The purpose of this policy is to establish and provide for the
sound financial management of the City's unassigned general fund balances.
Establishing a minimum, adequate level for the unassigned general
fund balance can provide the City the ability to meet financial uncertainties
arising from declining real estate values or the loss of a major tax
base, changes in spending requirements that may be imposed by the
federal or state governments, by natural disasters or infrastructure
failure, or by litigation. Maintaining an adequate level in the unassigned
general fund balance is important to the stability of the City's financial
management, especially towards contributing to adequate operating
cash where all liabilities are recognized. Finally, an adequate general
fund balance contributes to higher bond credit ratings, which offers
the potential for lower interest costs on long-term financings.
Unassigned general fund balances above and beyond a twelve-and-one-half-percent
level could then aid the City in meeting future capital project needs
by setting aside funds assigned to a specific future use and which
are otherwise not available for appropriation or expenditure unless
the capital project is completed or canceled. The stated goal of maintaining
an unassigned fund balance of 12 1/2% of the total operating budget
as defined in this Division shall not be construed to require an appropriation
to unassigned fund balance to meet the stated goal, unless said appropriation
is the intent of the City Council and further shall not be construed
to limit the City Council in approving an appropriation from unassigned
fund balance in order to meet an emergency.
As used in this Division, the following terms shall have the
meanings indicated:
FUND BALANCE
A term used to describe the net assets of governmental funds.
It is calculated as the difference between the assets and liabilities
reported in a governmental fund.
(1)
Governmental fund balance is reported in five classifications
that comprise a hierarchy based primarily on the extent to which the
City is bound to honor constraints on the specific purposes for which
amounts in those funds can be spent. The five classifications of fund
balance for the general fund are defined as follows.
a.
2.
Legally or contractually required to be maintained intact.
b.
1.
Externally imposed by creditors (such as through debt covenants),
grantors, contributors, or laws or regulations of other governments;
or
2.
Imposed by law through constitutional provisions or enabling
legislation.
c.
COMMITTED FUND BALANCEResources which are subject to limitations the government imposes upon itself at its highest level of decisionmaking and that remain binding unless removed in the same manner.
d.
ASSIGNED FUND BALANCEResources neither restricted nor committed for which a government has a stated intended use as established by the City Council or body or official to which the City Council has delegated the authority to assign amounts for specific purposes.
e.
UNASSIGNED FUND BALANCEResources which cannot be properly classified in one of the other four categories. The general fund should be the only fund that reports a positive unassigned fund balance amount.
(2)
The committed, assigned, and unassigned classifications are
often referred to, in the aggregate, as the unrestricted fund balance.