HomeMy WebLinkAboutCP 182 CIT FO wo s TEXAS
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COUNCIL PROPOSAL
Date File Number Subject
1/25/94 Cpm-182 ADOPTION OF FINANCIAL MANAGEMENT POLICY STATEMENTS
Proposed by Councilmembers City Manager's Review
Barr, Meadows, Silcox Page--L—of 2
PROPOSAL:
It is proposed that the City Council adopt the attached Financial Management Policy
Statements, which provide a policy framework to ensure that financial resources are
available to meet the present and future needs of the citizens of Fort Worth.
DISCUSSION:
To establish a framework for fiscal decision-making, Staff developed and submitted
for City Council review a comprehensive set of Financial Management Policy
Statements. The Ad Hoc Council Committee on Financial Management Policies has
reviewed this document, and the Committee's recommended revisions have been
incorporated. To highlight these revisions, two copies of the Financial Management
Policy Statements have been provided to City Councilmembers: the first copy shows
the revisions in bold typeface, the second contains the revisions in regular typeface.
The benefits that accrue from the formal adoption of financial policies can be
summarized thus:
1) The process of reviewing and adopting the policies allows elected officials and
their staff to consider current approaches to financial management from a
i long-term perspective.
2) The policies enhance the credibility of the City with the public, bond rating
agencies, and investors.
3) By establishing a framework for financial decisions, the policies improve and
streamline the decision-making process.
4) Established financial policies help to quickly orient newly-elected and appointed
officials to a range of financial matters.
5) Policy statements provide a sense of organizational continuity as elected
officials and staff change.
6) Financial policies provide a basis for dealing with fiscal emergencies.
eLEGALITY
VFISCAL NOTE
VCITY MANAGER'S COMMENTS
VCITY POLICIES MANUAL
CIT FO WO 9 TEXAS
o o.
COUNCIL PROPOSAL
Date File Number Subject ADOPTION OF FINANCIAL MANAGEMENT POLICY STATEMENTS
1/25/94 Q-182
Proposed by Councilmembers City Manager's Review
Barr, Meadows, Silcox Page_I_of 2
The Ad Hoc Council Committee on Financial Management Policies is in agreement
that, if adopted, the development and continual maintenance of this set of financial
policies will yield such benefits for this city government and its citizens.
The Financial Management Policy Statements will be reviewed annually by the City
Council and updated, revised, or refined as deemed necessary. Policy statements
adopted by the City Council are guidelines, and occasionally, exceptions may be
appropriate and required. Exceptions to stated policies, however, should be
specifically identified, and the need for the exception should be documented and fully
explained.
LEGALITY:
This proposal is within the powers of the City Council and there is no known legal
impediment to its implementation.
CITY MANAGER'S COMMENTS:
The City Manager has reviewed this proposal and has no objections to it.
APPROV D
CITY COUNCIL
,.IAN 25 1994
ew
City of P ��low
ROO t ALITY
Q OCAL NOTE
CITY MANAGER'S COMMENTS
0 CITY POLICIES MANUAL
CITY
OF
FORT WORTH
FINANCIAL
MANAGEMENT
POLICY STATEMENTS
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To establish and document a policy framework for fiscal decision-making, the City
Manager will develop and maintain a comprehensive set of Financial Management
Policy Statements. The aim of these policies is to ensure that financial resources are
available to meet the present and future needs of the citizens of Fort Worth. Specifically
this policy framework mandates the pursuit of the following fiscal objectives:
1. Revenues: Design, maintain and administer a revenue system that will assure a
reliable, equitable, diversified and sufficient revenue stream to support desired
City services.
2. Expenditures: Identify priority services, establish appropriate service levels and
administer the expenditure of available resources to assure fiscal stability and the
effective and efficient delivery of services.
�+ 3. Fund Balance/Retained Earnings: Maintain the fund balance and retained earnings
of the various operating funds at levels sufficient to protect the City's
creditworthiness as well as its financial position from emergencies.
4. Capital Expenditures and Improvements: Annually review and monitor the state of
the City's capital equipment and infrastructure, setting priorities for its
replacement and renovation based on needs, funding alternatives, and
availability of resources.
5. Debt: Establish guidelines for debt financing that will provide needed capital
equipment and infrastructure improvements while minimizing the impact of
debt payments on current revenues.
6. Investments: Invest the City's operating cash to ensure its safety, provide for
*. necessary liquidity and optimize yield.
7. Intergovernmental Relations: Coordinate efforts with other governmental agencies
to achieve common policy objectives, share the cost of providing governmental
services on an equitable basis and support favorable legislation at the state and
federal level.
8. Grants: Seek, apply for and effectively administer federal, state and foundation
grants-in-aid which address the City's current priorities and policy objectives.
9. Economic Development: Initiate, encourage and participate in economic
development efforts to create job opportunities and strengthen the local
economy.
10. Fiscal Monitoring: Prepare and present regular reports that analyze, evaluate, and
w� forecast the City's financial performance and economic condition.
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11. Financial Consultants: With available resources, seek out and employ the
assistance of qualified financial advisors and consultants in the management and
administration of the City's financial functions.
12. Accounting, Auditing and Financial Reporting: Comply with prevailing federal,
state and local statutes and regulations. Conform to generally accepted
accounting principles as promulgated by the Governmental Accounting
Standards Board (GASB), the American Institute of Certified Public Accountants
(AICPA), and the Government Finance Officers Association (GFOA).
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I.
Revenues
To design, maintain and administer a revenue system that will assure a reliable,
equitable, diversified and sufficient revenue stream to support desired City services.
A. Balance and Diversification in Revenue Sources
The City shall strive to maintain a balanced and diversified revenue system to
protect the City from fluctuations in any one source due to changes in local
economic conditions which adversely impact that source.
B. User Fees
For services that benefit specific users the City shall establish and collect fees to
recover the costs of those services. The City Council shall determine the
appropriate cost recovery level and establish the fees. Where feasible and
desirable, the City shall seek to recover full direct and indirect costs. User fees
shall be reviewed on a regular basis to calculate their full cost recovery levels, to
compare them to the current fee structure, and to recommend adjustments where
necessary.
C. Property Tax Revenues/Tax F&teBurden
The City shall endeavor to reduce its reliance on property tax revenues by
revenue diversification, implementation of user fees, and economic development.
The City shall also strive to minimize tax rate inErease the property tax burden
on Fort Worth citizens.
D. Utility/Enterprise Funds User Fees
Utility rates and enterprise funds user fees shall be set at levels sufficient to cover
operating expenditures, meet debt obligations, provide additional funding for
capital improvements, and provide adequate levels of working capital. The City
shall seek to eliminate all forms of subsidization to utility/enterprise funds from
the General Fund.
E. Administrative Services Charges
The City shall establish a method to determine annually the administrative
services charges due the General Fund from enterprise funds for overhead and
staff support. Where appropriate, the enterprise funds shall pay the General
Fund for direct services rendered.
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CITY OF FORT WORTH
FINANCIAL MANAGEMENT POLICY STATEMENTS
F. Revenue Estimates for Budgeting
In order to maintain a stable level of services, the City shall use a conservative,
objective, and analytical approach when preparing revenue estimates. The
process shall include analysis of probable economic changes and their impacts on
revenues, historical collection rates, and trends in revenues. This approach
should reduce the likelihood of actual revenues falling short of budget estimates
during the year and should avoid mid-year service reductions.
G. Revenue Collection and Administration
The City shall maintain high collection rates for all revenues by keeping the
revenue system as simple as possible in order to facilitate payment. In addition,
since a revenue should exceed the cost of producing it, the City shall strive to
control and reduce administrative costs. The City shall pursue to the full extent
allowed by state law all delinquent taxpayers and others overdue in payments to
the City.
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CITY OF EDRF WORTH
FINANCIAL MANAGEMENT POLICY STATEMENTS
U.
Expenditures
To assure fiscal stability and the effective and efficient delivery of services, through the
identification of necessary services, establishment of appropriate service levels, and
careful administration of the expenditure of available resources.
A. Current Funding Basis
The City shall operate on a current funding basis. Expenditures shall be
budgeted and controlled so as not to exceed current revenues plus the planned
use of fund balance accumulated through prior year savings. (The use of fund
balance shall be guided by the Fund Balance/Retained Earnings Policy
Statements.)
B. Avoidance of Operating Deficits
The City shall take immediate corrective actions if at any time during the fiscal
year expenditure and revenue re-estimates are such that an operating deficit(i.e.,
projected expenditures in excess of projected revenues) is projected at year-end.
Corrective actions can include a hiring freeze, expenditure reductions, fee
increases, or use of fund balance within the Fund Balance/Retained Earnings
Policy. Expenditure deferrals into the following fiscal year, short-term loans, or
use of one-time revenue sources shall be avoided to balance the budget.
C. Maintenance of Capital Assets
Within the resources available each fiscal year, the City shall maintain capital
�. assets and infrastructure at a sufficient level to protect the City's investment, to
minimize future replacement and maintenance costs, and to continue service
levels.
D. Periodic Program Reviews
The City Manager shall undertake periodic staff and third-party reviews of City
programs for both efficiency and effectiveness. Programs net meeting effleieney
or- effeeti-veness objeetives shall be subjeet to reduetien or elimination
Privatization and contracting with other governmental agencies will be
evaluated as alternative approaches to service delivery. Programs which are
determined to be inefficient and/or ineffective shall be reduced in scope or
eliminated.
AIR-
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CITE` OF FOIST WORTH
FINANCIAL MANAGEMENT POLICY STATEMENTS
E. Purchasing
The City shall make every effort to maximize any discounts offered by
creditors/vendors. Staff shall also use competitive bidding to attain the best
possible price on goods and services.
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CITY OF FORT WORTH
FINANCIAL. MANAGEMENT POLICY STATEMENTS
III.
Fund Balance/Retained Earnings
To maintain the fund balance and retained earnings of the various operating funds at
levels sufficient to protect the City's creditworthiness as well as its financial positions
from unforeseeable emergencies.
A. General Fund Undesignated Fund Balance
The City shall strive to maintain the General Fund undesignated fund balance at
10 percent of current year budget expenditures. After completion of the annual
audit, if the undesignated fund balance exceeds 10 percent, the excess shall be
transferred to the Capital Projects Reserve Fund. (The use of this Fund shall
be guided by the Capital Expenditures and Improvements Policy Statements.)
B. Retained Earnings of Other Operating Funds
In other enterprise operating funds, the City shall strive to maintain positive
retained earnings positions to provide sufficient reserves for emergencies and
revenue shortfalls. Specifically, in the Water and Sewer Enterprise Fund, an
operating reserve will be established and maintained at 20 percent of the
current year's budget appropriation for operation and maintenance, which is
defined as the total budget less debt service and capital project expenditures.
C. Use of Fund Balance/Retained Earnings
Fund Balance/Retained Earnings shall be used only for emergencies, non-
recurring expenditures, or major capital purchases that can not be
accommodated through current year savings. Should such use reduce the
balance below the appropriate level set as the objective for that fund,
recommendations will be made on how to restore it.
D. Retained Earnings of Internal Service Funds
The City shall not regularly maintain positive retained earnings in internal
service funds. When an internal service fund builds up retained earnings, the
City shall transfer it to other operating funds.
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CITY OF FORT WORTH
FINANCIAL MANAGEMENT POLICY STATEMENTS
IV.
Capital Expenditures and Improvements
To annually review and monitor the state of the City's capital equipment and
infrastructure, setting priorities for its replacement and renovation based on needs,
funding,alternatives,and availability of resources.
A. Capital Improvement Planning Program
The City shall annually review the needs for capital improvements and
equipment, the current status of the City's infrastructure, replacement and
renovation needs, and potential new projects. All projects, ongoing and
proposed, shall be prioritized based on an analysis of current needs and resource
availability. For every capital project, all operation, maintenance and
replacement costs shall be fully costed.
B. Replacement of Capital Assets on a Regular Schedule
The City shall annually prepare a schedule for the replacement of its non-
infrastructure capital assets. Within the resources available each fiscal year, the
City shall replace these assets according to the aforementioned schedule.
C. Capital Expenditure Financing
The City recognizes that there are three basic methods of financing its capital
requirements. It can budget the funds from current revenues; it can take the
funds from fund balance/retained earnings as allowed by the Fund
Balance/Retained Earnings Policy; or it can borrow money through debt. Debt
financing includes general obligation bonds, revenue bonds, certificates of
obligation, lease/purchase agreements, certificates of participation, and
commercial paper. Guidelines for assuming debt are set forth in the Debt Policy
Statements.
D. Capital Projects Reserve Fund
A Capital Projects Reserve Fund shall be established and maintained to
accumulate proceeds from the sale of real property assets, reimbursements
from other governmental agencies for the prior purchase of real assets, and
transfers from the General Fund undesignated fund balance. This Fund shall
only be used to pay for capital improvements and capital equipment having an
expected useful life in excess of 10 years.
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CITY OF FORT WORTH
FINANCIAL MANAGEMENT POLICY STATEMENTS
V.
Debt
To utilize debt financing which will provide needed capital equipment and
infrastructure improvements while minimizing the impact of debt payments on current
revenues.
A. Use of Debt Financing
Debt financing, to include general obligation bonds, revenue bonds, certificates
of obligation, certificates of participation, commercial paper, and lease/purchase
agreements,shall only be used to purchase capital assets that can not be financed
from either current revenues or fund balance/retained earnings and to fund
infrastructure improvements and additions. The useful life of the asset or project
shall exceed the payout schedule of any debt the City assumes.
B. Assumption of Additional Debt
The City shall not assume more tax-supported general purpose debt than it
retires each year without conducting an objective analysis as to the community's
ability to assume and support additional debt service payments.
C. Affordability Targets
The City shall use an objective analytical approach to determine whether it can
afford to assume new general purpose debt beyond what it retires each year.
This process shall compare generally accepted standards of affordability to the
current values for the City. These standards shall include debt per capita, debt as
01b. a percent of taxable value,debt service payments as a percent of current revenues
and current expenditures,and the level of overlapping net debt of all local taxing
jurisdictions. The process shall also examine the direct costs and benefits of the
proposed expenditures. The decision on whether or not to assume new debt
shall be based on these costs and benefits and on the City's ability to "afford"
new debt as determined by the aforementioned standards. The City shall strive
to achieve and/or maintain these standards at a low to moderate classification.
D. Debt Structure
The City shall structure its debt payment schedules for general purpose debt to
ensure level principal repayment schedules. The City shall not assume any debt
with 'balloon" repayment schedules which consist of low annual payments and
one large payment of the balance due at the end of the term. While balloon
payment structures minimize the size of debt payments during the period, they
force a large funding requirement on the budget of the final year. Given the
uncertainties of the future, level payment schedules improve budget planning
and financial management.
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E. Sale Process
The City shall use a competitive bidding process in the sale of debt unless the
nature of the issue warrants a negotiated bid. The City shall award bonds based
on a true interest cost (TIC) basis as long as the financial advisor agrees that the
TIC basis can satisfactorily determine the lowest and best bid.
F. Rating Agencies Presentations
Full disclosure of operations and open lines of communication shall be made to
the rating agencies. City staff, with assistance of financial advisors, shall prepare
the necessary materials and presentation to the rating agencies.
G. Continuing Disclosure
The City is committed to continuing disclosure of financial and pertinent credit
information relevant to the City's outstanding securities.
H. Debt Refunding
City staff and the financial advisor shall monitor the municipal bond market for
s opportunities to obtain interest savings by refunding outstanding debt. As a
general rule, the present value savings of a particular refunding should exceed
3.5% of the refunded maturities.
Ot
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CITY OF FORT WORTH
FINANCIAL MANAGEMENT POLICY STATEMENTS
VI.
Investments
To invest the City's cash in such a manner so as to insure the absolute safety of principal
and interest, to meet the liquidity needs of the City, and to achieve the highest possible
yield. Interest earned from investments shall be distributed to the operating, internal
service, and other City funds from which the money was provided. (Reference M&C
G-9552,Cash Management Policy,adopted March 12,1992)
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CITY OF FORT WORTH
FINANCIAL MANAGEMENT POLICY T TEl4 UNT
VII.
Intergovernmental Relations
To coordinate efforts with other governmental agencies to achieve common policy
objectives, share the cost of providing government services on an equitable basis, and
support favorable legislation at the state and federal levels.
A. Interlocal Cooperation in Delivering Services
In order to promote the effective and efficient delivery of services, the City shall
actively seek to work with other local jurisdictions in joint purchasing
consortia,to share on an equitable basis the eests ef seFyiees,to sharing facilities,
sharing equitably the costs of service delivery, and to developing joint
programs to improve service to its citizens.
B. Legislative Program
The City shall cooperate with other jurisdictions to actively oppose any state or
federal regulation or proposal that mandates additional City programs or
services and does not provide the funding to implement them. Conversely, as
appropriate, the City shall support a"legislative initiatives that provide more
ti funds for priority local programs.
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CITY OF FORT WORTH
FINANCIAL MANAGEMENT 1T POLICY .ST A TTPIt U TS
VIII
Grants
To seek, apply for and effectively administer federal, state and foundation grants-in-aid
that address the City's current priorities and policy objectives.
A. Grant Guidelines
The City shall apply, and facilitate the application by others, for only those
grants that are consistent with the objectives and high priority needs and
ebjeefrves previously identified by Council. The potential for incurring ongoing
costs, to include the assumption of support for grant-funded positions from
local revenues,will be considered prior to applying for a grant.
B. Indirect Costs
The City shall recover full indirect costs unless the funding agency does not
permit it. The City may waive or reduce indirect costs if doing so will
significantly increase the effectiveness of the grant.
C. Grant Review
All grant submittals shall be reviewed for their cash match requirements, their
potential impact on the operating budget, and the extent to which they meet the
City's policy objectives. If there are cash match requirements, the source of
funding shall be identified prior to application. An annual report on the status of
grant programs and their effectiveness shall also be prepared.
a•► D. Grant Program Termination
The City shall terminate grant-funded programs and associated positions when
grant funds are no longer available unless alternate funding is identified.
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CITY OF FORT WORTH
FINANCIAL MANAGEMENT POLICY STA' UMENT
DC.
Economic Development
To initiate, encourage and participate in economic development efforts to create job
opportunities and strengthen the local economy.
A. Positive Business Environment
The City shall endeavor, through its regulatory and administrative functions,
to provide a positive business environment in which local businesses can
grow, flourish and create jobs. The City Council and City staff will be
sensitive to the needs, concerns and issues facing local businesses.
B. Commitment to Business Expansion,*wdDiversification, and Job Creation
.f.
The City shall encourage and participate in economic development efforts to
expand Fort Worth's economy and tax base and to increase local employment.
These efforts shall not only focus on newly developing areas but on inner city
areas, the Central Business District, and other established sections of Fort Worth
where development can generate additional jobs and other economic benefits.
C. Tax Abatements
The City shall follow a tax abatement policy (adopted December 8, 1992, M&C
G-9945, and revised September 21, 1993, M&C G-10335) to encourage
commercial growth and development throughout Fort Worth. The City shall use
due caution in the analysis of any tax incentives used to encourage development.
Factors considered in evaluating proposed abatements for development include
the location of the project, its size, the number of temporary and permanent jobs
created, the costs and benefits for the City and its impact on Fort Worth's
economy. The City will periodically review tax abatement contracts to ensure
the community is receiving promised benefits, and the Council may seek to
renegotiate an abatement contract if it is determined that the firm receiving the
abatement has failed to keep its part of the agreement.
D. Increase Non-residential Share of Tax Base
The City's economic development program shall seek to expand the non-
residential share of the tax base to decrease the tax burden on residential
homeowners.
E. Coordinate Efforts with Other Jurisdictions
The City's economic development program shall encourage close cooperation
with other local jurisdictions, chambers of commerce, and groups interested in
promoting to pwmete the economic well-being of this area.
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CITY OF FOIST WORTH
FINANCIAL MANAGEMENT POLICY STATEMENTS
F. Use of Other Incentives
The City shall use enterprise zones as allowed by law to encourage business
expansion. The City shall also coordinate with state and federal agencies on
offering any incentive programs they may provide for potential economic
expansion. The factors used to evaluate possible recipients of any incentives
shall include those listed in B. Tax Abatements.
16
CITY OF TORT WORTH
FINANCIAL MANAGEMENT POLICY STATEMENTS
XII.
Accounting,Auditing,and Financial Reporting
To comply with prevailing local, state, and federal regulations relative to accounting,
auditing, and financial reporting. Accounting practices and financial reporting shall
conform to generally accepted accounting principles as promulgated by the
Governmental Accounting Standards Board (GASB),the American Institute of Certified
Public Accountants, (AICPA), and the Government Finance Officers Association
(GFOA). The City Council shall select an independent firm of certified public
accountants to perform an annual audit of all operations. The City shall not engage any
one firm for more than five consecutive years.
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CITY OF FORT WORTH
FINANCIAL MANAGEMENT POLICY STATEMENTS
X.
Fiscal Monitoring
To prepare and present regular reports that analyze, evaluate and forecast the City's
financial performance and economic condition.
A. Financial Status and Performance Reports
Monthly reports comparing expenditures and revenues to current budget,
projecting expenditures and revenues through the end of the year, noting the
status of fund balances to include dollar amounts and percentages, and
outlining any remedial actions necessary to maintain the City's financial position
shall be prepared for review by the City Manager and the Council.
B. Five-year Forecast of Revenues and Expenditures
A five-year forecast of revenues and expenditures, to include a discussion of
major trends affecting the City's financial position, shall be prepared in
anticipation of the annual budget process. The forecast shall also examine critical
issues facing the City, economic conditions, and the outlook for the upcoming
budget year. The document shall incorporate elements of the International City
Management Association financial trend monitoring system to provide further
insight into the City's financial position and to alert the Council to potential
problem areas requiring attention.
C. Quarterly Status Report on Capital Projects
A summary report on the contracts awarded, capital projects completed and the
status of the City's various capital programs will be prepared quarterly and
presented to the City Manager and the Council.
D. Compliance with Council Policy Statements
The Financial Management Policy Statements will be reviewed annually by
the Council and updated, revised or refined as deemed necessary. Policy
statements adopted by the Council are guidelines,and occasionally,exceptions
may be appropriate and required. However, exceptions to stated policies will
be specifically identified, and the need for the exception will be documented
and fully explained.
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CI FY OF FORT WORTH
FINANCIAL CIAL MANA E TENT POLICY STATEMENTS
M.
Financial Consultants
To employ the assistance of qualified financial advisors and consultants as needed in
the management and administration of the City's financial functions. These areas
include but are not limited to investments, debt administration, financial accounting
systems, program evaluation,and financial impact modeling. Advisors shall be selected
on a competitive basis using objective questionnaires and requests for proposals based
on the scope of the work to be performed.
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