Preliminary Budget - Financial PoliciesCity of Kalispell
Post Office Box 1997 - Kalispell, Montana 59903
Telephone: (406) 758-7701 Fax: (406) 758-7758
MEMORANDUM
TO: Mayor Fisher and Members of Council
FROM: Jane Howington, City Manager
DATE: January 21, 2011
RE: Financial Policy
The work session on Monday, January 24, 2011 has been scheduled to discuss a series of draft
financial policies for Kalispell. These policies should be designed to provide strategic direction
toward financing the city's operations and goals. Over the next few months we will move the
budget process from this initial discussion to a final budget recommendation. In general terms, I
anticipate the next 4 months to have work sessions designed to move us through this process
focusing on the following areas of discussion:
Policies
Financial plan
Review of fiscal history, trends and projections
Assets & liabilities/Capital planning
Preliminary budget review
Departmental and fund reviews
Final budget review
Respectfully submitted,
l,ane Howington
® The City shall endeavor to maintain a diversified and stable revenue base to minimize the
effects of economic fluctuations as well as eliminate an over dependence on any single
revenue source.
® The City shall project and update revenues annually. These revenue forecasts shall be
presented to the City Council prior to the beginning of the budget process.
® Cash investments of the City shall be undertaken in a manner that seeks to ensure the
preservation of capital in the portfolio.
• User fees and rates shall be examined annually and adjusted as necessary to cover the
costs of providing the services.
® The City shall follow a policy of collecting, on a timely basis, all fees, charges, taxes, and
other revenues properly due the City. The City shall follow an aggressive policy of
collecting all delinquencies due the City.
® In no event shall the total amount of the proposed expenditures exceed the estimated
income of the City.
• All appropriations shall lapse at the end of the budget year to the extent that they have not
been expended or lawfully encumbered.
• Budgetary emphasis shall focus on providing those basic municipal services which
provide the maximum level of services, to the most citizens, in the most cost effective
manner, with due consideration being given to all costs — economic, fiscal, and social.
® The budget should endeavor to provide for adequate maintenance of capital, plant, and
equipment and for their orderly replacement.
® The City shall give highest priority in the use of one-time revenues to the funding of
capital assets or other non -recurring expenditures.
® The City shall ensure the conduct of timely, effective and annual audit coverage of all
financial records in compliance with local, state and Federal law.
Capital Improvements Policy
• The City shall develop a five-year program for capital improvements and updates it
annually for budgeting purposes. A Capital Improvement Plan (CIP) document will be
prepared which shall list all project requests that go beyond the five year budget guideline.
• Estimated costs and potential funding sources for each capital improvement project
proposal shall be identified before the document is submitted to the City Council for
approval.
• The capital improvement program shall be included in the Annual Budget. The Annual
Budget shall implement the first year of the capital improvement program as funds are
available.
Construction projects and capital purchases of $10,000 or more shall be included in the
Capital Improvement Plan; minor capital outlays of less than $10,000 shall be included in
the regular operating budget.
® The City may issue general obligation bonds, revenue bonds, special obligation bonds, and
short-term notes and leases.
® The City shall limit long-term debt to only those capital projects that cannot be financed
from current revenue or other available sources.
® The City's policy shall be to manage its budget and financial affairs in such a way so as to
obtain and maintain a high bond rating.
® The City shall not use long-term debt for financing current operations.
® The City shall calculate an unreserved, undesignated fund balance equal to 15-20% of
expenditures for the adopted budget. These funds shall be used to avoid cash flow
interruptions, generate interest income, and reduce the need for short-term borrowing.
• A contingency reserve account shall be appropriated annually in the General Fund to
provide for unanticipated expenditures of a nonrecurring nature and/or to meet unexpected
increases in costs.
* At the direction of the Council and the oversight of the City Manager, the General Fund
portion of the budget shall be balanced. Expenditures must equal revenues with the use of
appropriated fund balance. The use of fund balance shall not reduce the ending projected
balance below the Council's established guidelines of 15-20% of expenditures.
Enterprise funds shall be used to account for the acquisition, operation, and maintenance
of City facilities and services which are intended to be entirely or predominately self-
supporting from user charges.
® Enterprise funds are required to establish rates that generate revenues sufficient to cover
the cost of operations including debt expense and capital needs. Operating costs shall
include any intragovernmental charges.