the reserve is restored to the five hundred thousand dollar reserve level. (Ord. O-2015-003, § 1, 2015)

Risk Management Reserve Policy

The purpose of this policy is to establish general guidelines for the establishment, maintenance and use of a risk management reserve. This reserve will generate investment income, provide funding to protect the city from exposure to increased risk management costs from general liability, workers compensation, or property insurance premiums; and or legal claims against the city. (Ord. O-2015-003, § 1, 2015)

The risk management reserve policy requires that fifty thousand dollars from the general fund unassigned fund balance set aside each year, up to two hundred fifty thousand dollars, to fund general liability and workers' compensation costs over 10% of the adopted budget for risk management costs, legal costs, judgments, or to avoid judgments such as American Disability Act improvements over one hundred thousand dollars. The reserve balance should be reported to council annually with fund transfers to be made annually prior to the closing of the fiscal year. (Ord. O-2015-003, § 1, 2015)

A. In the event that the actual cost exceeds 10% of the adopted budget for general liability and workers' compensation costs, the reserve may be used to fund unanticipated risk management costs, upon city council approval.

B. In the event that legal costs, judgments, or judgment avoidance improvements exceed one hundred thousand dollars of the adopted budget, the reserve may be used to fund these unanticipated costs. (Ord. O-2015-003, § 1, 2015)

The risk management reserve policy requires that fifty thousand dollars from the general fund unassigned fund balance be set aside each year, up to a maximum two hundred fifty thousand dollars. (Ord. O-2015-003, § 1, 2015)