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IV. RESERVE POLICIES A. PURPOSE The purpose of the city's reserve funds are to provide 1) a stable funding source for expenditures that fluctuate significantly each year, for example equipment acquisitions and replacement, 2) working capital to maintain a sufficient cash flow and 3) a stable or improved credit rating. B. POLICY The city's goal is to maintain a General Fund fund balance reserve of 45 percent of the general funds operating budget for working capital to provide cash flow between its two semi annual state aid and tax payments (July and December). At year end, if the General Fund fund balance has a reserve for working capital at a minimum balance of 45% of the next year's operating budget, the remaining reserves will be transferred to the capital improvement funds on a projected needs basis as determined by the five year capital improvement plan by city council approval. The Infrastructure Fund will receive any fund balances remaining in any debt service fund once the debt is retired. The city will maintain capital improvement fund accounts for the timely purchase and replacement of equipment in excess of $500 or that will last for three or more years as identified in the five year capital improvement program. V. CAPITAL IMPROVEMENT POLICIES A. PURPOSE m is to plan for the capital improvement program p cit s P items, P .he purpose of Y P P items and replacement of obsolete equipment, purchase of new capital repairing and replacing the infrastructure without implementing significant changes in the tax levy. B. POLICY The city will plan for the timing, expenditures and future revenue sources for all capital purchases over $500 or lasting for three or more years as part of the five year capital improvement program. The city will time the capital improvement projects to accommodate administrative workloads for planning and implementing these improvements each year. The city will plan the capital improvement program to assure that funds remain to accrue interest in each capital account whenever possible and use its reserve policy to provide a revenue source for these funds. The city will plan a realistic capital improvement program in including creative, but workable projects.