HomeMy WebLinkAboutRes 2003-14i
RESOLUTION NO.2003-14
A RESOLUTION OF THE MAYOR AND COUNCIL OF THE TOWN OF
FOUNTAIN HILLS,ARIZONA,ADOPTING THE TOWN OF FOUNTAIN
HILLS FINANCIAL POLICIES.
WHEREAS,the Mayor and Council of the Town of Fountain Hills (the "Town
Council")has determined that itisin the best interests of the citizens of the Town of Fountain
Hills (the "Town")to establishwritten financial policies that safeguard the Town's financial
condition despite changes in Town personnel or political bodies;and
WHEREAS,the existence of written financial policies isan important factor in securing
and maintaining a favorable municipal bond rating;and
WHEREAS,the Town Council desires to establish a financial policies to formalize the
frameworkforthe Town's fiscal planning and management to enhance the Town's financial
healthaswellasitsimageand credibility withits citizens,thepublicingeneral,bondrating
agencies and investors.
NOW,THEREFORE,BE TT RESOLVED BY THE MAYOR AND COUNCIL OF
THE TOWN OF FOUNTAIN FELLS,ARIZONA as follows:
SECTION 1.That the "Town of Fountain Hills Financial Policies"is hereby adopted in
theform attached hereto as Exhibit Aand incorporated herein by reference.
SECTION 2.That the Town Manager is hereby authorized and directed totakeall steps
necessary toensurethatthe Town of Fountain Hills Financial Policies are implemented and
applied tothe Town's financial management.
PASSED AND ADOPTED BY the Mayor and Council of the Town of Fountain Hills,
Arizona,May 1,2003.
FOR THE TOWN OF FOUNTAIN HILLS:
Tim GTrickering,Town Manager
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ATTESTED TO:
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Bevelyn J.Bender,Town Clerk
APPROVED AS TO FORM:
Andrew J.McGuire,Town Attorney
TOWN OF FOUNTAIN HILLS FINANCIAL POLICIES
Introduction
The principles of sound financial management establish the framework for overall fiscal
planning and management.The principles set forth guidelines for both current activities
and long range planning.Following these principles will enhance theTown's financial
health as well as its image and credibility with its citizens,the public in general,bond
rating agencies and investors.The policies will be reviewed annually to assure the
highest standards of fiscal management.Policy changes will be needed as the Town
continues to grow and becomes more diverse and complex in the services it provides,as
well asthe organization under which it operates to provide these services toits citizens.
The Town Manager and staff have the primary role of reviewing and providing guidance
in the financial area to the Town Council.
Overall Goals
The overall financial goals underlying these principles are:
1.Fiscal Conservatism:toensurethattheTownisatalltimesinasolid financial
condition,defined as:
(a)cash solvency -the ability to pay bills
^-^b)budgetary solvency -the ability to balance the budget
c)longrun solvency -theabilitytopay future costs
d)service level solvency -the ability to provide needed and desired services
e)adhering to the highest accounting and management practices as set by the
GovernmentFinance Officers'Associationstandardsforfinancial
reportingandbudgeting,bythe Governmental Standards Boardandother
professional standards
2.To maintain an Aa3 or better bond rating in the financial community to assure the
Town taxpayers that the Town government is well managed and financially
sound.
3.To have the ability to withstand local and regional economic fluctuations,to
adjust to changes in the service requirements of our community,and to respond to
changes in Federal and State priorities and funding as they affect theTown's
residents.
4.Todeliverqualityservicesinanaffordable,efficientandcost-effectivebasis
providing full value for each tax dollar.
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FUND BALANCE
Fund balance is defined as the cumulative difference of all revenues and expenditures,
also considered the difference between fund assets and fund liabilities,known as fund
equity.Fund balance is an important indicator of the Town's financial position and
adequate reserves must be maintained to allow the Town to continue providing services
to the community during periods of economic downturns and/or unexpected emergencies
or requirements.
The level of Fund Balance is related to the degree of uncertainty that the Town faces.A
prudent level of financial resources is necessary to protect against the need to reduce
service levels or raise taxes and fees due to temporary revenue shortfalls or unpredicted
one-time expenditures.With the Town dependency upon State Shared Income and State
Sales Tax revenues for one third of the General Fund budget there is increased
opportunity for fluctuation.Additionally,a significant portion of Town revenue is
receivedfromsalestaxes-bothstatesharedandlocal-whicharesensitiveto
fluctuations inthe economy.Therefore,the level of reserves needs tobe sufficient to
ensure stability in on-going government operations during a slowdown in the economy or
legislative changestotherevenuesharing formula.
Other objectives that influence thesize of thefund balance are:
a)preserving or improving the Aa3 bond rating
b)maintaining apositivetrendtohistoricalfundbalances
c)maintaining a rating equal toor better than surrounding communities
d)maintaining ratios consistent with desired outcomes of ten key ratios of
financial condition (Government Finance Review,Dec.1993)-Appendix A
General Fund
The Town fund balance consists ofthree(3)components,defined below.Inorderto
satisfy the objective of maintaining a bond rating equal to or better than surrounding peer
communities afund balance ofatleast30%of revenues is recommended.Thethree
componentsaddedtogetherwillhelpachievethe30%goal.
Definitions:
Undesignated unreserved fund balance -available expendable financial resources thatare
nottheobjectoftentativemanagementplans.Alsodefinedasresidualbalanceafter
revenues,expenditures and reserved/designated fundbalanceandavailableforfuture
year appropriation.
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Designated unreserved fund balance -management's intended useof otherwise available
expendable financial resources reflecting actual plans submitted bythe Town Manager
and approved bytheTown Council.An example would be funds set aside for future
capital purchases,land acquisition,construction projects,equipment replacement,etc.
Reservedfundbalance-theportionoftheTownfundsthatarenotavailablefor
appropriation.
Guidelines:
In order to achieve the objectives of this policy,and to maintain sufficient working
capital and a comfortable margin of safety to address emergencies and unexpected
declines in revenue without borrowing the following guidelines shall be adhered to by the
Town Manager,staff and Town Council:
Undesignated unreserved fund balance -designated for unanticipated expenditure or loss
of revenue,theTownofFountainHills'undesignated unreservedfundbalanceinthe
General Fund attheendofany fiscal year will be equal tono less than 30 days of annual
operating expenditures for the upcoming fiscal year.This contingency will provide for
the temporary financing ofan unforeseen nature forthat year.Expenditures for these
emergency or unforeseen appropriations can only be undertaken with Town Manager
approval and only if funds are not available in the department requesting the contingency
funding.Expenditures exceeding $20,000 will require Council approval.This
contingency willexpireattheendofeach fiscal yearandanyunused balance will be
included with the funds available for appropriation inthe following fiscal year.
Designated unreserved fund-theTown will maintain a designated unreserved fund
balance inthe General Fund ofa minimum ten percent (10%)ofthe average actual
General Fund revenues forthe preceding five fiscal years.These reserves will be
designated for "pay-as-you-go"capital replacement expenditures,equipment
replacement,capital projects,prepay existing Town debt,oranyother expenditure that is
non-recurring in nature.The 10%is the minimum and is based onthe Property and
EquipmentReplacementSchedulewhichmaybeincreasedtoaccelerateaccumulation
funds fora large capital expenditure.To the extent these reserves are expended
additional funds necessary torestorethis additional tenpercent (10%)amount willbe
provided inat least approximately equal contributions during the five fiscal years
following the fiscal yearin which theevent occurred.The designated General Fund
Balancecanonlybeauthorizedforexpenditurebyupon recommendation oftheTown
Manager andvote of the Town Council.
Reserved Fund Balance -the Town will maintain a reserved fund balance in the General
Fundof20%ofthe average actual General Fund revenues forthe preceding five fiscal
Years,indicatingstablefiscalpolicies.The maintenance ofthisfiscalbalanceisa
particularlyimportantfactorconsideredbycreditratingagenciesintheirevaluationof
thecreditworthinessoftheTown.Itisofprimaryimportancethatthe Town's credit
rating be protected.
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During the annual budget process the Town Manager will estimate the surplus or deficit
for the current year and prepare a projection of the year-end undesignated general fund
balance.Such projection will include an analysis of trends in fund balance levels on an
historical andfutureprojectionbasis.
Funds in excess of the fund balance goal will be retained in the undesignated unreserved
General Fund Balance,and may be considered to supplement "pay as you go"capital
outlay expenditures,or may be used to prepay existing Town debt.These funds may not
be used to establish or support costs that are recurring in nature.
This policy will be reviewed by the Town Manager every three years following adoption
or sooner at the direction of the Town Council.
Special Revenue Funds
The Highway User Revenue Fund (HURF)is a restricted fund and depends upon State
Shared Revenues for over 90%of annual revenues.This fund may only be used for street
and highway purposes.The combined undesignated unreserved,designated unreserved
and reserved Fund Balance will be based on the minimum requirement as specified in the
Propertyand Equipment Replacement Schedule.Theschedulewillbereviewedonan
annual basis to determine the required amount tobe set aside as designated unreserved
Fund Balance.
TheExciseTax(.4%ofLocalSalesTax)Fundisarestrictedfund dedicated to
Downtown Development and Land Preservation.The combined undesignated
unreserved,designatedunreservedandreservedFundBalancewillbenolessthanthe
annual debt service payment for Land Preservation and prior year available funds for
DowntownDevelopment.
Debt Service Funds
The Debt Service Fund is established for the payment of principal and interest on bonded
indebtedness.Revenues are derived from a property tax levy,pledged excise taxes,
municipalpropertyleasepaymentsandsharedrevenues.Revenuesarereceivedin
amounts sufficient to pay the annual debt service payment,therefore,the Undesignated
unreserved,designated unreserved andreservedFundBalancewillbenolessthanthe
annual debt service payment dueonJuly1ofthe new fiscal year.
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Capital Project Funds
The Capital Project Funds includes accumulated Development Fees that are assessed on
new construction forthepurposeoffundinggrowth.Thesefundsarerestrictedto
growth-related capital expenditures.The Undesignated Unreserved,Designated
Unreserved and Reserved Fund Balance will be established each fiscal year during the
budget process depending onplanned expenditures butcannotexceed accumulated
revenues.The Development Feesmustbe expended within six years of collection or
refundedtothetaxpayer.
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FINANCIAL PLANNING
Fiscal planning refers to the process of identifying resources and allocating those
resources among competing purposes.The primary vehicle for this planning isthe
preparation,monitoring and analyses of the Town's budget.Itis increasingly important
to monitor the performance ofthe programs competing to receive funding.
1.The Town Manager shall submit to the Town Council a proposed annual budget,
with their recommendations,and shall execute the budget as finally adopted,
pursuant to Section 15.1-602 of the Arizona Revised Statues,as amended.The
Town will budget revenues and expenditures onthe basis ofa fiscal year which
begins July 1 and ends on the following June 30.The Town Council will adopt
the budget no later than June 30.
2.The Town will prepare a budget in accordance with the guidelines established by
the Government Finance Officers Association inits Distinguished Budget Award
Program.The proposed budget will contain the following:
a)Revenue estimates bymajor category,bymajor fund;
b)Expenditure estimates by department levels and major expenditure
category,by major fund;
c)Estimated fundbalancebymajorfund;
d)Debt service by issue detailing principal and interest amounts by fund.
e)Proposedpersonnelstaffinglevels;
f)A detailed schedule of capital projects,including a capital improvement
program;
g)Any additional information,data,or analysis requested of management by
the Town Council.
3.The operating budget will be based on the principle that current operating
expenditures,including debt service,willbe funded with current revenues
creating a balanced budget.The Town will not balance the current budget at the
expense of meeting future years'expenditures;for example accruing future years'
revenuesorrollingovershort-termdebttoavoidplanneddebtretirement.
4.Ongoing operatingcostsshouldbe supported by ongoing,stable revenue sources.
ThisprotectstheTownfromfluctuatingservicelevels,andavoidscriseswhen
one-time revenues are reduced or removed.Revenues from growth or
development shouldbe targeted tocostsrelatedto development,or invested in
improvements that will benefit future residents or make future service provision
efficient.
5.The Town Manager will provide an estimate ofthe Town's revenues annually for
eachfiscalyear.Theestimatesofspecial(grant,excisetax,etc.)revenuesand
interfundtransferswillalsobeprovidedbytheTownManager.
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10.
The budget will fully appropriate the resources needed for authorized regular
staffing.Atno time shall the number of regular full-time employees on the
payroll exceed the total number of full-time positions authorized bythe Town
Council.All personnel actions shall bein conformance with applicable federal
andstatelawandallTownordinancesandpolicies.
TheTown Manager shall provide annually a budget preparation schedule
outlining the preparation timelines forthe proposed budget.Budget packages for
thepreparationofthebudget,includingformsandinstructions,shallbe
distributed to Town departments ina timely manner forthe Department's
completion.Department Directors shall prepare and return their budget proposals
tothe Administration Department,as required inthe budget preparation schedule.
Performance measurement indicators will be integrated into the budget process as
appropriate.
AlternativesforimprovingtheefficiencyandeffectivenessoftheTown's
programs andthe productivity ofits employees will be considered during the
budget process.Duplication of services and inefficiency in service delivery
shouldbeeliminatedwherevertheyareidentified.
Department Directors are required to monitor revenues and control expenditures
topreventexceedingtheirtotal departmental expenditure budget.Itisthe
responsibility of these department directors to immediately notify the Town
Manager ofany exceptional circumstances that could result ina departmental
expenditure budget tobe exceeded.
11.A quarterly report onthestatusofthe General Fund budget and trends will be
preparedwithin60daysoftheendofeachquarterbytheAdministration
Department.Inaddition,thequarterlyreportshallincluderevenueand
expenditureprojectionsthroughtheendofthefiscalyear.
12.Ifa deficit is projected during any fiscal year,the Town will take steps to reduce
expenditures,increase revenues or,ifa deficit is caused byan emergency,
consider usingthe undesignated unreserved General Fund Balance,tothe extent
necessarytoensureabalancedbudgetatthecloseofthefiscalyear.TheTown
Managermayinstituteacessationduringthe fiscal yearon hirings,promotions,
transfers,andcapitalequipmentpurchases.Suchactionwillnotbetaken
arbitrarilyandwithoutknowledgeandsupportoftheTownCouncil.
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EXPENDITURE CONTROL
Management must ensure compliance with the legally adopted budget.In addition,
purchases and expenditures must comply with legal requirements.
1.Expenditures will be controlled by an annual budget at the departmental level.
The Town Council shall adopt appropriations through the budget process.
Written procedures will be maintained for administrative approval and processing
ofcertain budget transfers withinfunds.
2.The Town will maintain a purchasing system that provides needed materials ina
timely manner to avoid interruptions in the delivery of services.All purchases
shall be made in accordance with the Town's purchasing policies,guidelines and
procedures and applicable state and federal laws.The Town will endeavor to
obtain supplies,equipment and services as economically as possible.
3.Expenditures will be controlled through appropriate internal controls and
proceduresin processing invoicesforpayment.
4.TheTownshallpayapplicable contractor invoicesinaccordancewiththe
requirements of Arizona Revised Statues 34-221.
5.The State of Arizona sets a limit on the expenditures of local jurisdictions.The
Townwillcomplywiththeseexpenditurelimitationsand will submitanaudited
expenditure limitation report,audited financial statements,andaudited
reconciliation report as defined bythe Uniform Expenditure Reporting System
(A.R.S.Section 41-1279.07)totheState Auditor General each year.
6.Assetswillbe capitalized at $10,000 andwillberecordedintheTownof
Fountain Hills Summary of General Fixed Assets.
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REVENUES AND COLLECTIONS
All government employees are considered stewards of public funds.In order to provide
fundingforservicedelivery,theTownmusthavereliablerevenuesources.Thesediverse
revenuesmustbecollectedequitably,timely,andefficiently.
1.The Town's goal isa General Fund revenue basethatis equally balanced between
salestaxes,statesharedrevenues,propertytax,servicefeesandotherrevenue
sources.
2.The Town will strive fora diversified and stable revenue base to shelter itfrom
economic changes or short-term fluctuations andinanyone revenue source by
doingthefollowing:
a)Establishing new charges and fees as needed andas permitted by law at
reasonable levels.
b)Pursuing legislative change,when necessary,to permit changes or
establishment of user charges andfees.
c)Aggressively collecting all revenues,late penalties,outstanding taxes
owedandrelatedinterestasauthorizedbytheArizonaRevisedStatues.
3.The Town will monitor all taxes to insure theyare equitably administered and
collectionsaretimelyand accurate.Feesandchargesshouldbebasedon benefits
and/orprivilegesgrantedbytheTown,orbasedoncostsofaparticular service.
4.TheTownshouldpursue intergovernmental aidforthose programs and activities
that address a recognized need and are consistent with the Town's long-range
objectives.Anydecisiontopursueintergovernmentalaidshouldincludethe
consideration ofthefollowing:
a)Presentandfuturefundingrequirements.
b)Costof administering thefunds.
c)Costsassociatedwithspecialconditionsorregulationsattachedtothe
grant award.
5.TheTownwillattempttorecoverallallowable costs-both directand indirect-
associatedwiththeadministrationandimplementationofprogramsfunded
through intergovernmental aid.Inthecaseofthe School District,the Town may
determinetorecoverlessthanfullcostofservicesprovided.InthecaseofState
and federally mandatedprograms,theTownwillattempttoobtain full funding for
theservicefromthegovernmentalentityrequiringtheservicebe provided.
Allowable costswillbe determined basedupona"Cost Allocation Study"
prepared periodically.
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USER FEE COST RECOVERY
User fees and charges are payments for voluntarily purchased,publicly provided services
that benefit specific individuals.The Town relies on user fees and charges to supplement
otherrevenuesourcesinordertoprovidepublicservices.
1.The Town may establish user fees and charges for certain services provided to
users receiving a specific benefit.
2.User fees and charges will be established to recover as much as possible the direct
and indirect costsofthe program or service,,unless the percentage offullcost
recovery hasbeen mandated by specific action of the Town Council.Itis
recognized that occasionally competing policy objectives mayresultin reduced
userfeesandchargesthatrecoverasmallerportionofservicecosts.
3.Periodically,the Town will recalculate the full costs of activities supported by
userfeesto identify the impact of inflation and other attendant costs.
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