[Amended 10-3-2011; 3-2-2020]
A.
"Fund balance" is 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.
B.
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.
(1)
Nonspendable: resources which cannot be spent because they are either
a) not in spendable form or b) legally or contractually required to
be maintained intact.
(2)
Restricted: resources with constraints placed on the use of resources
which are either a) externally imposed by creditors (such as through
debt covenants), grantors, contributors, or laws or regulations of
other governments; or b) imposed by law through constitutional provisions
or enabling legislation.
(3)
Committed: resources 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.
(4)
Assigned: resources 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.
(5)
Unassigned: resources 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.
C.
The committed, assigned, and unassigned classifications are often
referred to, in the aggregate, as the unrestricted fund balance.
The City's unassigned fund balance represents those funds held
in reserve to cover unexpected expenditure needs and emergencies,
revenue shortfalls and seasonal cash flow variations. The City Council
has determined that maintenance of an adequate fund balance is essential
to the financial health and security of the City of Saco.
It is the policy objective of the City that the audited unassigned
fund balance should be a maximum of 16.67% of the following year's
general fund budget as adopted by the Saco City Council. The minimum
unassigned fund balance should be set at one month's budgeted expenditures
or 8.33% of the annual budget.
It is the goal of the City that unassigned fund balance identified in the City's audited financial statements shall be raised by the City Council in the next three budget cycles. The minimum revenue requirement shall be the funds needed to bring the unassigned fund balance above the 8.33% established in § 15-26.
Any surplus in the unassigned fund balance identified in the
City's audited financial statements that exceeds the 16.67% maximum
target shall be made available for Council appropriation. In making
said allocation of funds, the City Council shall give priority to
the following activities:
A.
Economic development projects, such as industrial park land acquisition,
establishment of economic development loan fund programs or the development
of infrastructure improvements associated with industrial park priorities.
B.
Replacement of aging capital equipment that carries unusually high
costs and has a utility life of eight years or more.
C.
Specifically targeted infrastructure projects or other capital expenditures
required by the City.
D.
Funds may
be retained in an assigned account that may be used in future budget
cycles as a Property Tax Rates Stabilization Fund.
E.
Retirement
of debt.
F.
Taxpayer
refund as determined appropriate by the City Council.
[Amended 10-16-2023]
G.
Matching
funds for grants.
[Added 10-16-2023]
Upon acceptance of the City's annual audit by the City Council, the City Administrator shall determine the status of the unassigned fund balance relative to the policy established in § 15-26. At City Council meeting in January, the City Administrator or designee shall present an evaluation of the current unassigned fund balance and make recommendations regarding the action necessary to either make up any shortfall or appropriate any excesses. The City Council shall act on these recommendations no later than the first City Council meeting in February.
Notwithstanding any provision of this chapter, the City Council
may vote at any time to use unassigned fund balance funds to respond
to emergency funding needs.
