HomeMy WebLinkAboutReso 09-19 Long Term Financial Planning PolicyRESOLUTION NU. 09-19
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MORRO BAY, CALIFORNIA,
ESTABLISHING A LONG-TERM FINANCIAL PLANNING POLICY
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 Long -Term
Financial Planning; and
WHEREAS, the Government Finance Officers Association (GFOA) provides guidance and
recommendations regarding the importance of long-term financial planning; and
WHEREAS, the City committed to long-term financial planning in 2014/15 with the
development of a financial forecast model; and
WHEREAS, staff recommends the City Council adopt the proposed Long -Term Financial
Planning 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
"Long -Term Financial Planning Policy," as set forth in Exhibit A, attached hereto and incorporated
herein, is hereby approved.
PASSED AND ADOPTED, by the City Council of the City of Morro Bay, at a regular
meeting thereof held on the 22"d day of January 2019, by the following vote:
AYES:
NOES:
ABSENT
ATTEST:
Headding, Addis, Davis, Heller, McPherson
None
None
NSON3 City Clerk
Resolution No. 09-19
Exhibit A
COUNCIL POLICY
LONG TERM FINANCIAL PLANNING 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 financial management policies that conform with
generally accepted accounting principles and state regulations.
Purpose
The purpose of this policy is to ensure the City's on -going financial sustainability beyond a single fiscal year
budget cycle in light of the Cirty's long-term service commitments, objectives and vision. Financial
sustainability is defined by the City 's long-term financial performance and positioning where long-term
service and infrastructure levels and standards are met. This policy is intended to describe particular
elements or aspects of such long-term planning programs within the City and to memorialize their practice
into a formal policy.
Policy
A commitment to long-term financial planning —the long-term financial planning (LTFP) process evaluates
known internal and external issues impacting the City's financial conon. Such issues are identified,
presented and mitigated when and where possible. The process begins by identifying critical areas which
have, or are expected to have, an impact on the financial condition of the City over the next ten years.
Once the issues are identifying, specific goals and objectives are developed for each. The LTFP is
constantly changing and moving document which will be routinely updated and presented on an ongoing
rolling basis. The LTFP will be incorporated into the City 's business planning process and presented to
the City Council, at a minimum, on an annual basis, during the budget development process. The LTFP is
intended to help the City achieve the following:
1. Ensure the City can attain -and maintain financial sustainability;
2. Ensure that the City has sufficient long-term information to guide financial decisions;
3. Ensure that the City has sufficient resources to provide programs and services to residents;
4. Ensure that potential risks to on -going operations are identified in the LTFP process and
communicated on a regular basis;
5. Establish mechanics to identify early warning indicators;
6. Identify changes in expenditures or revenue structures needed to deliver services or to meet the
goals adopted by the City Council.
Scope
The LTFP will forecast revenues, expenditures and financial position ten years into the future. The LTFP
will provide meaningful analysis of key trends and conditions, including but not limited to:
1. Analysis of affordability of current services, projects and obligations:
a. An analysis of the City's environment in order to anpate changes that could impact
the City's service and/or financial objectives.
b. Revenue and expenditure projections, including the financial sustainability of current
service levels over a multi -year period.
c. The affordability of maintaining and replacing the City's current capital assets.
d. The ability to maintain reserves within the target ranges prescribed by the City's
reserve policies.
e. The impact of non -current liabilities on the City's financial position.
2. Analysis of affordability of anticipated service expansions or investments in new assets:
a. The operating cost of new initiatives, projects or expansion of services where funding
has been identified through alternative source (CIP, grants, debt issuance, etc.) or
adopted by the City Council.
b. The affordability of master plans that call for significant financial investment by the City.
3. Synthesis of the above to present the City's financial position:
a. A clear presentation of the resources needed to accomplish the capital improvements
identified by the City Council and staff and to maintain the existing capital assets.
b. A clear presentation of the resources needed to maintain existing services at their
present level in addition to the expansion of services as may have been identified
through the analysis described above.
c. Identification of imbalances between the City's current direction and the conditions
needed for continued financial health.
The LTFP will identify issues that may challenge the continued financial health of the City, and the plan
will identify possible solutions to those challenges. Planning decisions will be made primarily from a long-
term perspective and structural balance is the goal of the planning process. For these purposes,
structural balance means the ending fund balance (or working capital in enterprise funds) must meet the
minimum levels prescribed by the City Council's reserve policies.
Continuous Improvement
City staff will regularly look for and implement opportunities to improve the quality of the forecasting,
analysis, and strategy development that is part of the planning process. These improvements will
primarily be identified through the comparison of projected performance with actual results.
Structural Balance
Long-term structural balance is the goal of long-term financial planning at the City. Should the long-term
forecasting and analysis show that the City is not structurally balanced over the ten-year projection period,
staff would then make recommendations, for City Council consideration, on now the plan can be brought
into balance within three years.
DRAFT Long -Term Financial Planning 0olicy
Non -Current Liabilities
The LTFP will address strategies for ensuring that the City's long-term liabilities remain affordable. The
City Council supports efforts to ensure that critical long-term liabilities like debt service, asset
maintenance, pensions and other post -employment benefits remain affordable.
Reporting and Oversight
It is the responsibility of the Director of Finance to ensure the presence
sufficient guidance to affected City personnel to fulfill the intent of this policy.
at least annually and updated on an as -needed basis.
of procedures that provide
This policy will be reviewed
DRAFT Long -Term Financial Planning Policy