A couple
of new wrinkles have been added to Yorba Linda's policy regarding
funds held in reserve – cash that's been saved from several decades
of spending fewer dollars than the number raised from taxes, fees and
other income sources.
Currently,
the city has close to $17.7 million in reserves, nearly 57 percent of
the $31.2 million general fund budget. A city survey notes that's the
ninth highest percentage in the county's 34 cities, and the only city
with both a larger population and a larger reserve is Buena Park at
96 percent.
A
written City Council policy has long stated that reserves should be
50 percent of each year's operating budget. That won't change under
a revised policy adopted on a 4-1 vote at a recent council meeting,
with Mark Schwing dissenting.
But
two specific categories of reserves have been created, along with a
potential for more spending whenever the level of reserves reaches
more than 60 percent of a year's budget.
One
category is an “emergency reserve,” which will be set each June
30 at 40 percent of the upcoming fiscal year's general fund budget.
The other is an “economic contingency reserve,” which would be
fixed at 10 percent of the budget.
The
40 percent reserve “would only be utilized in a time of emergency,
which would be an extremely unusual and infrequent occurrence, such
as a major natural disaster or a major unforeseen settlement,”
Finance Director Scott Catlett told council members.
The
10 percent reserve “would only be accessible to address unforeseen
sudden revenue loss that could not be balanced with other measures,”
Catlett noted, adding the fund would allow “a measured and
thoughtful reduction in expenditures” during an economic downturn.
Once
the emergency or period of declining revenues ended, the city staff
would be required to present a plan to council to replenish the fund
levels over no more than a five-year period.
Catlett
also noted: “In cases where the reserve balance exceeds 50 percent
at any time, the policy would allow (council) to appropriate these
excess reserves for one-time expenditures.”
But,
he stated: “Any appropriation from reserves that causes the reserve
balance to drop below 50 percent must be backfilled in the subsequent
fiscal year, which absent revenue growth would mean a corresponding
reduction in budgeted expenditures.”
Also,
to avoid “accumulation of excess operating reserves,” Catlett
noted the policy includes “a requirement that when reserves exceed
60 percent, staff would present...options for appropriate uses” of
the excess funds to bring the balances below the 60 percent level.
“These
uses would likely include deferred capital projects, vehicle or
equipment purchases, contributions to special reserves, reductions to
unfunded liabilities or other expenditures of a one-time nature,”
he explained.
The
policy also eliminates specific reserve levels for landscape
district, library and golf course funds.