FOR ORDINANCE NO. 110183
Amending Chapter 2, Code of
Ordinances, Article XIV, Budgetary and Financial Policies, Division I,
Financial Planning Policies by enacting one new section, Section 2-1954, Fund balance
and reserve policy; and establishing an effective date.
Government Finance Officers Association (GFOA) and Governmental Accounting
Standards Board (GASB) establish best practices for fund balance and reserve
City is desirous of adopting sound fiscal policies that provide a stable
framework for the efficient and effective provisions of public services; and
WHEREAS, a fund
balance allows the City to prepare for emergencies; and
adequate level of fund balance is considered a sign of credit worthiness; NOW,
IT ORDAINED BY THE COUNCIL OF KANSAS CITY:
Section 1. That
Chapter 2, Code of Ordinances of the City of Kansas City, Missouri, is hereby
amended by enacting one new section to read as follows:
Sec. 2-1954. Fund balance and
is the policy of the City of Kansas City, Missouri (the “City”) to maintain its
balances and financial reserves at levels sufficient to pay
obligations when due, address emergencies, cover
temporary revenue shortfalls, provide stability throughout economic cycles
and to protect
the City's creditworthiness in accordance with applicable
federal, state and local laws, and established best governmental practices.
City’s fund balance and reserve policy is the City’s official guideline for use
by City staff in conjunction with the City’s budgeting and financial planning
efforts. The policy shall be reviewed on an annual basis by the Director of
Finance and any modifications made thereto must be approved by the City
(b) Authority. Under
the authority granted by the State Constitution and the City Charter, the City
Council is authorized to direct the financial affairs of the City. It is the
City Council’s intent to responsibly use this authority in order to fulfill the
service objectives of the City and its agencies. Management responsibility for
the City’s fund balances is hereby delegated to the Director of Finance.
(c) Scope. This
fund balance and reserve policy shall be inclusive of all funds of the City.
The policy incorporates recommended best practices of the Government Finance
Officers Association (GFOA) and Governmental Accounting Standards Board (GASB),
as amended over time.
establish appropriate fund balance and/or reserve levels for each fund or
fund type, after accounting for the “nonspendable” portions of the respective
(2)To set guidelines for each fund or fund type’s fund balance and/or
(3)To determine procedures for replenishment of fund balances or
reserves if drawn below recommended levels, if necessary.
(4)To establish financial reporting guidelines for amounts designated as
fund balances and/or reserves.
Amounts that are constrained by the City’s intent to be used for specific
purposes but are neither restricted nor committed will be classified as
“Assigned” fund balance. The intent will be identified by a City official to whom
the governing body has delegated the authority to assign amounts for specific
(2)Committed fund balance. Amounts that
can only be used for specific purposes pursuant to constraints imposed by a
formal action of the City Council will be classified as “Committed” fund balance.
fund balance. Amounts
that cannot be spent because they are not in spendable form (e.g. inventories,
receivables, advances, etc.) or are legally and/or contractually required to be
maintained intact will be classified as “Nonspendable” fund balance.
fund balance. Amounts
that are bound by externally imposed restrictions by creditors, grantors,
contributors, laws or regulations of other governments or through
constitutional provisions or enabling legislation will be classified as
“Restricted” fund balance.
fund balance. Represents
the remaining amount of fund balance which has not been classified as
non-spendable, restricted, committed or assigned.
General Fund. The general fund is the main operating fund of the City
and accounts for all financial transactions not accounted for in other funds.
The general operating expenditures, fixed charges, and capital improvement
costs that are not paid through other funds are financed through revenues
received by the general fund.
General Fund Balance. The committed general fund balance will include the
Those encumbrances imposed by ordinance of the City Council.
of unexpended and unencumbered appropriations and the re-estimation of
uncollected revenues as authorized by ordinance of the City Council.
Reserve (Floor). The emergency reserve portion of committed fund balance shall
not be less than one month of general fund operating expenditures.
The emergency reserve is available to address one-time operational
emergencies, unexpected revenue reductions and/or unanticipated expenditure
requirements occurring within a fiscal year. Funds may be withdrawn from this
emergency reserve when an emergency has been recognized by ordinance prior to fiscal
year end, the fund's budgeted contingency is exhausted, the countercyclical
reserve has been exhausted, and the withdrawal is needed to prevent the fund
from ending the fiscal year with a negative unassigned fund balance. An
ordinance appropriating funds from the emergency reserve shall include language
stating the City Council is waiving the fund balance and reserve policy for a
use of the emergency reserve.
General Fund Balance. The assigned fund balance will include the following
Those encumbrances authorized by department directors or the Manager of
Reserve (Ceiling). The countercyclical reserve, when combined with the
emergency reserve, shall not be greater than two months of general fund
countercyclical reserve may be established by the Director of Finance in the
maximum amount described above for varying purposes including, but not limited
to: reserves for tax increment financing, debt service stabilization, interest
rate risk, capital maintenance, swap termination payments, legal claims, and
Director of Finance may authorize the use of the countercyclical reserve when
the withdrawal is needed to prevent the fund from ending the fiscal year with a
negative unassigned fund balance.
Unassigned General Fund Balance. Any amount in excess of the non-spendable,
restricted, committed and assigned portions of fund balance is by definition unassigned general fund
balance. If necessary, all or a portion of unassigned fund balance may
be appropriated in the following fiscal year’s budget for uses including, but
not limited to, the following:
Prepayment of principal and
interest on City debt
Offsets to temporary revenue
reductions from local, state, and federal sources
One-time expenditures that do not
increase recurring operating costs
Establishment of or increase in
Start-up expenditures for new
General Fund Balance Replenishment.
Once the emergency reserve has initially been fully
funded, if the emergency reserve should fall below its floor, the Director of
Finance or Budget Officer will prepare and present to the City Council a plan
to replenish the emergency reserve. The City Council must approve and adopt a
plan within 12 months after the emergency reserve first falls below its floor,
which establishes a time frame to restore the reserve to, at minimum, its floor
Proprietary Funds. Each proprietary fund shall strive to
maintain an unassigned
fund balance equal to, at minimum, two month’s worth of operating costs, as
defined in the respective bond ordinances for that fund. For the purposes of this calculation, the current fiscal
year budget shall be the budget as originally
adopted by ordinance in March for the subsequent fiscal year. This reservation
of fund balance shall be in addition to all other required reservations including, but not limited to, amounts reserved
for debt service and/or amounts reserved for renewal and replacement of
long lived assets.
Fund - The
water fund accounts for activities of the City’s water distribution system.
Revenues are derived mainly from water service and installation charges.
City Airports Fund - The Kansas City airports fund accounts for the
operations of the City’s two airports: Kansas City International Airport (KCI)
and the Charles B. Wheeler Downtown Airport. Revenues are derived principally
from hangar and terminal building rental, landing fees, and parking.
Fund - The
sewer fund accounts for the activities of the wastewater collection and
treatment system. Revenues are derived primarily from sewer users’ service
charges and fees.
Funds - These
funds account for the proceeds from a special facility bond issue and the
related lease agreement for the aircraft maintenance and overhaul base located
at the Kansas City International Airport.
Revenue Funds. Special revenue funds are used to account for the proceeds of
specific revenue sources (other than certain capital projects and expendable
trusts) that are legally restricted to expenditure for specified purposes. No specific
reservation of fund balance is created by virtue of enactment of this policy. The amount of any reservation of fund
balance shall be governed by the
legal authority underlying the creation of the individual funds.
Capital Projects Funds. The capital projects funds account for
resources used for the acquisition of capital facilities, except those financed
by the proprietary funds and those budgeted in the general or special revenue
funds, when resources are derived exclusively from the direct revenues for the
fund and do not involve long-term borrowing. The City Council, by ordinance,
may elect to commit or assign a portion of its capital projects funds’ balances
to a general project contingency, capital maintenance or replacement reserve. All remaining restricted fund balance in the
Capital Projects Funds will be re-appropriated in the following year for
eligible construction and renovation projects. No
specific reserve requirements are established for Capital Projects Funds;
however, at a minimum, the fiscal year end unreserved fund balance, and estimated revenues for the ensuing fiscal year
must be sufficient to meet all outstanding fund encumbrances.
Debt Service Funds. The debt service funds are used to account
for the accumulation of resources for, and the payment of, general long-term
debt principal and interest. The City
shall maintain sufficient reserves in its debt service funds, which shall equal
or exceed the requirements dictated by its bond ordinances. Funds
restricted for debt service are monies held as required by a bond indenture or similar agreement and maintained either by the
City or by a trustee. Any assignment of fund balance within the Debt Service
Funds represents the City's efforts to cover specific risks associated with
business interruption, interest rates, swap termination, counterparties and difference in basis.
Claims and Workers
Compensation Funds. The claims and workers compensation funds are used to
cover general liability claims, automobile liability, fire, and extended
coverage on City vehicles, public official liability claims, and workers’
compensation claims on both Police Department and City employees. The City
shall seek to build and maintain reserves in its claims and workers
compensation funds in amounts equivalent to at least one times (1x) annual
projected claims exposure.
Waiving Recommended Levels.
The City Council may waive, by ordinance, the requirement to maintain reserves
at the recommended levels if it finds that it is in the best interests of the
Reporting. In the City’s fund financial statements, governmental and
proprietary funds report reservations of fund balance for amounts that are not
available for appropriation or are legally restricted by outside parties for use
for specific purposes. Encumbrances outstanding at year end are reported as
commitments or assignments of fund balances because they do not constitute
expenditures or liabilities. Such encumbrances serve as authorizations for
expenditures in the subsequent year. Commitments of fund balances represent
tentative plans for future use of financial resources that are subject to
Effective Date. This ordinance becomes effective May 1, 2011.
as to form and legality:
Assistant City Attorney