CITY COMMISSION AGENDA ITEM

Department:	Finance		Commission Meeting Date:  September 12, 2017
Staff Contact:	Bryan Kidney, Director
Recommendations/Options/Action Requested:
Review draft of City of Lawrence’s Fund Balance Policy.
Executive Summary:		Staff received questions during the 2018 budget process about an updated fund balance policy. Fund balances typically focus on the general fund since it is the primary operational fund of a community. The current policy is for the City to keep a 15-30% general fund balance. The adopted 2018 general fund balance is 25%. Staff reviewed industry standards and medians that Moody’s Investor Services provides.  Staff recommends a new policy that establishes 25% of the annual expenditure budget as the optimal general fund balance. The 25% is made up of: · 20% allocated for liquidly, revenue volatility, and unexpected expenditures · 2.5% allocated for emergency scenarios, and · 2.5% allocated for large equipment purchased on a pay-as-you-go scenario. The proposed fund balance policy was reviewed by Springsted Incorporated. A representative from Springsted will be at the work session to answer any questions about what impact a fund balance policy has to bond ratings.
Strategic Plan Critical Success Factor		Effective Governance and Professional Administration Sound Fiscal Stewardship
Fiscal Impact (Amount/Source):		There is no direct fiscal impact to the policy. However, the policy includes that if the City goes below 25% we must make it up over the five-year forecast period. The policy does not address if the fund balance is over 25% but the 2017 revised budget assumes that fund balance in excess of 25% will be transferred to the capital reserve fund.
Attachments:		Draft Fund Balance Policy

Reviewed By: (for CMO use only)

☐TM ☐DS ☒CT ☐BM