Financial policies set forth the basic framework for the fiscal management of the city. Policies, which are reviewed and approved by the city council, will be reviewed and updated annually to ensure that the city maintains a sound financial position in each of the city's fund and account groups. The policy will provide guidelines for short- and long-term decision making. Implementation of this policy will:
(1) 
Demonstrate to the citizens of Alamo Heights, the investment community, and the bond rating agencies that the city is committed to a strong fiscal operation;
(2) 
Provide precedents for future policy-makers and financial managers on common financial goals and strategies;
(3) 
Fairly present and fully disclose the financial position of the city in conformity to generally accepted accounting principles (GAAP); and
(4) 
Demonstrate compliance with finance-related legal and contractual issues in accordance with the Texas Local Government Code and other legal mandates.
(Ordinance 1705, exh. A, adopted 3/26/2007)
The budgeted funds for the city may include the following governmental funds:
General fund, which accounts for all financial resources except those required to be accounted for in another fund, and includes basic governmental services, such as police, fire, emergency medical services, public works, community development, streets, solid waste, parks and administration functions, among others.
Special revenue funds (SRF) account for specific revenues that are legally restricted for specified purposes. The city currently budgets several SRF funds.
Debt service fund accounts for the payment of general long-term debt principal and interest if applicable.
Capital project funds are used to account for the acquisition or construction of major capital facilities other than those financed by enterprise activities.
(Ordinance 1705, exh. A, adopted 3/26/2007; Ordinance adopting 2024 Code)
(a) 
The city accounts and budgets for all governmental funds using the modified accrual basis of accounting. This basis means that revenue is recognized in the accounting period in which it becomes available and measurable, while expenditures are recognized in the accounting period in which they are incurred. Because the appropriated budget is used as the basis for control and comparison of budgeted and actual amounts, the basis for preparing the budget is the same as the basis of accounting. Exceptions to the modified accrual basis of accounting include:
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Encumbrances, which are treated as expenditures in the year they are encumbered, not when expended.
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Grants, which are considered revenue when awarded, not received.
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Principal and interest on long-term debt, which are recognized when paid.
General government funds include the general fund, special revenue funds, debt service fund and general capital project funds.
(b) 
The basic framework for preparing the budget should include the following concepts:
(1) 
Planning.
The budget process will be coordinated so that major policy issues are identified prior to the budget approval date. This will allow city council adequate time for consideration of appropriate decisions and analysis of financial impacts.
(2) 
Preparation.
No budget will be adopted or appropriations made unless the total estimated revenues, income and funds available shall be equal to or in excess of such budget or appropriations, except as otherwise provided.
(3) 
Proposed budget.
A proposed budget shall be prepared by the city manager with participation of the city's department heads and other executive staff.
a. 
The budget shall include four (4) basic segments for review and evaluation:
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Revenues.
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Personnel costs.
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Operations and maintenance.
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Capital and other non-project costs.
b. 
The budget review process will include city council participation and will allow for sufficient time to address policy and fiscal issues by the city council.
c. 
A copy of the proposed budget will be filed with the city secretary when it is submitted to the city council.
(4) 
Balanced budget.
The goal of the city is to balance the operating budget with current revenues, whereby current revenues would match and fund ongoing expenditures/expenses. Excess balances in the operating funds from previous years would then be used for non-recurring expenditures/expenses or as capital funds.
(5) 
Adoption.
Upon finalization of the proposed budget, the city council will hold a public hearing for citizen input, and subsequently adopt by ordinance the final budget as amended. The budget will be effective for the fiscal year beginning April 1st. The Annual Operating Plan document may be submitted annually to the Government Finance Officers Association (GFOA) for evaluation and consideration for the Distinguished Budget Presentation Award.
(6) 
Reporting.
Summary financial reports will be presented quarterly to update the city council on the city's overall budget and financial status.
(7) 
Control and accountability.
Each department head will be responsible for the administration of his/her departmental budget. This includes accomplishing the programs adopted as part of the budget and monitoring each department budget for compliance with spending limitations. Transfers of appropriation or budget amendments require either city council or city manager approval as outlined below.
(8) 
Budget amendments.
If at any time during the fiscal year it appears probable that the total revenues available within any fund contained in the budget will be insufficient to meet the total fund appropriations, the city council may authorize by ordinance to increase estimated revenues or to decrease appropriations within the fund. The following criteria will be used in evaluation of budget amendments:
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Is the request necessary?
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Why was the item not budgeted in the normal budget process?
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Can a transfer be done within the division to remedy the condition?
Availability of revenues or funding sources must be identified prior to adoption.
The city will amend the budget at year-end, if needed, for revenue-based expenditures that exceeded budgeted amounts due to increased revenue and recognize any grant-funded expenditures for grants received after the budget was adopted or last amended. The city may also amend the budget if necessary as part of a mid-year review process for any capital project timing adjustments from the prior year, as well as any other known adjustments needed and approved at that time.
(9) 
Contingency appropriations.
The budget may include a contingency appropriation within the administrative operating department budget. These funds are used to offset expenditures for unexpected maintenance or other unanticipated expenses that might occur during the year. Currently, the city maintains contingency appropriations for insurance deductibles, unexpected legal expenses, equipment repairs and other expenses that are difficult to anticipate or estimate.
(Ordinance 1705, exh. A, adopted 3/26/2007; Ordinance adopting 2024 Code)
(a) 
Characteristics.
The city will strive for the following optimum characteristics in its revenue system:
(1) 
Simplicity.
The city, where possible and without sacrificing accuracy, will strive to keep the revenue system simple in order to reduce compliance costs for the taxpayer or service recipient.
(2) 
Certainty.
A knowledge and understanding of revenue sources increases the reliability of the revenue system. The city will understand its revenue sources and enact consistent collection policies to provide assurances that the revenue base will materialize according to budget.
(3) 
Equity.
The city shall make every effort to maintain equity in its revenue system; i.e., the city should seek to minimize or eliminate all forms of subsidization between entities, funds, services, utilities, and customer classes, and ensure an ongoing return on investment for the city.
(4) 
Revenue adequacy.
The city should require there be a balance in the revenue system; i.e., the revenue base will have the characteristics of fairness and neutrality as it applies to cost of service, willingness to pay, and ability to pay.
(5) 
Realistic and conservative estimates.
Revenues will be estimated realistically, and conservatively, taking into account the volatile nature of various revenue streams.
(6) 
Administration.
The benefits of a revenue source should exceed the cost of levying and collecting that revenue.
(7) 
Diversification and stability.
A diversified revenue system with a stable source of income shall be maintained. This will help avoid instabilities in revenue sources due to factors such as fluctuations in the economy and variations in the weather.
(b) 
Other considerations.
The following considerations and issues will guide the city in its revenue policies concerning specific sources of funds:
(1) 
Cost/benefit of incentives for economic development.
The city will use due caution in the analysis of any incentives that are used to encourage development. A cost/benefit (fiscal impact) analysis will be performed as part of the evaluation.
(2) 
Non-recurring revenues.
One-time or non-recurring revenues should not be used to finance current ongoing operations. Non-recurring revenues should be used only for non-recurring expenditures and not for budget balancing purposes.
(3) 
Property tax revenues.
All real and business personal property located within the city will be valued at one hundred (100) percent of the fair market value for any given year based on the current appraisal supplied by the Bexar County Appraisal District.
Conservative budgeted revenue estimates result in a projected ninety-eight (98) percent budgeted collection rate for current ad valorem taxes. Two (2) percent of the current ad valorem taxes will be projected as the budget for delinquent ad valorem tax collection. For budgeting purposes, the city will forecast the current year's effective tax rate at the current collection rate of ninety-eight (98) percent, unless prior collection history indicates otherwise.
(4) 
Interest income.
Interest earned from investments will be distributed to the funds in accordance with the equity balance of the fund from which the monies were provided to be invested.
(5) 
User-based fees and service charges.
For services associated with a user fee or charge, the direct or indirect costs of that service will be offset by a fee where possible.
(6) 
Intergovernmental revenues.
All potential grants will be examined for matching requirements and must be approved by the city council prior to making application of the grant if time allows. It must be clearly understood that operational requirements (ongoing costs) established as a result of a grant program could be discontinued once the term and conditions of the program have been completed.
(7) 
Revenue monitoring.
Revenues as they are received will be regularly compared to budgeted revenues and variances will be investigated, and any abnormalities will be included in the quarterly report to the city council.
(Ordinance 1705, exh. A, adopted 3/26/2007)
(a) 
Appropriations.
The point of budget control is at the department level budget for all funds. Any transfer or appropriation between funds must be approved by the city council. Transfer of appropriations between departments may be authorized by the city manager without city council approval.
(b) 
Purchasing.
All city purchases of goods or services will be made in accordance with the city's current purchasing policy and with state law. The city's purchasing policy requires all contracts greater than fifty thousand dollars ($50,000.00) be approved by the city council. Materials and other bid items may be purchased up to the fifty thousand dollar ($50,000.00) limit allowed by state law without city council approval.
(Ordinance 1705, exh. A, adopted 3/26/2007; Ordinance adopting 2024 Code)
(a) 
All new programs or service enhancements shall be implemented according to council direction as a part of the budget process. In the event additional revenues are required to implement a new program or service enhancement, the fiscal impact of the program change will be considered by the staff to determine if a new revenue source or increase in existing revenue will be needed. The analysis shall include the applicability of user fees as a source of revenue to support the new or expanded program.
(b) 
Through the proposed budget the city shall strive to develop a balance in major revenue sources to protect the financial stability of the city in the event of severe fluctuation in the national and/or local economy. This balance will maintain a diversified and stable revenue system. The major revenue sources of the general fund are sales tax, ad valorem taxes and all other charges for services.
(c) 
Charges for services shall be reviewed and updated as a part of the budget process. The review will consider the cost of providing the service and a review of similar charges in comparable cities in the region.
(d) 
Revenues shall be projected based on actual collections from the preceding year and estimated collections of the current fiscal year, while taking into account known circumstances that will impact revenues for the new fiscal year. Revenue projections will be made conservatively.
(Ordinance 1705, exh. A, adopted 3/26/2007)
(a) 
A cost of service rate study will be conducted to determine a benchmark rate necessary to fund the utility for five (5) years. Updates to the study will be performed as recommended to ensure that the rates in effect will fund the utility budgets. These rates should be sufficient for funding a depreciation reserve which will accumulate resources to replace or rehabilitate aging infrastructure which no longer can be serviced by regular maintenance. Attempts should be made to fund the reserve at a level approximate to annual depreciation of assets as reported in the city's Comprehensive Annual Financial Report.
(b) 
Utility fund revenues are budgeted on the basis of a normal year, not on the basis of forecasted extreme wet or dry years. The city will make every reasonable effort to ensure accurate measurement of water purchased and sold.
(Ordinance 1705, exh. A, adopted 3/26/2007)
(a) 
The city will issue only multi-year debt and the debt will be used to fund capital projects that cannot be funded by current revenues except as may be otherwise required by an emergency or other unforeseen circumstance.
(b) 
To minimize interest costs on issued debt, the city will structure debt with maturities not to exceed the life of the assets funded. Longer issues may be authorized in the unusual case of a substantially longer life or other extenuating circumstances. The final maturity date for any multi-year debt will not exceed the expected useful life of the capital improvement so financed.
(c) 
An evaluation of existing and projected overlapping and direct debt shall be reviewed by the council as well as any committee appointed by the council to develop recommendations for proposed new debt for the city. Estimates of growth shall be conservative and consideration will be given as to the city's future ability to repay the debt and maintain an ability to issue additional unforeseen debt.
(d) 
The city will set appropriate debt limits in accordance with state law and local charter. Financial limitations through appropriate debt service coverage ratios should be established prior to insurance of general obligation debt to positively impact bond ratings.
(Ordinance 1705, exh. A, adopted 3/26/2007)
(a) 
The proposed general fund budget shall be submitted to the city council with a fund balance reserve of not less than four (4) months of recurring operating appropriations.
(b) 
Debt service fund balances shall be sufficient to meet future debt service payment of general obligation debt outstanding. A comprehensive and routine analysis of debt capacity will be made when debt is issued to establish a minimum required percentage of the principal to be maintained. Debt service fund balances in excess of this requirement may be drawn down to be used to reduce ad valorem tax revenue for bond principal and interest payments on existing or new debt. Consideration will be given to the impact such use would have on future tax rate calculations.
(c) 
All other fund balances shall be maintained at a level necessary to ensure stability in the event of a decline in revenues dedicated to that fund. Fund balance requirements shall always be in agreement with bond covenants.
(d) 
Fund balances which exceed the minimum levels established for each fund may be appropriated for non-recurring capital projects or programs or in emergency situations.
(Ordinance 1705, exh. A, adopted 3/26/2007)
(a) 
Operating fund expenditures shall be accounted for and budgeted in the four (4) major categories:
(1) 
Personnel.
(2) 
Commodities.
(3) 
Contractual.
(4) 
Capital outlay.
(b) 
The proposed budget shall appropriate sufficient funds for operations to maintain existing quality and scope of city services and, where appropriate, include funds for expanded or new services.
(c) 
The city will regularly examine programs and services in order to reduce operating cost or enhance service levels without cost increases.
(d) 
Personnel service expenditures will reflect the minimum staffing to provide approved quality and scope of city services.
(e) 
The city will provide a competitive compensation and benefit plan to attract and retain quality employees in order to provide high-quality service.
(f) 
Supply expenditures shall be sufficient to ensure optimal productivity of city employees. Maintenance expenditures shall be sufficient to ensure a relatively stable level of maintenance expenditures each budget year and to enhance and prolong the life of capital equipment and property.
(g) 
Expenditures for new capital equipment shall be made only to enhance employee productivity, improve quality of service, or expand scope of services.
(h) 
The city will evaluate the methods for providing public services in order to reduce operating expenditures and/or enhance quality and scope of services without increased costs.
(Ordinance 1705, exh. A, adopted 3/26/2007)
(a) 
The city may develop a multi-year capital budget, which identifies all projects likely to be constructed within a five-year period. The multi-year budget will reflect for each project the likely funding source and timeframe for completion.
(b) 
Capital projects will be constructed to:
(1) 
Protect or improve the community's quality of life.
(2) 
Protect or enhance the community's economic vitality.
(3) 
Provide significant rehabilitation of city infrastructure for sustained service.
(Ordinance 1705, exh. A, adopted 3/26/2007)
This policy is designed to establish general guidelines for managing revenue shortfalls resulting from local and national economic downturns that adversely affect the city's revenue streams.
(1) 
Immediate action.
Once a budgetary shortfall is projected, the city manager will take the necessary actions to offset any revenue shortfall with a reduction in current expenses. The city manager may:
a. 
Freeze all new hire and vacant positions except those deemed to be a necessity.
b. 
Review all planned capital expenditures.
c. 
Delay all "non-essential" spending or equipment replacement purchases.
(2) 
Further action.
If the above actions are insufficient to offset the revenue deficit and the shortfall continues to increase, the city manager will further reduce operating expenses to balance the variance.
a. 
Any resulting service level reductions, including workforce reductions, will be addressed by the city council.
(Ordinance 1705, exh. A, adopted 3/26/2007)
(a) 
Accounting.
The city is solely responsible for the recording and reporting of its financial affairs, both internally and externally. The city treasurer is the city's chief financial officer and is responsible for establishing the structure for the city's Chart of Accounts and for assuring that procedures are in place to properly record financial transactions and report the city's financial position.
(b) 
Audit of accounts.
In accordance with the Charter, an independent audit of the city accounts will be performed every year. The auditor is retained by and is accountable directly to the city council.
(c) 
External reporting.
Upon completion and acceptance of the annual audit by the city's auditors, the city shall prepare a written Comprehensive Annual Financial Report (CAFR) which shall be presented to the city council within one hundred eighty (180) calendar days of the city's fiscal year end. The CAFR shall be prepared in accordance with Generally Accepted Accounting Principals (GAAP) and shall be presented annually to the Government Finance Officer Association (GFOA) for evaluation and consideration for the Certificate of Achievement in Financial Reporting.
(d) 
Internal reporting.
The administrative and finance department will prepare internal financial reports, sufficient to plan, monitor and control the city's financial affairs.
(Ordinance 1705, exh. A, adopted 3/26/2007)
(a) 
Cash management and investments.
The city council has formally approved a separate investment policy for the city that meets the requirements of the Public Funds Investment Act (PFIA), chapter 2256 of the Texas Government Code. This policy is reviewed annually by the city council and applies to all financial assets held by the city.
(b) 
Fixed assets.
These assets will be reasonably safeguarded and properly accounted for, and prudently insured.
(1) 
Capitalization criteria.
For purposes of budgeting and accounting classification, the following criteria must be capitalized:
a. 
The asset must be owned by the city.
b. 
The expected useful life of the asset must be longer than one (1) year, or extend the life of an identifiable existing asset by more than one (1) year.
c. 
The original cost of the asset must be at least five thousand dollars ($5,000.00).
d. 
The asset must be tangible.
e. 
Ongoing repairs and general maintenance are not capitalized.
(2) 
New purchases.
All costs associated with bringing the asset into working order will be capitalized as part of the asset cost. This will include start up costs and engineering or consultant-type fees as part of the asset cost once the decision or commitment to purchase the asset is made. The cost of land acquired should include all related costs associated with its purchase.
(3) 
Improvements and replacement.
Improvements will be capitalized when they extend the original life of an asset or when they make the asset more valuable than it was originally. The replacement of assets components will normally be expensed unless they are of a significant nature and meet all the capitalization criteria.
(4) 
Contributed capital.
Infrastructure assets received from developers will be recorded as equity contributions when they are received.
(5) 
Distributions systems.
All costs associated with public domain assets, such as streets and utility distribution lines will be capitalized in accordance with the capitalization policy. Costs should include engineering, construction and other related costs including right of way acquisition.
(6) 
Reporting and inventory.
The administrative and finance department will maintain the permanent records of the city's fixed assets, including description, cost, department of responsibility, date of acquisition, depreciation and expected useful life. Periodically, random sampling at the department level will be performed to inventory fixed assets assigned to that department. Responsibility for safeguarding the city's fixed assets lies with the department supervisor or manager whose department has been assigned the asset.
(Ordinance 1705, exh. A, adopted 3/26/2007)
(a) 
Grants.
All potential grants will be examined for any matching requirements and the source of those requirements identified. Grant funding will be reviewed to clearly identify funding sources, outcomes and other relevant information for presentation and approval by the city council. The city council must authorize acceptance of any grant awarded.
(b) 
Use of reserve funds.
The city may authorize the use of reserve funds to potentially delay or eliminate a proposed bond issue. This may occur due to higher than anticipated fund balances in prior years, thus eliminating or reducing the need for debt proceeds, or postpone a bond issue until market conditions are more beneficial or timing of the related capital improvements does not correspond with the planned bond issue. Reserve funds used in this manner are replenished upon issuance of the proposed debt. A reimbursement ordinance will be adopted to authorize replacement of these reserves.
(c) 
Leases.
The city may authorize the use of lease financing for certain assets when it is determined that such an arrangement is advantageous to the city.
(Ordinance 1705, exh. A, adopted 3/26/2007)
These policies should be used to frame major policy initiatives and be summarized in the budget document. These policies address both the need for a long-term view and the fundamental principle of a balanced budget.
(Ordinance 1705, exh. A, adopted 3/26/2007)