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WS — Item 2 WORK SESSION STAFF REPORT Special Work Session Item 2 Date: September 22, 2014 To: City Council From: Al Rolek Re: Fund and Cash Reserve Balance Information Background At Council's direction, staff has prepared information regarding all City funds, including their origin, purpose, restrictions and cash reserve balances. In addition staff has prepared a schedule of interest income by fund for the period of 2008 through 2013, the average rate of return and benchmarks to compare the return with market rates. Fund and Cash Reserve Balances By Fund The attached spreadsheet lists the current city funds, their purpose, term, restrictions, if any, and current cash balance. City funds are established for various reasons. The General Fund is the central operating fund of the City, with most city functions falling under this area. The primary funding source of this fund is property taxes; intergovernmental revenues, licenses and permits fees, charges for services fees, interest income and various miscellaneous sources providing the remaining financing sources. The General Fund is ongoing, with balances carried over year to year. The disposition of resources within the fund are solely at the City Council's discretion. The City Council has established a fund balance policy for the General Fund to maintain a balance of 40% to 50% of annual budgeted expenditures. This balance has remained over 50% for many years. Special Revenue Funds are established for specific purposes and activities, with revenues generated by sources or fees directly relating to these purposes. The revenues and cash balances have been committed by Council resolution to these purposes. The Council may change this by resolution if it chooses. The City's narcotics and DUI forfeiture funds are included in this fund category, and their use is regulated by federal and state government for law enforcement. Debt Service funds are established when the City finances projects or equipment purchases through the issuance of municipal bonds. These bonds are issued through the authority granted by state statute. The debt service funds account for resources (special assessment collections, debt levies, operating transfers from other funding sources, etc.) accumulated to pay principal and interest on the outstanding bonds. Per the bond documents signed at the time of issuance, these resources are restricted and dedicated to the repayment of the specific debt issue until the issue is fully retired. Once the issue is retired, per past practice and policy, any residual balance is transferred to the Closed Bond Fund. This fund is used to finance projects on the `front-end' before formal financing has been established.