4.10. SR 12-19-2016 Eclty1� ,.,�� Request for Action
River
To Item Number
Mayor and City Council 4.10
Agenda Section Meeting Date Prepared by
Consent December 19, 2016 Lori Ziemer, Finance Director
Item Description Reviewed by
Resolution Removing Commitment of General Cal Portner, City Administrator
Fund Balance For OPEB Obligation Reviewed by
Action Requested
Adopt,by motion, the resolution removing the commitment of General Fund balance for OPEB
obligation.
Background/Discussion
In 2010, the city implemented Governmental Accounting Standards Board (GASB) Statement No. 54 and
adopted the Fund Balance Policy distinguishing fund balance classifications based on the constraints that
control the purposes for which specified amounts can be spent. The Fund Balance Policy is included in
the city's Financial Management Policy and is reviewed annually.
As stated in the Fund Balance Policy, committed fund balance is amounts that can be used only for the
specific purposes determined by a formal action of the government's highest level of decision-making
authority,which is by resolution. Commitments may be changed or lifted only by the government taking
the same formal action that imposed the constraint originally.
On November 15, 2010, Resolution 10-61 was adopted formalizing the commitment of General Fund
balance for the city's other post-employment benefit (OPEB) obligation in the amount as determined
each year by the annual audit.
Staff recommends removal of this constraint as there is no financial management benefit in maintaining
the commitment of General Fund balance for the OPEB obligation. Commitment of General Fund
balance may only be removed by resolution,which is the same formal action that imposed the constraint.
Financial Impact
N/A
Attachments
■ Fund Balance Policy
■ Resolution 10-61 Committing General Fund Balance For OPEB Obligation
■ Resolution Removing Commitment of General Fund Balance For OPEB Obligation
POWERED 6T
Template Updoted 4/14 INAWRE1
Fund Balance Policy
Fund balance reserves are an important component in ensuring the overall financial health of a
community,by giving the city sufficient funds to meet contingency and cash-flow timing needs. In
establishing an appropriate fund balance, the city needs to consider the demands of cash flow, need
for emergency reserves, ability to manage fluctuations of major revenue sources, credit rating and
long-term fiscal health.
A. Classification of Fund Balance/Procedures
1. Nonspendable
Amounts that are not in a spendable form or are required to be maintained intact.
Examples are inventory or prepaid items.
2. Restricted
Amounts subject to externally enforceable legal restrictions. Examples include grants,
tax increment and bond proceeds.
3. Unrestricted
The total of committed fund balance, assigned fund balance, and unassigned fund
balance:
■ Committed fund balance— amounts that can be used only for the specific
purposes determined by a formal action of the government's highest level of
decision-making authority. Commitments may be changed or lifted only by the
government taking the same formal action that imposed the constraint originally.
■ Assigned fund balance— amounts a government intends to use for a specific
purpose;intent can be expressed by the government body or by an official or body
to which the governing body delegates the authority.
■ Unassigned fund balance—residual amounts that are available for any purpose
in the general fund. The General fund should be the only fund that reports a
positive unassigned fund balance amount. This classification is also used to
account for deficit fund balances in other governmental funds.
B. General Fund
■ The city will maintain an unassigned General Fund balance of not less than 40-45% of
budgeted operating expenditures;however, this need could fluctuate with each year's
budget objectives.
■ Annual proposed General Fund budgets shall include this benchmark policy. Council
shall review the amounts in fund balance in conjunction with the annual budget
approval, and make adjustments as necessary to meet expected cash-flow needs.
■ In the event the unassigned General Fund balance will be calculated to be less than the
minimum requirement at the completion of any fiscal year, the city shall plan to adjust
budget resources in the subsequent fiscal years to bring the fund balance into
compliance with this policy.
■ The City Council may consider appropriating (for authorized purposes) year-end fund
balance in excess of the policy level or increasing the minimum fund balance. An
example of preferred use of excess fund balance would be for one-time expenditures,
such as:
1. to fund an expenditure of significant long-term benefit or legacy to the
community
2. to fund a one-time (non-recurring) expenditure or grant match
opportunity
3. to provide catch-up funding or long-term obligations not previously
recognized
4. to fund a one-time unplanned revenue shortfall
5. to fund an unplanned expenditure due to an emergency or disaster
6. to retire existing debt
7. to fund policy shifts by other governmental entities having a negative
impact on the city
8. to moderate property taxes
■ Appropriation from the minimum fund balance shall require the approval of the City
Council and shall be used only for non-recurring expenditures, unforeseen emergencies
or immediate capital needs that cannot be accommodated through current year
savings. Replenishment recommendations will accompany the decision to utilize fund
balance.
■ At the discretion of the City Council, fund balance may be committed for specific
purposes by resolution designating the specific use of fund balance and the amount.
The resolution would need to be approved no later than the close of the reporting
period and will remain binding unless removed in the same manner.
■ The City Council authorizes the Finance Director and/or City Administrator to assign
fund balance that reflects the city's intended use of those funds.
■ When both restricted and unrestricted resources are available for use,it is the city's
policy to first use restricted resources, and then use unrestricted resources as they are
needed. When committed, assigned or unassigned resources are available for use,it is
the city's policy to use resources in the following order; 1) committed 2) assigned and
3) unassigned.
• RESOLUTION 10--6,1—
A RESOLUTION OF THE CITY OF ELK RIVER
A RESOLUTION COMMITTING GENERAL FUND BALANCE
FOR OPEB OBLIGATION
WHEREAS, The Governmental Accounting Standards Board's Statement #54 definition of
committed fund balance describes that portion of fund balance that represents resources whose use
is constrained by limitations that the government imposes upon itself at its highest level of decision-
making; and,
WHEREAS, City Council action is required to formalize the commitment of the general fund
balance for specific purposes; and,
WHEREAS, It has been determined to commit general fund balance for the City's other
postemployment benefit (OPEB) obligation in the amount as determined each year by the annual
audit.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk River that
general fund balance will be committed for the City's OPEB obligation.
• Passed and adopted this 15`' day of November 2010.
ATTEST:
Tina Allard, City Clerk
•
City of
Elk
River
Resolution 16-
A Resolution of the City of Elk River Removing Commitment of General
Fund Balance for OPEB Obligation
WHEREAS, the City Council adopted a resolution on November 15, 2010, formalizing
the commitment of the General Fund balance for the city's other postemployment benefit
(OPEB) obligation as determined each year by the annual audit; and
WHEREAS, commitments of fund balance may be changed or lifted only by the same
formal action that imposed the constraint originally; and
WHEREAS, the city desires to lift the $376,943 commitment of the General Fund balance
for OPEB obligation; and
WHEREAS, the city desires there be no amounts of General Fund balance committed for
any purpose.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk
River,Minnesota, as follows: That any and all commitments of General Fund balance be
removed effective immediately upon adoption of this resolution.
Passed and adopted this 191h day of December 2016.
John J. Dietz,Mayor
ATTEST:
Tina Allard, City NATUREJ