Temple City Municipal Code Ch. 5.5 Budget Reserve Fund Balance Requirements

The primary purpose of this chapter is to ensure adequate fiscal resources and stable delivery of city services during emergencies, fiscal emergencies, annual revenue fluctuations, liquidity shortages, or severe economic downturns so that in the event of these occurrences the city is able to continue providing essential city services and satisfying expenditure obligations. The secondary purpose of this chapter is to enable realistic long term planning, assist in development of annual budgets, require the prudent use of resources, and to implement sound fiscal management practices. To achieve these purposes, this chapter requires the city to:

A. Establish adequate reserves.

B. Establish sound fiscal reserve requirements.

C. Ensure the city satisfies its short term and long term financial obligations.

D. Establish a periodic review of the city's fund balances and reserves.

E. Enhance the city's credit rating.

To achieve the purposes of this chapter it is contemplated that the city will establish various budget reserve fund balance accounts facilitating funding of emergencies, contingencies, liabilities and planned major capital projects. (Ord. 12-953)

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

ECONOMIC STABILIZATION RESERVE: As provided in GASB 54 (Governmental Accounting Standards Board), an identified fund for which the specified purpose is stabilizing the delivery of city services during periods of operational deficits resulting from deferral of federal, state, or county remittance and which may also be used as a short term bridge from unexpected and drastic downturns in the economy. Pursuant to GASB 54 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.

EMERGENCY: As provided in section 2-7-1 of this title.

FISCAL EMERGENCY: The occurrence of any one or more of the following:

A. The existence of a default on a debt obligation for more than thirty (30) days, or the reasonable probability that the city will default on a debt obligation, or that the city will not be able to cure a default on a debt obligation within thirty (30) days;

B. The existence of a failure for lack of funds to make payment of all payroll to officials, officers, or employees of the municipal corporation for more than one payment cycled;

C. 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 one- twelfth (1/12) of the available revenues during the preceding fiscal year;

D. 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 one-twelfth (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;

E. 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 one- twelfth (1/12) of the total amount received into the unsegregated treasury during the preceding fiscal year. (Ord. 12-953; amd. Ord. 12-961)

The city will maintain combined general fund reserves as follows:

A. Emergency/Disaster Reserve - Fifty Thousand Dollars:

1. Use of these funds is allowable only when the following conditions have been met: a) the city council has declared the existence of either an "emergency" or "fiscal emergency"; and b) the use of the reserve has been approved by four-fifths (4/5) vote of the membership of the city council.

2. Within six (6) months after the council's determination in subsection A1 of this section the city manager shall present a plan to the city council to replenish this fund.

3. If all or a portion of the reserve is utilized, the reserve will be restored to the original level as adopted within the next five (5) years or whenever reasonably possible.

B. Liquidity Reserve - Two Million Dollars:

1. Funds are to be set aside to provide cash flow for timing of revenues and expenditures. For example, while payroll costs are biweekly and fairly predictable, state and county tax payments can vary. The city may also from time to time have major projects that are grant funded on a reimbursement basis that require large cash outlays. A "liquidity reserve" is established to provide the cash on hand needed in between large revenue payments and grant reimbursements and will alleviate the need for short term borrowing.

2. If all or a portion of the reserve is utilized, the reserve will be restored to the original level as adopted within the next five (5) years or whenever reasonably possible.

C. Local Economic Uncertainty Reserve - One Million Four Hundred Fifty Thousand Dollars:

1. Funds are to be set aside for the purpose of stabilizing the delivery of city services during periods of operational budget deficits resulting from the conditions as described in the definition of "economic stabilization reserve" herein.

2. Use of the funds are allowable only when the city council, upon the four-fifths (4/5) vote of its membership, has approved the use of the fund.

3. If all or a portion of the reserve is utilized, the reserve will be restored to the original level as adopted within the next five (5) years or whenever reasonably possible. (Ord. 15-1006)

D. Other Reserve Designations: The city council may at any time designate specific fund balance levels for future development of projects which it has determined to be in the best long term interests of the city.

E. Amount Of Reserves: The city manager must include a recommendation for the amounts to be appointed to these reserves during the annual budget process. (Ord. 12-953)