Exhibit B-Reserve Policy - Clean Version

Exhibit B 
Reserve Policy 
 
 
The purpose of the Reserve Policy is to ensure the City remains a financially stable organization by 
maintaining appropriate reserves.  Adequate reserves position an organization to effectively plan 
for cash funded needs, as well as unplanned needs caused by significant economic downturns, 
manage the consequences of outside agency actions that may result in revenue reductions, and 
address unexpected emergencies, such as natural disasters, catastrophic events caused by human 
activity, or excessive liabilities or legal judgments against the organization.  In concert with the City’s 
other financial policies, the City’s Reserve Policy serves as an important tool to guide the use of City 
resources in meeting the City’s financial commitments and provides a framework for addressing 
unexpected future events in a fiscally prudent manner. 
 
This policy documents the City’s approach to establishing and maintaining adequate reserves 
(target levels) based on consideration of risks to operations, in the budgetary fund balance across 
a spectrum of City operations in various funds.  The budgetary fund balance represents the one-
time amount accumulated from prior years, which is different than the fund balance under 
Generally Accepted Accounting Principles (GAAP), but includes the same constraints on spending. 
 
Governmental Accounting Standards Board (GASB) Statement No. 54 defines five reserve 
classifications of fund balance based on the level of restrictions placed on the specific purposes for 
which amounts can be spent:  nonspendable fund balance, restricted fund balance, committed fund 
balance, assigned fund balance, and unassigned fund balance.  The last three classifications are 
termed Unrestricted Fund Balance since the constraint on spending is imposed by the government 
itself, therefore subject to this reserve policy.  Additionally, contingencies and reserves can be 
appropriated and unappropriated, depending if the City would like the reserve to be available for 
spending in the current budget year or not. 
 
General Fund Reserve Policy 
 
The General Fund is the main operating fund that pays for general services provided by the City, 
such as public safety, parks, and library services.  The General Fund accounts for all general 
revenues of the City and for expenditures related to the rendering of the City’s general services.  
The General Fund is considered to have a high level of risk to operations due to its dependence on 
revenue streams that are susceptible to economic downturns and revenue reduction impacts from 
outside agency actions.  In addition, the General Fund is the main funding source when responding 
to unexpected events or emergencies. 
 
Consideration of potential risk and other drivers influence the targeted minimum level of total 
Unrestricted Fund Balance that should be maintained.  The Government Finance Officers 
Association (GFOA) recommends no less than two months of General Fund Unrestricted Budgetary 
Fund Balance. 
 
The City desires to maintain a prudent level of reserves based on the revenue impacts described 
above and the City’s desire to maintain strong bond ratings to minimize borrowing costs.  This 
reserve policy sets the targeted minimum level at four months of budgeted ongoing General Fund 
operating revenues, excluding one-time transfers in, to provide stability and flexibility to respond

to unexpected adversity and/or opportunities.  Should the minimum reserve level fall below its 
target, a plan will be formulated to restore within a three-year period.  The Unrestricted Budgetary 
General Fund Balance can include the following contingency and reserve types. 
 
General Fund Contingencies/Reserves (Type/ Appropriated or Not/ GASB 54 Classification) 
 
General Fund Contingency / Appropriated / Unassigned:  This Contingency will be maintained equal 
to 15% of General Fund operating revenues, excluding one-time transfers in.  Acceptable 
contingency reserve uses are emergency situations, unexpected one-time opportunities, and 
appropriation transfers to allow spending in other funds.  Use of this reserve requires Council 
approval unless delegated in the Budget Resolution.  The 15% General Fund Contingency reserve 
must be replenished annually. 
 
Council Contingency / Appropriated / Unassigned:  This Contingency will be created annually for use 
by Mayor and Council during the Council budget amendment process or during the year for 
initiatives identified. 
 
Budget Stabilization Reserve / Not Appropriated / Assigned:  This reserve may be created to offset 
operating deficits that result from economic downturns and revenue reduction impacts from 
outside agency actions that can create adverse service impacts, allowing time to reduce spending 
and/or find other ongoing revenue opportunities.  Council may add to the reserve from time to time 
but not draw from it for more than three consecutive fiscal years. This reserve is included within the 
targeted minimum level of four months of budgeted ongoing General Fund operating revenues, 
excluding one-time transfers in. 
 
Capital and Economic Development Reserves / Appropriated and/or Not Appropriated / Assigned:  
These reserves may be created to fund economic development opportunities, planned new and 
redevelopment capital projects and capital maintenance projects to sustain existing City 
infrastructure and minimize additional borrowing to help manage tax rate impacts. 
 
Personnel and Operating Reserves / Appropriated and/or Not Appropriated / Assigned:  These 
reserves may be created to fund specific operating expenditure areas that are susceptible to 
economic fluctuations and to fund personnel costs that can be reasonably estimated and are short-
term in nature. 
 
Other Fund Reserve Policies 
 
Other funds have been identified as needing reserves due to one or more of the following reasons:  
self-supporting nature, the potential for unanticipated revenue or expense changes that can 
negatively affect operations, to help maintain a stable fee structure, or to cover the potential of 
unanticipated events threatening the public health, safety, or welfare.  Reserves have been created 
in Enterprise Operating Funds (i.e., Water, Wastewater, Solid Waste, and Airport), Highway User 
Revenue Fund (HURF), Self-Insurance Funds and Replacement Funds (i.e., Vehicle and Technology). 
 
Targeted reserves will be maintained as described below.  A portion of the reserve will be 
appropriated annually for each applicable fund to provide for unanticipated revenue shortfalls 
and/or unexpected expense increases in the current year.  Reserves should only be utilized after all

other budget sources have been examined for available funds.  Should the minimum target level 
for any of the funds identified fall below its target, a plan will be formulated to restore within the 
next year, but not to exceed a three-year period. 
 
Water Operating Enterprise Fund accounts for specific services funded directly by fees and charges 
to City Water customers.  The fund is intended to be self-supporting and will maintain a minimum 
target reserve of 20% of operating revenues.  Other Water reserves may be created when deemed 
appropriate (i.e., fuel, utilities, lump sum). 
 
Wastewater Operating Enterprise Fund accounts for specific services funded directly by fees and 
charges to City Wastewater customers.  The fund is intended to be self-supporting and will maintain 
a minimum target reserve of 20% of operating revenues.  Other Wastewater reserves may be 
created when deemed appropriate (i.e., fuel, utilities, lump sum). 
 
Reclaimed Water Operating Enterprise Fund accounts for specific services funded directly by fees 
and charges to City Reclaimed Water customers.  The fund is intended to be self-supporting and will 
maintain a minimum target reserve of 20% of operating revenues.  Other Reclaimed Water reserves 
may be created when deemed appropriate (i.e., fuel, utilities, lump sum). 
 
Solid Waste Operating Enterprise Fund accounts for specific services funded directly by fees and 
charges to City Solid Waste customers.  The fund is intended to be self-supporting and will maintain 
a minimum target reserve of 15% of operating revenues.  Other Solid Waste reserves may be 
created when deemed appropriate (i.e., fuel, utilities).  A Landfill Post-Closure Compliance Reserve 
will also be maintained as required by State and Federal law. 
 
Airport Operating Enterprise Fund accounts for specific services funded directly by fees and charges 
to City Airport customers.  The fund is not currently intended to be self-supporting, and depends 
on General Fund to fund a portion of operating and capital costs; therefore a minimum target 
reserve is not a reasonable expectation until the Airport is determined as self-sustainable by 
Council. 
 
Highway User Revenue Fund (HURF) accounts for Highway Users Tax received and spent on street 
and highway maintenance and construction projects.  The fund will maintain a minimum target 
reserve of 15% of operating revenues.  Other HURF reserves may be created when deemed 
appropriate (i.e., fuel, utilities). 
 
Self-Insurance Funds - Insured Liability Fund (Risk) reserve will be maintained at a level, together 
with purchased umbrella insurance policies, that will adequately indemnify the City’s property and 
liability risk.  A qualified actuarial firm shall be retained on an annual basis in order to recommend 
an appropriate reserve level. 
 
Health Benefits Trust and Workers Compensation and Employee Liability Trust Self-Insurance Funds 
reserves are maintained based on the Trust documents approved by Council.  Qualified actuarial 
firms shall be retained on an annual basis in order to recommend appropriate funding levels. 
 
The contributions to Self-Insurance Funds (i.e., Insured and Uninsured Liability Funds, Workers 
Compensation and Employee Liability Trust Fund, Health Benefits Trust Fund, Short-Term Disability

Fund and Dental Fund) will be reassessed annually and incorporated into the budget process, in 
order to ensure that the targeted goal is met in a manner that is balanced with other budget 
priorities. 
 
Vehicle Replacement Fund will maintain a minimum target reserve of 10% of the total City fleet 
replacement value.  A fleet management vehicle replacement plan will be reviewed annually by the 
Fleet Advisory Committee to ensure systematic replacement of vehicles based on a combination of 
miles driven, repairs and maintenance schedules, and years of service. 
 
Technology Replacement Fund will maintain a minimum target reserve of 10% of the total City 
technology asset replacement value.