04. Resolution 5578 - Fiscal Policy- City of Kalispell
_ WX _ OFFICE OF THE CITY MANAGER
TO: Mayor Fisher and Kalispell City Council
FROM: Doug Russell, City Manager
SUBJECT: Resolution No. 5578 - Resolution Adopting an Unassigned Fund Balance in
the General Fund
MEETING DATE: August 20, 2012
Attached is a resolution adopting a fiscal policy for the City of Kalispell that benchmarks the
development of an unassigned fund balance of 20% of that specific year's general fund revenues.
BACKGROUND: Following a discussion at a previous City Council meeting, staff has been
developing a resolution to adopt a general fund balance of unassigned funds, or more informally, a
reserve fund. Having a specified balance of unassigned funds provides direction for the Council and
staff when considering the annual budget development; provides for financial consistency when
faced with short-term cash flow concerns; establishes quantifiable measures for credit rating
agencies; and provides a source of revenue should unexpected events occur within the local economy
or organizational operations.
The Government Finance Officers Association recommends a minimum of a two -month fund
balance for general government, but recognizes that a government's particular situation may require
a level of fund balance significantly higher than the minimum recommendation. Previous discussion
with the governing body has identified a level of comfort with a fund balance of 20% for the City of
Kalispell; recognizing the importance of the fund balance while also striving to avoid excessive
levels of funds that are not being directly used for service delivery.
RECOMMENDATION: It is recommended that the City Council adopt Resolution 5578 which
adopts an unassigned fund balance of 20% in the general fund.
FISCAL IMPACTS: Adopting a fiscal policy that establishes a desired fund balance of 20% of un
unassigned fund balance in the general fund will impart some fiscal pressure as we direct efforts to
balance out service needs while reaching that specific goal,. Our current unassigned fund balance is
approximately $1.4 million. To reach the 20% target, we would need approximately $1.9 million.
Once reached, however, the City of Kalispell will have the ability to appropriate funds above that
level with the confidence and awareness that the targeted amount has been met.
ALTERNATIVES: Alternative options to this requested motion include changing the level of
balance to a lower or higher percentage (10%, 30%), or rejecting the recommended resolution
outright and managing fund balances on an annual basis.
Respectfully Submitted,
.-Doug- Ry sell, City Manager
111
WHEREAS, the City Council acknowledges that the City of Kalispell, as a local government,
is vulnerable to economic uncertainty, unanticipated events, credit rating
assignments, and potential shortfalls in revenue cycles within any respective
budget year; and
WHEREAS, it is the desire of the City Council that the city sustain a strong financial
foundation for unassigned fund balances, but to also uphold a financial culture
that does not sacrifice the provision of municipal services merely for the sake of
fiscal targets; and
WHEREAS, the Government Finance Officers Association in Best Practice "Appropriate Level
of Unrestricted Fund Balance in the General Fund" identifies that a general
purpose government, regardless of size, should maintain an unrestricted fund
balance in its general fund of no less than two months (16.7%) of general fund
operating revenues or expenditures;" and
WHEREAS, the City Council hereby finds that it is prudent and in the best interests of the city
to establish a specific policy to guide the development and maintenance of the
level of unassigned fund balance within the general fund.
NOW THEREFORE BE IT RESOLVED by the Council of the City of Kalispell, Montana
that:
SECTION I. The targeted ending unassigned fund balance in the general fund shall be
20% of the annual general fund revenues for that respective fiscal year.
SECTION II. Should events occur that require the use of the unassigned fund balance
that lowers it below the 20% level, budgeting adjustments shall be made
in the following year that realigns the unassigned fund balance toward, if
not to the 20% amount.
SECTION 111. Unassigned fund balances above 20% will be budgeted toward
municipal operations so as to not create an excessive unassigned balance
of taxpayer provided funds.
PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF
THE CITY OF KALISPELL, THIS 20TH DAY OF AUGUST, 2012.
Tammi Fisher
Mayor
Theresa White
City Clerk