Loading...
HomeMy WebLinkAbout08-18-2026 FIC Regular Meeting Agenda PacketAugust 18, 2026 Dublin Finance and Investment Committee Agenda 1 COMMITTEE MEMBERS: Kashef Qaadri, Councilmember Michael McCorriston, Councilmember Regular Meeting of the DUBLIN FINANCE AND INVESTMENT COMMITTEE Tuesday, August 18, 2026 Location: City Manager’s Conference Room Dublin Civic Center 100 Civic Plaza Dublin, CA 94568 REGULAR MEETING 5:30 PM 1. CALL TO ORDER AND PLEDGE OF ALLEGIANCE 2. PUBLIC COMMENT 3. ACTION ITEMS 3.1 Approval of the April 7, 2026 Regular Finance and Investment Committee Meeting Minutes The Committee will consider approval of the minutes of the April 7, 2026 Regular Finance and Investment Committee Meeting. STAFF RECOMMENDATION: Approve the minutes of the April 7, 2026 Regular Finance and Investment Committee Meeting. April 7, 2026 Regular Finance and Investment Committee Meeting Minutes 4. REPORTS 4.1 Fund Balance and Reserve Policy Update The Finance and Investment Committee will receive an overview of the City's Fund Balance and Reserves Policy, including the requirements established by Governmental Accounting Standards Board (GASB) Statement No. 54, the evolution of the City's policy, and current best practices recommended by the Government Finance Officers Association (GFOA). Staff will also present recommendations intended to update the Policy, simplify its structure, and better align it with the City's current strategic priorities and long-term financial planning practices. STAFF RECOMMENDATION: Receive the report and provide feedback and policy direction regarding the recommended updates to the City's Fund Balance and Reserve Policy Staff Report Attachment 1 - Fund Balance and Reserves Policy Attachment 2 - Fund Balance and Reserves Policy - Redline 1 August 18, 2026 Dublin Finance and Investment Committee Agenda 2 5. REQUEST FOR FUTURE MEETING AGENDA ITEMS The Committee and/or City Staff will present items to be discussed at future meetings. 6. ADJOURNMENT This AGENDA is posted in accordance with Government Code Section 54954.2(a) If requested, pursuant to Government Code Section 54953.2, this agenda shall be made available in appropriate alternative formats to persons with a disability, as required by Section 202 of the Americans with Disabilities Act of 1990 (42 U.S.C. Section 12132) (ADA), and the federal rules and regulations adopted in implementation thereof. To make a request for disability-related modification or accommodation, please contact the City Clerk’s Office (925) 833-6650 at least 72 hours in advance of the meeting. Upon receiving a request, the City will swiftly resolve requests for reasonable accommodation for individuals with disabilities, consistent with the federal ADA, and resolve any doubt in favor of accessibility. Agenda materials that become available within 72 hours in advance of the meeting, and after publishing of the agenda, will be available at Civic Center, 100 Civic Plaza, and will be posted on the City’s website at www.dublin.ca.gov/ccmeetings. Mission The City of Dublin promotes and supports a high quality of life, ensures a safe, secure, and sustainable environment, fosters new opportunities, and champions a culture of equity, diversity, and inclusion. 2 Agenda Item 3.1 MINUTES OF THE FINANCE AND INVESTMENT COMMITTEE REGULAR MEETING Tuesday, April 7, 2026 – 5:30 p.m. A regular meeting of the Finance and Investment Committee was held on Tuesday, April 7, 2026, at the Civic Center, located at 100 Civic Plaza, Dublin, CA 94568. The meeting was called to order at 5:30 p.m. 1. CALL TO ORDER AND PLEDGE OF ALLEGIANCE PRESENT: Councilmember Kashef Qaadri and Councilmember Michael McCorriston ABSENT: None 2. PUBLIC COMMENT None. 3. ACTION ITEMS 3.1 Approval of the March 3, 2026 Regular Finance and Investment Committee Meeting Minutes ACTION: By consensus, the Committee approved the minutes of the Regular Meeting of March 3, 2026. 4. REPORTS 4.1 Preliminary Budget for Fiscal Years 2026-27 and 2027-28 Finance Director Jay Baksa presented a summary report on the Preliminary Two -Year General Fund Budget for Fiscal Years 2026-27 and 2027-28. Assistant Public Works Director Vatsal Patel provided a detailed review of the City's maintenance agreement with MCE Corporation. The Committee discussed the assumptions used to project revenues and expenditures in the upcoming budget, the increased cost of the MCE agreement, and the preliminary budgets fo r Fire and Police services. The Committee received the report. 5. REQUEST FOR FUTURE MEETING AGENDA ITEMS None. COMMITTEE MEMBERS Kashef Qaadri, Councilmember Michael McCorriston, Councilmember 3 6. ADJOURNMENT The meeting was adjourned at 6:41 p.m. Minutes prepared by Tony Lam, Senior Office Assistant ____________________________________ Councilmember Qaadri ATTEST: ____________________________________ Finance Director 4 Agenda Item 4.1 STAFF REPORT FINANCE AND INVESTMENT COMMITTEE Page 1 of 4 DATE: August 18, 2026 TO: Honorable Committee Members FROM: Hazel Wetherford, Assistant City Manager SUBJECT: Fund Balance and Reserves Policy Update Prepared by: Jay Baksa, Finance Director EXECUTIVE SUMMARY: The Finance and Investment Committee will receive an overview of the City's Fund Balance and Reserves Policy, including the requirements established by Governmental Accounting Standards Board (GASB) Statement No. 54, the evolution of the City's policy, and current best practices recommended by the Government Finance Officers Association (GFOA). Staff will also present recommendations intended to update the Policy, simplify its structure, and better align it with the City's current strategic priorities and long-term financial planning practices. STAFF RECOMMENDATION: Receive the report and provide feedback regarding the recommended updates to the City's Fund Balance and Reserves Policy. FINANCIAL IMPACT: There is no immediate fiscal impact associated with this report. Adoption of an updated Fund Balance and Reserves Policy would not change existing reserve levels or appropriate additional funding. The proposed amendments are intended to improve the administration, governance, and long-term management of the City's reserves. DESCRIPTION: The City of Dublin’s Fund Balance and Reserves Policy was last comprehensively updated in 2015. Since then, the City's financial condition, organizational priorities, Strategic Plan, and reserve structure have evolved significantly. Additionally, several reserve subclassifications referenced in the current Policy are no longer active or no longer reflect the City's current financial priorities. During the November 4, 2025 City Council meeting, as part of the annual Special Designation 5 Page 2 of 4 of General Fund Reserves, the City Council discussed the need to modernize the Policy. Staff confirmed that a revision would be brought forward to the Finance and Investment Committee for discussion prior to preparing amendments for City Council consideration. Background A fund balance policy serves as a local agency’s primary financial management framework for establishing, maintaining, and utilizing reserves. Such a policy helps agencies maintain long- term financial stability by ensuring adequate resources are available to respond to economic uncertainty, unforeseen emergencies, cash flow needs, and future capital and infrastructure obligations. The establishment and classification of reserves are governed by a mix of accounting standards, local legal authority, and an agency's own internal policy choices. The main accounting standard is Governmental Accounting Standards Board (GASB) Statement No. 54 (issued in 2009) which establishes a five-tier fund balance hierarchy:  Nonspendable – Amounts that cannot be spent because they are either (1) not in spendable form or (2) legally or contractually required to remain intact.  Restricted – Amounts constrained by external parties, constitutional provisions, or enabling legislation that legally restricts their use.  Committed – Amounts designated for a specific purpose through formal action of the governing body. These balances can only be modified or removed through subsequent formal action by the governing body.  Assigned – Amounts intended for a specific purpose but that do not meet the criteria for restricted or committed fund balance.  Unassigned – Residual amounts available for any lawful governmental purpose. This classification is unique to an agency’s General Fund. While GASB 54 establishes how fund balances are classified and reported, it does not prescribe how governments should manage their reserves, determine appropriate reserve levels, or establish policies governing the use of reserves. Those decisions are left to each local government. The Government Finance Officers Association (GFOA) recommends that governments adopt formal reserve policies tailored to their specific financial risks and periodically review those policies to ensure reserve levels remain appropriate as financial conditions evolve. History of Dublin’s Fund Balance and Reserves Policy The City incorporated GASB 54 requirements in 2011 with the adoption “Principal Components of Fund Balance in Accordance with GASB Statement No. 54.” That action established the framework for the City's current fund balance classifications and served as the foundation for the Fund Balance and Reserves Policy adopted the following year. In 2012, the City adopted its first comprehensive Fund Balance and Reserves Policy, which restated the GASB 54 classifications and specifically identified Dublin’s numerous reserve subclassifications within each fund balance category. For example, all individual reserve designations established within the Committed Fund Balance classification were specifica lly 6 Page 3 of 4 identified and described within the Policy. While this approach provided detailed documentation of the City's reserves, it also required frequent amendments whenever reserve designations were created, modified, or eliminated as part of the annual designation process. To improve flexibility, the City Council approved significant revisions to the Policy in June 2015. Those amendments removed many of the individual reserve subclassifications from the Policy and retained only those reserves considered long-term or general in nature. This reduced the need for frequent policy amendments while maintaining appropriate guidance for reserve management. The current Policy remains substantially unchanged since those 2015 amendments. Recommended Policy Updates Based on a review of GFOA best practices and reserve policies adopted by comparable California agencies, Staff recommends simplifying and modernizing the City's Policy so that it serves as a long-term governance document rather than a detailed listing of reserve accounts. Specifically, Staff recommends the following amendments:  Remove references to individual reserve subclassifications unless specifically required by the Policy.  Replace individual reserve listings with broader reserve categories that provide flexibility while maintaining consistency with GASB classifications, as shown in Table 1. Table 1. Summary of Reserve Categories Reserve Group Type Description Committed Reserves Contingency Reserves Funds reserved for significant unforeseen events, emergencies, or future liabilities. Project-Specific Reserves Funds designated for current or future Capital Improvement Program (CIP) projects or other specifically identified initiatives. Assigned Reserves Accounting Adjustment Reserves Funds used to accommodate year-end accounting adjustments and ensure compliance with financial reporting requirements. Specific Use Reserves Funds established for defined purposes, such as debt repayment or planned facility relocations. Non-Specific Use Reserves Funds established for broader strategic or financial priorities, providing flexibility to address future Council priorities.  Maintain the current minimum and targeted funding requirements for the Unassigned Cash Flow Reserve.  Continue to allow automatic reserve funding mechanisms where appropriate but limit 7 Page 4 of 4 their use to situations where they support long-term financial objectives. Automatic funding mechanisms can provide consistency and simplify annual reserve designations; however, excessive reliance on automatic allocations may reduce flexibility and result in reserves receiving funding beyond what is reasonably necessary. For example, the City's previous policy allocated a fixed percentage of available fund balance to the Pension Reserve. As the City's pension funding strategy evolved, this automatic allocation would have resulted in the reserve becoming overfunded while limiting the City's ability to address other emerging priorities. Accordingly, Staff recommends limiting automatic funding mechanisms and placing greater emphasis on annual recommendations developed by the City Manager based on current financial conditions, strategic priorities, and long-term planning objectives. Staff further recommends updating the Policy to include the following governance provisions:  Require the Finance and Investment Committee to review the Policy at least every three years and the City Council to conduct a comprehensive review at least every five years.  Require a biennial assessment of reserve adequacy to evaluate whether reserve levels remain appropriate based on current economic conditions, revenue volatility, long -term financial forecasts, infrastructure obligations, and other financial risks.  Establish guiding principles for the appropriate use of reserves, emphasizing that reserves should primarily be used for one-time expenditures, emergencies, economic downturns, cash flow needs, or other extraordinary circumstances rather than ongoing operating costs.  Require Staff to present a replenishment strategy whenever reserve balances fall below established minimum funding levels.  Develop a companion reserve schedule, included annually within the City's Budget document and made available on the City's website, that summarizes each reserve's purpose, funding source, current balance, target funding level, and authorized use. This approach will improve transparency while allowing reserve information to be updated without requiring amendments to the Policy. Conclusion Staff is seeking the Finance and Investment Committee's feedback on the proposed policy framework and recommendations. Following Committee discussion, Staff will incorporate the Committee's direction into a revised Fund Balance and Reserves Policy for future consideration by the City Council. ATTACHMENTS: 1) Fund Balance and Reserves Policy 2) Fund Balance and Reserves Policy - Redline 8 Attachment 1 CITY OF DUBLIN FUND BALANCE AND RESERVES POLICY GENERAL FUND AND OTHER GOVERNMENTAL FUNDS A. POLICY OBJECTIVES This document shall establish the foundation for the components of fund balance and provide requirements for maintaining reasonable levels of reserves in governmental funds, with a focus on the General Fund. The presentation of fund balances is also presented in the Annual Comprehensive Financial Report (ACFR) and the official City financial records. This policy is intended to comply with Governmental Accounting Standards Board (GASB) Statement No. 54. In the event of a conflict between this policy and the provisions of GASB Statement No. 54 the accounting statement shall prevail. The City of Dublin’s Fund Balance and Reserves Policy has four primary objectives: • Determine available liquid resources; • Classify fund balances in accordance with GASB 54; • Define the methodology of allocating net resources; and • Provide information needed to make informed financial decisions. The City Manager will periodically review this Policy against overall City initiatives and current fund balances to recommend adjustments, which must be formally adopted by the City Council. The reserves specifically identified in this Policy do not represent all reserves maintained by the City. Rather, only those reserves that establish ongoing policy direction, funding requirements, spending limitations, or other governance provisions are specifically referenced. All other reserve designations shall be established through the annual reserve designation process and documented in the City's Budget document or other official financial records. B. ORDER OF EXPENDITURES In accordance with the requirements of GASB, the City Council also confirms as part of this Policy the order of expenditures from resources available. The City considers “Restricted” amounts to have been spent prior to “unrestricted” amounts when an expenditure is incurred for purposes for which both are available (“unrestricted” would include Committed, Assigned, and Unassigned). Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the City considers “Committed” amounts to be reduced first, followed by assigned amounts and then the unassigned amounts. C. CLASSIFICATION OF FUND BALANCES In accordance with GASB Statement No. 54 and as reported in the City’s financial statements, fund balances are identified by the following five fund balance categories: I. Non-spendable Fund Balance Non-spendable Fund Balance are amounts in a form that cannot be spent because they are either (a) pre-paid items, inventories, or loans receivable; or (b) they have external restrictions imposed by creditors, grantors, contributors, laws, regulations, etc. However, if the use of the proceeds from the collection of those receivables or from the sale of those properties is restricted, committed, or assigned, then they should be included in the appropriate fund balance classification (restricted, committed, or assigned), rather than non-spendable fund balance. 9 Page 2 of 4 II. Restricted Fund Balance Restricted Fund Balance shall reflect that portion of fund balance that reflects constraints placed on the use of resources (other than nonspendable items) that are either: (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. It includes revenues restricted by statute or grant terms for specific municipal functions, such as public safety, transportation, environmental programs, parks, cultural arts, housing, and impact mitigation capital projects. III. Committed Fund Balance Committed Fund Balance shall be comprised of amounts that are constrained to specific purposes by a formal action of the City Council such as an ordinance or resolution. The constraint remains binding unless removed in the same formal manner by the City Council. The Committed Fund Balance will be grouped into two categories based on intended use: 1. Contingency Reserves - The portion of fund balance that is set aside by the City Council to address significant unforeseen events, emergencies, or future liabilities. Economic Stability: The portion of General Fund Balance committed for the purpose of stabilizing the delivery of City services during periods of severe operational deficits and to mitigate the effects of uncertainties from unforeseen change in revenues and / or expenditures. City Council approval shall be required before expending any portion of this fund balance. Reserves shall be used only if: a) sudden and unexpected decline in ongoing revenues greater than five percent of General Fund operating revenues; and/or b) elimination or reduction of state revenue source(s) received consistently for municipal purposes, resulting in a decrease of $1,000,000 in General Fund revenues; and/or c) reduction in projected or actual property tax or sales tax of $1,000,000 or more; and/or d) an increase in contracted Police or Fire Services in excess of 10 percent more than the previous year. Service Continuity Obligations: The City Council recognizes the importance of maintaining funds for continued obligations to provide Building and Safety inspections in the event that program supporting fees are collected in one year and the expenditures occur in a subsequent year. The City Council hereby establishes as policy that the funds shall not exceed 125 percent of the budgeted Building and Safety Division operating cost. Pension and Other Post-Employment Benefits: The City Council recognizes that investment earnings can fluctuate from year to year and they are an important component of the funding of retiree benefits. Investment performance impacts annual contributions and expenditures made towards retiree obligations. The intent of the City Council is to establish a fund balance that can provide supplemental financing to lessen the impacts from decreases in investment performance on retiree obligations. The City Manager or designee may allocate from what would otherwise be “Unassigned” fund balance to increase the fund balance. The use of funds from this fund balance may be used: (a) if the City Employer share of the Public Employee Retirement System (PERS) rate increases by three percent; and / or (b) if the City Annual Required Contribution (ARC) for retiree medical benefits increases by 10 Page 3 of 4 three percent or more; and / or (c) if the City Council by majority vote authorizes a lump sum use of the fund balance to reduce pension or OPEB liabilities. 2.Project Specific Reserves - The portion of fund balance that is established to fund design, improvements, and equipment required for a variety of capital improvement projects. IV. Assigned Fund Balance Assigned fund balances are amounts constrained by the City’s intent to be used for a specific purpose, but are neither restricted nor committed. The City Council has authorized the City Manager or his/her designee to make assignments in accordance with this Policy and in conformance with any formal direction provided by the City Council. The Assigned fund balance will be grouped into three categories based on intended use: 1. Accounting Adjustment Reserves - The portion of fund balance used to accommodate year-end accounting adjustments and ensure compliance with financial reporting requirements. Carry-Over Items (Operating Budget & Capital Improvement Projects): Fund balance may be assigned for operating expenditures (excluding personnel costs) which were not expended in the current year and the expense will occur in the following year, i.e. encumbrances. Similarly, a capital project may have funds allocated in a specific year and the project remains incomplete at year end. The City Manager or his/her designee may assign fund balance representing the unexpended funds. These funds are available for authorized appropriations in the subsequent year. 2. Specific Use Reserves - The portion of fund balance established for defined purposes, such as debt repayment or planned facility relocations. 3. Non-Specific Use Reserves - The portion of fund balance established for broader strategic or financial priorities, providing flexibility to address future Council priorities. V. Unassigned Fund Balance (General Fund Only) Unassigned fund balance represents amounts that have not been restricted, committed, or assigned and are available for any purpose. The City Council at its discretion may modify unassigned fund balance and designate in the future an intended “Commitment” or “Assignment”. Unrealized Gain on Investments: Used to account for that portion of fund balance that is the result of unrealized investment gains that have been recorded in accordance with GASB Statement No. 31. Unassigned For Cash Flow Purposes: The City Council recognizes the importance to maintain funds for cash flow purposes to balance the fact that the receipt of major revenues and major expenditure disbursements are not evenly distributed throughout the year. The City Council establishes as policy that this fund balance shall be at a minimum equal to two months of budgeted operating expenditures with a goal of achieving a maximum of four months. D. CHANGES IN GENERAL FUND RESOURCES 11 Page 4 of 4 In accordance with the requirements of GASB the City Council also confirms as part of this policy how General Fund resources shall impact changes in balances. Allocation of Residual Resources: When there are net resources in excess of what is classified as Non-spendable, Restricted, Committed, and/or Assigned, and after maintaining the minimum level of unassigned cash flow funding, those resources shall be allocated annually through the Resolution Authorizing Special Designations of General Fund Reserves. Allocations shall be based on the recommendation of the City Manager and approved by the City Council, taking into consideration the most recent reserve adequacy assessment, current economic conditions, the City's Strategic Plan, and long-term financial forecasts. E. MINIMUM AND TARGET RESERVE LEVELS The Unassigned Cash Flow Reserve shall be maintained at a minimum of two months of General Fund operating expenditures, with a target of up to four months. F. APPROPRIATE USE OF RESERVES Reserves are intended for one-time purposes including emergencies, severe economic downturns, revenue shortfalls, major infrastructure failures, cash flow needs, strategic capital investments, or other Council-authorized one-time initiatives. Reserves should generally not be used to support ongoing operating expenditures except as part of an approved financial recovery strategy. G. RESERVE REPLENISHMENT Whenever reserve balances fall below established minimums, Staff shall present a replenishment strategy during the next budget cycle with the goal of restoring reserves within one to three fiscal years unless extraordinary circumstances justify a longer period. H. RISK ASSESSMENT At least every two years Staff shall evaluate reserve adequacy considering revenue volatility, economic conditions, long-term financial forecasts, infrastructure obligations, pension and OPEB liabilities, disaster exposure, debt obligations, liquidity, and other financial risks, to be discussed with the Finance and Investment Committee. Staff may recommend adjustments to reserve targets based on this assessment. I. ANNUAL REPORTING As part of each budget cycle Staff shall report reserve balances, funding status, reserve adequacy, recommended changes, and compliance with this Policy. A Reserve Schedule identifying each reserve's purpose, balance, target, funding source, and authorized use shall be included in the Budget Document and published on the City's website. J. POLICY REVIEW The Finance and Investment Committee shall review this Policy at least every three years. The City Council shall conduct a comprehensive review at least every five years. 12 Attachment 2 CITY OF DUBLIN FUND BALANCE AND RESERVES POLICY GENERAL FUND AND OTHER GOVERNMENTAL FUNDS A. POLICY OBJECTIVES This document shall establish the foundation for the components of fund balance and provide requirements for maintaining reasonable levels of reserves in governmental funds, with a focus on the General Fund. The presentation of fund balances is also presented in the Annual Comprehensive Annual Financial Report (CAFR) (ACFR) and the official City financial records. This document policy is intended to comply with Governmental Accounting Standards Board (GASB) Statement No. 54. In the event of a conflict between this policy and the provisions of GASB Statement No. 54 the accounting statement shall prevail. In accordance with the requirements of GASB, the City Council also confirms as part of this policy the order of expenditures from resources available. The City considers “Restricted” amounts to have been spent prior to “unrestricted” amounts when an expenditure is incurred for purposes for which both are available (“unrestricted” would include Committed, Assigned, and Unassigned). Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the City considers “Committed” amounts to be reduced first, followed by assigned amounts and then the unassigned amounts. POLICY OBJECTIVES The City of Dublin’s Fund Balance and Reserves Policy has four primary objectives: • Determine available liquid resources; • Classify fund balances in accordance with GASB 54; • Define the methodology of allocating net resources; and • Provide information needed to make informed financial decisions. The City Manager will periodically review this Policy against overall City initiatives and current fund balances to recommend adjustments, which must be formally adopted by the City Council. The reserves specifically identified in this Policy are not intended do notto represent all reserves maintained by the City. Rather, only those reserves that establish ongoing policy direction, funding requirements, spending limitations, or other governance provisions are specifically referenced. All other reserve designations shall be established through the annual reserve designation process and documented in the City's Budget document or other official financial records. Periodically the City Manager may recommend to the City Council a review of this policy based on overall City initiatives and current balances. Any adjustments to the policy shall be adopted by the City Council. B. ORDER OF EXPENDITURES In accordance with the requirements of GASB, the City Council also confirms as part of this Policy the order of expenditures from resources available. The City considers “Restricted” amounts to have been 13 Page 2 of 9 spent prior to “unrestricted” amounts when an expenditure is incurred for purposes for which both are available (“unrestricted” would include Committed, Assigned, and Unassigned). Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the City considers “Committed” amounts to be reduced first, followed by assigned amounts and then the unassigned amounts. CLASSIFICATION OF FUND BALANCES C. A. In accordance with GASB Statement No. 54 and as reported in the City’s financial statements, fund balances are identified by the following five fund balance classificationscategories: I. Non-spendable Fund Balance Non-spendable Ffund Bbalances are amounts in a form that cannot be spent because they are either (a) in a non-spendable form such as pre-paid items, inventories, or loans receivable; or (b) they have external restrictions imposed by creditors, grantors, contributors, laws, regulations, etc. However, if the use of the proceeds from the collection of those receivables or from the sale of those properties is restricted, committed, or assigned, then they should be included in the appropriate fund balance classification (restricted, committed, or assigned), rather than non- spendable fund balance. The following are items that are expected to be recorded as “Non-spendable”: Prepaid Expenditures: The portion of fund balance that represents the asset amount of prepaid expenditures, held by a given fund. Endowments: The portion of fund balance established as an endowment by the donor and in which the principal balance is not intended for expenditure. Advances To Other Funds: The portion of the fund balance that represents the asset amount of cash advanced to other funds, held by a given fund. Notes / Loans Receivable: The portion of fund balance that represents the asset amount of notes or loans receivable, held by a given fund. II. Restricted Fund Balance Restricted Fund Balance shall reflect that portion of fund balance that reflects constraints placed on the use of resources (other than nonspendable items) that are either: (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) iImposed by law through constitutional provisions or enabling legislation.. It includes revenues restricted by statute or grant terms for specific municipal functions, such as public safety, transportation, environmental programs, parks, cultural arts, housing, and impact mitigation capital projects. The following are items that are expected to be recorded as “Restricted”: Public Safety Special Revenue Funds: The portion of fund balances derived from funds collected to be used for Public Safety related activities. 14 Page 3 of 9 Transportation Special Revenue Funds: The portion of fund balances derived from funds collected to be used for Transportation related activities. Environmental Special Revenue Funds: The portion of fund balances derived from funds collected to be used for Environmental related activities. Parks Special Revenue Funds: The portion of fund balances derived from funds collected to be used for Parks related activities. Assessment District Special Revenue Funds: The portion of fund balances derived from funds collected to be used for Public Safety and Transportation related activities, consistent with the purpose under which the fee is collected. Cultural & Arts Special Revenue Funds: The portion of fund balances derived from funds collected to be used for Cultural & Arts related activities. Health & Welfare Special Revenue Funds: The portion of fund balances derived from funds collected to be used for Social Services and Housing related activities. Impact & Mitigation Capital Project Funds: The portion of fund balances derived from funds collected to be used for parks, public facilities, fire and transportation related activities, consistent with the purpose under which the fee is collected. Other Restricted: The portion of fund balance in any governmental fund (except the General Fund) that is restricted under the “Restricted Fund Balance” definition as otherwise prescribed by Governmental Accounting Standards Board Statement No. 54 and not otherwise described in this category above. III. Committed Fund Balance Committed Fund Balance shall be comprised of amounts that are constrained to specific purposes by a formal action of the City Council such as an ordinance or resolution. The constraint remains binding unless removed in the same formal manner by the City Council. in which the City Council has taken action to commit the funds before the end of fiscal year. The decision to modify the amount or use of funds designated as committed can only be changed by action of the City Council. The Committed Fund Balance will be grouped into two categories based on intended use: 1. Contingency Reserves - The portion of fund balance that is set aside by the City Council to address significant unforeseen events, emergencies, or future liabilities. Economic Stability: The portion of General Fund Balance committed for the purpose of stabilizing the delivery of City services during periods of severe operational deficits and to mitigate the effects of uncertainties from unforeseen change in revenues and / or expenditures. City Council approval shall be required before expending any portion of this fund balance. Reserves shall be used only if: a) sSudden and unexpected decline in ongoing revenues greater than 5%five percent of General Fund operating revenues; and/or b) 15 Page 4 of 9 eElimination or reduction of sState revenue source(s) received consistently for municipal purposes, resulting in a decrease of $1,000,000 in General Fund revenues; and/or c) rReduction in projected or actual property tax or sales tax of $1,000,000 million or more; and/or d) aAn increase in contracted Police or Fire Services in excess of 10 percent more than the previous year. Downtown Public Improvements Seed Funding: The portion of General Fund Balance established by the City Council for public improvements in the downtown. The use of this balance is intended to address public improvements within the Downtown Specific Plan Area. The expenditure is to be identified as a specific appropriation made by the City Council. The appropriation shall be a minimum of $50,000. Open Space Funding: The portion of General Fund Balance established by the City Council for the acquisition and long term protection of open space in the City. The acquisition may be in cooperation with other agencies. The expenditure is to be identified as a specific appropriation made by the City Council. Affordable Housing Funding: The portion of General Fund Balance established by the City Council to support the construction, acquisition, or creation of affordable housing in the City. The acquisition may be in cooperation with other public and private entities. The expenditure is to be identified as a specific appropriation made by the City Council. Emergency Communications System: The portion of General Fund Balance established by the City Council to fund the purchase of emergency radio system equipment. This includes a pro-rata share of regional radio infrastructure as well as City owned radios for Police, Fire, and Public Works. Further the reserve may be used to fund the upgrade of centralized City telephone and communication systems. The expenditure is to be identified as a specific appropriation made by the City Council. Fire Retiree Other Post-Employment Benefits (OPEB): The portion of General Fund Balance established by the City Council for the future liability related to retiree medical benefits offered to the inactive Dougherty Regional Fire Authority Staff, as well as the City share of obligations with the OPEB benefits for Alameda County Fire Department. The expenditure is to be identified as a specific appropriation made by the City Council. Innovations & New Opportunities: The portion of General Fund Balance established by the City Council to fund potential projects which require up-front costs, but would provide longer term benefits and / or potential operating cost reductions. The expenditure is to be identified as a specific appropriation made by the City Council. One Time InitiativesThe City Council recognizes that there may be fluctuations in revenues and expenditures over time. Periodically the Council may determine that funds are best set-aside to address certain one-time initiatives within the operating and/or capital budget. The expenditure is to be identified as a specific appropriation made by the City Council. 16 Page 5 of 9 Joint City / School Projects This commitment shall be used to fund projects undertaken via a joint effort of the City and the Dublin Unified School District. The expenditure is to be identified as a specific appropriation made by the City Council. Fund Balance-Committed: The portion of Fund Balance that is in any non-general fund governmental fund that is committed under the “Committed Fund Balance” definition as otherwise prescribed by Governmental Accounting Standards Board Statement No. 54 and not otherwise described in this category above. The portion of Fund Balance that was restricted but later found to be unrestricted shall be designated as a “Committed” balance. Committed for Specific Projects: The portion of fund balance that is established annually by the City Council to fund design, improvements, and equipment required for a variety of capital improvement projects. Specific project designations will be identified with the Resolution Authorizing Special Designations of General Fund Reserves, to be considered for adoption by the City Council prior to the end of each fiscal year. This reserve category replaces all subcategories for specific projects, except for the reserves listed here separately, which are more long term in nature and/or are considered contingency reserves to be used in the case of specific fiscal necessity. Service Continuity Obligations: The City Council recognizes the importance to maintainof maintaining funds for continued obligations to provide Building and Safety inspections in the event that program supporting fees are collected in one year and the expenditures occur in a subsequent year. The City Council hereby establishes as policy that the funds shall not exceed 125 percent of the budgeted Building and Safety Division operating cost. Pension and Other Post-Employment Benefits: The City Council recognizes that investment earnings can fluctuate from year to year and they are an important component of the funding of retiree benefits. Investment performance impacts annual contributions and expenditures made towards retiree obligations. The intent of the City Council is to establish a fund balance that can provide supplemental financing to lessen the impacts from decreases in investment performance on retiree obligations. The City Manager or designee may allocate from what would otherwise be “Unassigned” fund balance to increase the fund balance. The use of funds from this fund balance may be used: (a) if the City Employer share of the Public Employee Retirement System (PERS) rate increases by three percent; and / or (b) if the City Annual Required Contribution (ARC) for retiree medical benefits increases by three percent or more; and / or (c) if the City Council by majority vote authorizes a lump sum use of the fund balance to reduce pension or OPEB liabilities. 2.Project Specific Reserves - The portion of fund balance that is established to fund design, improvements, and equipment required for a variety of capital improvement projects. IV. Assigned Fund Balance Assigned fund balances are amounts constrained by the City’s intent to be used for a specific purpose, but are neither restricted nor committed. 17 Page 6 of 9 The City Council has authorized the City Manager or his/her designee to make assignments in accordance with this Ppolicy and in conformance with any formal direction provided by the City Council. The Assigned fund balance will be grouped into three categories based on intended use: 1. Accounting Adjustment Reserves - The portion of fund balance used to accommodate year-end accounting adjustments and ensure compliance with financial reporting requirements. Carry-Over Items (Operating Budget & Capital Improvement Projects): Fund balance may be assigned for operating expenditures (excluding personnel costs) which were not expended in the current year and the expense will occur in the following year, i.e. encumbrances. Similarly, a capital Capital Improvement pProject may have funds allocated in a specific year and the project remains incomplete at year end. The City Manager or his/her designee may assign fund balance representing the unexpended funds. These funds are available for authorized appropriations in the subsequent year. 2. Specific Use Reserves - The portion of fund balance established for defined purposes, such as debt repayment or planned facility relocations. 3. Non-Specific Use Reserves - The portion of fund balance established for broader strategic or financial priorities, providing flexibility to address future Council priorities. Accrued Leave Subject To Year End Calculations: Certain fund balances are calculated based on the financial performance of the reporting period including accrued Leave. These amounts fluctuate each year and are reflected as part of the year-end financial statements. Carry-Over Items (Operating Budget & Capital Improvement Projects): Fund balance may be assigned for operating expenditures (excluding personnel costs) which were not expended in the current year and the expense will occur in the following year, i.e. encumbrances. Similarly, a Capital Improvement Project may have funds allocated in a specific year and the project remains incomplete at year end. The City Manager or his/her designee may assign fund balance representing the unexpended funds. These funds are available for authorized appropriations in the subsequent year. Non-Streets Capital Improvement Projects (CIP) Reserve: The portion of General Fund Balance intended to fund future non-streets capital projects, where total funding may not currently be known, and for which lump sum amounts will be set aside over time. These funds are available for authorized appropriations in the subsequent year. Carry-Over Fiscally Responsible Adjustment: In any year that an appropriation was made to the contingency For Fiscally Responsible Adjustment the unused fund balance may be assigned as a carry- over for personnel costs. The City Manager or his/her designee may assign fund balance representing the unexpended funds. These funds are available for authorized appropriations in the subsequent year in conformance with personnel policies and procedures. Catastrophic Facility / Infrastructure Loss & City Business Recovery: The City Council recognizes the importance to maintain funds to recover from a catastrophic loss which are unexpected and incur more than $500,000 in expenses to public facilities and infrastructure. This may also be used for short-term recovery and business operations following a catastrophic loss pending the reimbursement from 18 Page 7 of 9 insurance or grants to the extent that they are available. The balance is established in the General Fund and the expenditure shall be made only by City Council appropriation, which shall include a special emergency appropriation. The target established for the maximum balance in this category is an amount equal to 15% of the reported book value of the City owned Buildings and Improvements recorded as Capital assets. Service Continuity Obligations: The City Council recognizes the importance to maintain funds for continued obligations to provide Building and Safety inspections in the event that program supporting fees are collected in one year and the expenditures occur in a subsequent year. The City Council hereby establishes as policy that the assigned funds shall not exceed 125% of the budgeted Building and Safety Division operating cost. Pension and Other Post-Employment Benefits: The City Council recognizes that investment earnings can fluctuate from year to year and they are an important component of the funding of retiree benefits. Investment performance impacts annual contributions and expenditures made towards retiree obligations. The intent of the City Council is to establish a fund balance that can provide supplemental financing to lessen the impacts from decreases in investment performance on retiree obligations. The City Manager or designee may allocate from what would otherwise be “Unassigned” fund balance to increase the fund balance. The use of funds from this fund balance may be used: (a) if the City Employer share of the Public Employee Retirement System (PERS) rate increases by 3 percent; and / or (b) If the City Annual Required Contribution (ARC) for retiree medical benefits increases by 3 percent or more; and / or (c) If the City Council by majority vote authorizes a lump sum use of the fund balance to reduce pension or OPEB liabilities. Assigned for Specific Projects: The portion of fund balance that is intended to be used to fund design, improvements, and equipment required for a variety of capital improvement projects, via recommendation of either the City Council or the City Manager. Specific assigned reserves will be identified with the Resolution Authorizing Special Designations of General Fund Reserves, to be considered for adoption by the City Council prior to the end of each fiscal year. This reserve category replaces all subcategories for specific projects, except for the reserves listed here separately, which are more long term in nature and/or are considered contingency reserves to be used in the case of specific fiscal necessity. IV. Unassigned Fund Balance (General Fund Only) Unassigned fund balance represents amounts that have not been restricted, committed, or assigned and is are available for any purpose. The City Council at its discretion may modify unassigned fund balance, and designate in the future an intended “Commitment” or “Assignment”. Unrealized Gain on Investments: Used to account for that portion of fund balance that is the result of unrealized investment gains that have been recorded in accordance with GASB overnmental Accounting Standards Board Statement No. 31. Unassigned For Cash Flow Purposes: The City Council recognizes the importance to maintain funds for cash flow purposes to balance the fact that the receipt of major revenues and major expenditure disbursements are not evenly distributed throughout the year. The City Council establishes as policy that this fund balance shall be at a minimum equal to two months of budgeted 19 Page 8 of 9 operating expenditures with a goal to achieveof achieving a maximum of four months. As part of the annual budget appropriation the City Council may also appropriate as a source of funding “Unrestricted – Capital Contribution” from this source. This shall typically be done only for high priority one time capital expenditures, provided the minimum fund balance would remain. B.D. C. CHANGES IN GENERAL FUND RESOURCES In accordance with the requirements of GASB the City Council also confirms as part of this policy how General Fund resources shall impact changes in balances. Revenue Sources Allocated to Fire OPEB: The entire amount of the General Fund resources derived from the repayment of funds advanced to the PERS Side Fund, shall be assigned to the Fire OPEB Committed Balance, until such time that either there are no longer any repayments made, or the balance equals $8.6 million, whichever occurs first. Revenue Sources Allocated to Service Continuity: If the “Assigned” balance is below the target maximum of 125% of Building & Safety Expenditures, the following criteria shall be used for calculating an adjustment only if annual building permit revenue exceeds annual Building and Safety expenditures. The Administrative Services Director shall complete an analysis of major building permits issued in the period April – June and shall assign an allocation of the portion of revenue that is expected to be related to expenditures occurring in the subsequent year. The amount derived shall be recommended to the City Manager. If annual building permit revenue is less than the annual Building and Safety expenditures, the City Manager is authorized to reduce the assigned amount by the amount necessary to balance revenues and expenditures. Allocation of Residual Resources: When there are net resources in excess of what is classified as Non-spendable, Restricted, Committed, and/or Assigned, and after maintaining the minimum level of unassigned cash flow funding, those resources shall be allocated annually through the Resolution Authorizing Special Designations of General Fund Reserves. Allocations shall be based on the recommendation of the City Manager and approved by the City Council, taking into consideration the most recent reserve adequacy assessment, current economic conditions, the City's Strategic Plan, and long-term financial forecasts. When there are net resources in excess of what is classified as Non-spendable, Restricted, Committed, and/or Assigned, and after maintaining the minimum level of unassigned cash-flow funding, those resources shall be allocated as follows: a) 50% to Pension and Other Post Employment Benefits; and b) 50% to Non-Streets CIP Reserve. E. MINIMUM AND TARGET RESERVE LEVELS The Unassigned Cash Flow Reserve shall be maintained at a minimum of two months of General Fund operating expenditures, with a target of up to four months. F. APPROPRIATE USE OF RESERVES Reserves are intended for one-time purposes including emergencies, severe economic downturns, revenue shortfalls, major infrastructure failures, cash flow needs, strategic capital investments, or other 20 Page 9 of 9 Council-authorized one-time initiatives. Reserves should generally not be used to support ongoing operating expenditures except as part of an approved financial recovery strategy. G. RESERVE REPLENISHMENT Whenever reserve balances fall below established minimums, Staff shall present a replenishment strategy during the next budget cycle with the goal of restoring reserves within one to three fiscal years unless extraordinary circumstances justify a longer period. H. RISK ASSESSMENT At least every two years Staff shall evaluate reserve adequacy considering revenue volatility, economic conditions, long-term financial forecasts, infrastructure obligations, pension and OPEB liabilities, disaster exposure, debt obligations, liquidity, and other financial risks, to be discussed with the Finance and Investment Committee. Staff may recommend adjustments to reserve targets based on this assessment. I. ANNUAL REPORTING As part of each budget cycle Staff shall report reserve balances, funding status, reserve adequacy, recommended changes, and compliance with this Policy. A Reserve Schedule identifying each reserve's purpose, balance, target, funding source, and authorized use shall be included in the Budget Document and published on the City's website. J. POLICY REVIEW The Finance and Investment Committee shall review this Policy at least every three years. The City Council shall conduct a comprehensive review at least every five years. 21