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HomeMy WebLinkAboutReso 19-19 Revenue and Expenditure PoliciesRESOLUTION NO.19-19 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MORRO BAY, CALIFORNIA, ESTABLISHING THE CITY OF MORRO BAYS REVENUE AND EXPENDITURE POLICIES THE CITY COUNCIL City of Morro Bay, California WHEREAS, the City of Morro Bay wishes to establish Accounting and Financial Reporting policies to direct staff and provide transparency to the Council and Community; and WHEREAS, those Accounting and Financial policies include a policy regarding Revenue Management; and WHEREAS, those Accounting and Financial policies include a policy regarding Expenditure Management; and WHEREAS, staff recommends the City Council adopt the proposed Revenue Policy, which demonstrates the City's commitment to fiscal responsibility and prudent management and is consistent with Government Accounting Standards; and WHEREAS, staff recommends the City Council adopt the proposed Expenditure Policy, which demonstrates the City 's commitment to fiscal responsibility and prudent management and is consistent with Government Accounting Standards NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California, the "Revenue Policy," as set forth in Exhibit A, attached hereto and incorporated herein, is hereby approved and hereby established as City policy. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California, the "Expenditure Policy," as set forth in Exhibit B, attached hereto and incorporated herein, is hereby approved and hereby established as City policy. PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 26h day of March, 20199 by the following vote: AYES: NOES: ABSENT ATTEST: Headding, Addis, Davis, Heller, McPherson None None DANA SWANSON, City Clerk Resolution No. 19-19 Exhibit A W COUNCIL POLICY REVENUE POLICY Policy Statement The City of Morro Bay (City) is afull-service City, providing essential services to over 10,000 residents related to public safety, planning, building, public works and recreation. In addition, the City has a vibrant tourism industry, attracting thousands of visitors annually, all of whom utilize city services in some fashion. As such, it is prudent for the City to establish sound revenue management policies that conform with generally accepted accounting principles and state regulations. Purpose The purpose of this policy is to describe the City's key revenue management policies with respect to general revenue management, use of one-time revenues, and use of new revenue sources, so as to guide City staff and City Council in determining recommended use of City revenues. General Revenue Management Diversified and Stable Base. The City will seek to maintain a diversified and stable revenue base to protect it from short-term fluctuations in any one revenue source. Long -Range Focus. To emphasize and facilitate long-range financial planning, the City will maintain current projections of revenues for the succeeding ten years. Current Revenues for Current Uses. The City will make all current expenditures with current revenues, avoiding procedures that balance current budgets by postponing needed expenditures, accruing future revenues, or rolling over short-term debt. Interfund Transfers and Loans. In order to achieve important public policy goals, the City has established various special revenue, capital project, internal service and enterprise funds to account for revenues whose use should be restricted to certain activities. Accordingly, each fund exists as a separate financing entity from other funds, with its own, expenditures and fund equity. Any transfers between funds for operating purposes are clearly set forth in the adopted budget and can only be made by the Director of Finance in accordance with the adopted budget. These operating transfers, under which financial resources are transferred from one fund to another, are distinctly different from interfund borrowings, which are usually made for temporary cash flow reasons, and are not intended to result in a transfer of financial resources by the end of the fiscal year. The Council recognizes that accounting principles for state and local governments discourage the "earmarking" of General Fund revenues, and accordingly, the practice of designating General Fund revenues for specific programs should be minimized in the City's management of its fiscal affairs. Approval of the following revenue distribution policies does not prevent the Council from directing General Fund resources to other functions and programs as necessary. One - Time Revenues Once the General Fund Budget is brought into structural balance, one-time resources such as proceeds from asset sales, debt refinancing, one-time grants, revenue spikes, budget savings and similar non -recurring revenue shall not be used for current or new one-time operating expenses. Appropriate uses of one-time resources include replenishment of the Emergency Reserve if needed, replenishment of internal service fund reserves if necessary, pay down of unfunded liabilities, including CalPERS and Other Post -Employment Benefits (OPEB), early retirement of debt, capital expenditures and other non -recurring expenditures. This policy is intended to ensure that the City maintains a structurally balanced budget and does not use onetime resources to increase the base budget that cannot be sustained by ongoing resources. Definitions One-time Resources: resources that the City cannot reasonably expect to receive on an ongoing basis. The source is most likely one-time if any of the following apply: a. Will not be available the next fiscal year. b. Has a set ending date such as 12-18 months from date of receipt. c. Results from a one-time spike. e. Results from temporary expenditure savings. One-time resources include bond or debt proceeds, bond -refinancing proceeds, money from the sale of assets, one-time grant funds, budget surpluses, and fund balance. Use of New Discretionary Revenues New, discretionary revenues will be treated as one-time revenues for a period of two years (consecutive 24-month period), to establish that they will be permanent, steady and reliable ongoing revenues which can be added to the City's base general fund budget. For the first two years of a new, discretionary revenue, all funds will be used according to the defined one-time revenue uses in the section entitled "One -Time Revenues" above. Once the General Fund budget is brought into structural balance, a minimum of 10 percent of all new (ongoing) discretionary revenue will be devoted to capital projects including deferred maintenance and infrastructure needs. Allocation of discretionary revenues is intended to insure the designation of a proportionate and ongoing share of the annual budget for the needed care and construction of infrastructure. 1. This policy applies to the net increase of all discretionary General Fund recurring revenues (e.g., tax revenue, non -fee -based revenue [necessary for providing services]) due to a change in city )olicy, law, etc. An example would be cannabis tax revenue). 2. The designation of these funds in no way displaces or substitutes for the funds already being budgeted for capital projects. Page 2 of 3 3. Examples of projects qualifying for funding under this provision include such projects as facility repairs, roof repairs, street repairs, air conditioning repair or replacement, replacement of flooring, elimination of mold, etc. User Fees and Charges The City of Morro Bay recaptures, through fees, up to the full cost of providing specific services. Regular and consistent review of all fees is necessary to ensure that the costs associated with delivery of individual services have been appropriately identified, and that the City is fully recovering those costs. It is the City's policy to set user fees at full cost recovery levels, except where a greater public benefit is demonstrated to the satisfaction of the City Council, or when it is not cost effective to do so. The Morro Bay Municipal Code Chapter 3.34, Master Fee Schedule, stipulates how the City shall move forward with amending the Master Fee Schedule. Relevant sections of that chapter are included below for reference. 3.34.010 —Established The city Master Fee Schedule is established, which shall set forth a consolidated listing of fees as fixed and adopted by the city council, in accordance with all applicable provisions of state and city laws. 3.34.020 —Fee revisions and reviews Any fees included in the Master Fee Schedule may be reviewed and revised annually by the city council. The city 's cost of providing the services shall be computed and reflected in these fees. The fees shall then be enumerated and the revised Master Fee Schedule adopted by resolution of the city council. On July 14, 2015, the City Council established December as the desired index for Consumer Price Index (CPI) and Engineering News Record (ENR) Construction Cost Index for the San Francisco Oakland -San Jose area as the adjusting factor. Increases to the fee schedule, based either on CPI or ENR increase or as a result of a fee study and update, may be added to the base general fund budget, or other Internal Service Funds (ISF), if used to fund ISF needs (i.e., technology and software needs), immediately following adoption. Reporting and Oversight The Departments are responsible for working with the Finance Department and City Manager in identifying new revenue sources and bringing a proposed plan for allocation of new and one-time revenue sources that conforms to this policy to the City Council for consideration and direction. Page 3 of 3 COUNCIL POLICY EXPENDITURE POLICY Policy Statement Resolution No. 19-19 Exhibit B The City of Morro Bay (City) is afull-service City, provng essential services to over 10,000 residents related to public safety, planning, building, public works and recreation. In addition, the City has a vibrant tourism industry, attracting thousands of visitors annually, all of whom utilize City services in some fashion. As such, it is prudent for the City to establish a sound expenditure policy that conform with generally accepted accounting principles and state regulations. Purpose The purpose of this policy is to describe the City's expenditure management practices with respect to general expenditure management, to ensure service levels are maintained and to guide City staff and City Council in obtaining and maintaining a structurally balanced budget. General Expenditure Management Service Levels. The City will endeavor to achieve service levels that provide quality of life, public safety and enjoyment to residents, business owners and visitors of the City of Morro Bay in the most efficient manner possible and within the financial means of the City. Service Delivery. The City will continue to look for and implement the most cost effective and reliable methods of delivering services to the City's residents, business owners and visitors. Capital Investments. The City will endeavor to maintain all assets at a level that protects capital investments and minimizes future maintenance and replacement costs, if possible. Risk Management. The risk management program will provide protection against loss and reduction in exposure to liability to the extent possible. Safety Program. The City will endeavor to establish and maintain a safety program, to ensure that safe working conditions are provided to the City's employees, and to minimize the City's exposure to liability and thereby reduce the number of claims against the City. General Fund Expenditures High priority is given to expenditures that will reduce future operating costs, such as increased utilization of technology and equipment and proven business models. As appropriate, balance will be maintained between budget dollars provided for direct public services and dollars provided to assure good management and 1egal compliance. All departments sh financial viability, ii and all employees expenditures, ire in the responsibility of looking at and understanding the City's long-term > general spending trends, its projected incomes, and educating themselves on the necessary short-term and long-term balance between revenues and Before the City undertakes any agreements that would create fixed, ongoing expenses, the cost implications of such agreements will be estimated and considered for current and future years. Organizations and agencies that are not part of the City, but which receive funds from the City, shall not have their appropriation carried forward from year to year unless contractually authorized and directed by City Council. Annual review and reauthorization of funding is required. Maintenance and Replacement The City's annual budget process will include amulti-year projection of facilities and vehicle replacement requirements and outline sufficient funding for adequate maintenance and orderly replacement of capital infrastructure and equipment. Future maintenance needs of new infrastructure and equipment will be costed out and included as decision criteria. Capital Improvements The City will prepare and maintain amulti-year Capital Improvement Plan (CIP) and update it annually as part of the City's annual budget process. The CIP will be developed in conjunction with the operating budget to ensure that all operation and maintenance costs associated with the new capital improvements are adequately addressed. All capital improvements will be made in accordance with the adopted plan. The City will endeavor to maintain all of its assets at a level adequate to protect the capital investments and minimize future maintenance and replacement costs. Operating/Capital Expenditure Accountability It is the City's policy to compare actual expenditures to budget, internally on a monthly basis, and generally on a quarterly basis to be reported to the City Council. If necessary, actions are taken to bring the budget into balance during the quarterly budget updates. Human Resource Management Regular Staffing: The budget will fully appropriate the resources needed for authorized regular staffing (full-time or full-time equivalent staffing that are provided benefits) and will limit programs to the regular staffing authorized. Regular employees are and will continue to be the core work force and the preferred means of staffing ongoing, year-round program activities that should be performed by full-time City employees rather than independent contractors. The City will strive to provide competitive compensation and benefit schedules for its authorized regular work force. Each regular employee will: • Fill a funded, authorized full-time equivalent (FTE) position. • Be assigned to an appropriate classification and assigned a bargaining unit or maintain an employment agreement. Page 2 of 4 • Receive salary and benefits consistent with labor agreements or other compensation plans. To maintain the growth of the regular work force and overall staffing costs, the City will follow these procedures: • The Council will authorize all regular posons. • The Human Resources Division will coordinate and approve the hiring of all regular, part-time and temporary employees. • All requests for additional regular positions will include evaluations of: o The necessity, term and expected results of the proposed position. o Staffing and equipment costs, including salary, benefits, equipment, uniforms, facilities, etc. o The ability of private industry to provide the service (contract services) and the benefits of hiring in-house staff. o Additional revenues or cost savings, which may be realized. • Periodically, programs will be evaluated to determine appropriate staffing levels. Temporary Staffing_ The hiring of temporary employees will not be used as an incremental method for expanding the City's regular work force. Temporary, part-time employees include all employees other than regular employees, elected officials and volunteers. Temporary employees will augment regular City staffing as extra -help employees, seasonal employees, contract employees, interns and work-study assistants. The use of temporary employees is encouraged to meet peak workload requirements, fill interim vacancies, and accomplish tasks where less than full-time staffing is required. Under this guideline, temporary employee hours will generally not exceed (on a per employee basis) 50% of a regular, full-time position (1,040 hours annually). There may be limited circumstances where the use of temporary employees on an ongoing basis in excess of this target may be appropriate due to unique circumstances or staffing requirements. However, any such exceptions must be approved by the City Manager based on the review and recommendation from the Human Resources Division. Contract employees are defined as temporary employees with written contracts approved by the City Manager. Contract employees will generally be used for medium -term (generally between six months and two years) projects, programs and activities requiring specialized or augmented levels of staffing for a specific period. Contract employees should not be used for services that are anticipated to be delivered on an ongoing basis. Independent Contractors: Independent contractors are not City employees. They may be used in two situations: 1. Short-term, peak workload assignments to be accomplished using personnel contracted through an outside temporary employment agency. These employees are always considered to be the employee of the outside employment agency and not the City. All placements through a temporary employment agency will be coordinated through and subject to approval of the Human Resources Division, 2. Construction of Public Works projects and delivery of operation, maintenance or specialized professional services not routinely performed by City employees. Contract awards are guided by the City 's purchasing policies and procedures. Page 3 of 4 Productivity The City will constantly monitor and review the methods of operation to ensure that services continue to be delivered in the most cost-effective manner possible. This review process encompasses a wide range of productivity issues, including: A. Analyzing systems and procedures to identify and remove unnecessary review requirements. B. Evaluating the ability of new technologies and related capital investments to improve productivity. C. Developing the skills and abilities of all City employees. D. Developing and implementing appropriate methods of recognizing and rewarding exceptional employee performance. E. Evaluating the ability of the private sector to perform the same level of service at a lower cost. F. Conducting periodic formal reviews of operations on a systematic, ongoing basis. G. Maintaining a decentralized approach in managing the City's support service functions. Although some level of centralization is necessary for review and control purposes, decentralization supports productivity by: 1. Encouraging accountability by delegating responsibility to the lowest possible level. 2. Stimulating creativity, innovation and individual initiative. 3. Reducing the administrative costs of operation by eliminating unnecessary review procedures. 4. Improving the organization's ability to respond to changing needs, and identify and implement cost -saving programs. 5. Assigning responsibility for effective operations and citizen responsiveness to the department Reporting and Oversight The Departments are responsible for understanding and working within the direction provided in tHIS policy. Departments will coordinate closely with the City Manager, Human Resources Staff and Finance Staff to meet compliance with this policy. To the extent necessary, the City has three - years from date of adoption, to comply with this policy in all respects, but specially to bring the Capital budget process and identification of existing or future funds needed to meet infrastructure maintenance and repair needs. Should the City fall out of compliance with this policy, it is the responsibility of the City Manager, working with all Departments, to bring forward a plan to the City Council to come into compliance with policy stipulations within three years. Page 4 of 4