4. Fund Reserve Policies
• Sustainability has become a defining term for
municipalities that are successful in
accomplishing their missions at a high level
and on a consistent basis.
• GFOA has also adapted to the ideal of
sustainability when addressing long-term
financial policies.
• City is ahead of curve on Social and
Environmental sustainability.
5. Fund Reserve Policies
• Current Reserve Policies set prior to 2008
• More volatile economy means a higher
reserve level is advisable
• GFOA Best Practices
6. General Operating Funds
• GFOA Recommends a minimum
unrestricted fund balance of two months
(16.6%) regardless of city size.
• Area Communities vary from this minimum
due to size and circumstance, with many
having higher than 3 months reserve.
• Recommend City Increase General Fund
Reserve to GFOA minimum.
• No revenue increase is required for 2014.
7. Enterprise Funds
• Recommend Enterprise fund reserve
requirement be moved from 10% to 16.6% as
well.
• Recommend additional reserve be established
for implementation of projects each year as a
budget alternative to funding depreciation, which
is GFOA recommended practice.
• Will result in varying fund balance reserves since
each enterprise fund has different capital and
operating levels.
8. Internal Service Funds
• Each Fund varies in mission and structure
• Maintenance Fund to maintain a positive balance.
• Equipment Replacement Fund to build reserves for the
ongoing replacement of vehicles, funded by department
transfers, reserve should not exceed accumulated
depreciation of vehicles.
• Insurance Fund:
– Liability Insurance program to maintain reserve of 25% of
outstanding claims or twice the annual SIR level, which ever is
greater.
– Health Insurance program to maintain three months reserve of
annual expenses due to volatility in health care costs.
9. TIF Funds
• Fund reserves to be based on outstanding debt-
service requirements and/or multi-year
development agreements in place.
• Funds to be designated for these purposes prior
to being released for future development
projects or surplus distribution.
10. Fund Operating Policies
• The Annual Budget contains summaries of the
City’s Budget Policies for several critical funds.
• Many City funds can operate with fairly simple
policies, however, some that include both
capital and operating activities may require
more dynamic policies that reflect the
changing needs for operations vs. capital
expenses over time.
11. General Fund
• Current - The General Fund budget will be balanced with
property tax, only after all other revenue sources and
expenditure reductions have been exhausted. In addition, all
new unfunded mandates must be itemized within the budget.
One-time revenues shall not be used to fund current
operations.
• Proposed – The General Fund budget will be balanced each
year, subject to the current Fund Reserve level. In the event
the General Fund Reserve balance is below the minimum
level of 16.6%, the fund may be structured with a surplus
budget in order to bring reserves up to the minimum. In the
event the fund reserve is above the 20% recommended
maximum, the budget may be structured in a deficit to
account for the transfers out to other funds as noted in the
reserve policy.
12. Enterprise Funds
• No Change to Parking and Water Policies
• Sewer Fund
– Current - This is an enterprise fund and as such is expected to be self-
sufficient. As a result, rates should be scheduled to increase to meet
costs of sewer programs. Transfers to other funds for administrative
expenses should be maintained to reflect true program costs.
– Proposed - This is an enterprise fund and as such is expected to be
self-sufficient. As a result, rates should be scheduled to increase to
meet costs of sewer operations, debt service and capital projects.
Transfers to other funds for administrative expenses should be
maintained to reflect true program costs.
13. Enterprise Funds
•Solid Waste Fund
– Current – There is no current policy.
– Proposed - This is an enterprise fund and as such is expected to be
self-sufficient. As a result, rates should be scheduled to increase to
meet costs of solid waste operations, debt service and capital
projects. Transfers to other funds for administrative expenses should
be maintained to reflect true program costs.
14. Internal Service Funds
• Insurance Fund
– Fund Policy changed to reference Self-funded Benefits program
– Benefits Program to be operated with a goal to keep insurance cost
increases below the medical rate of inflation.
• Fleet Maintenance Fund – Policy changed to reflect the
removal of vehicle purchases to the Equipment Replacement
Fund.
• Equipment Replacement Fund –
– Interfund transfers from operating departments shall be established
to replace vehicles within two years of the expiration of their useful
life as determined by the Fleet Maintenance Division.
– General Obligation debt shall only be used for vehicles with an
expected life equal to or greater than 15 years and with a purchase
price $250,000.
15. Other Funds
• Motor Fuel Tax Fund – Include a 25% reserve to ensure the efficient start
up of roadway projects each year.
• No change is recommended to the Debt Service Fund policy due to the
ongoing discussion of the City’s Capital Improvements Program. If the City
moves toward a more balanced utilization of current revenues for
infrastructure and bond proceeds for facilities replacement, then there is
the potential for this policy to be amended to include a lower total cap for
Tax-Supported General Obligation Debt.
• Economic Development Fund
• Current - Expenditures for the Economic Development Fund should not
exceed projected Hotel Tax Revenues.
• Proposed – Expenditures in the Economic Development Fund will be for
development activities as directed by the Economic Development
Committee and City Council. Funds may be accumulated from year to
year for major development activities.
•
16. City Debt Background
• City has historically been Aa1 or Aaa rated
– Solid Property Tax Base
– Home Rule
– Consistent Payment Record and Management
• City has used alternative debt forms
– General Obligation Bonds
– Revenue Bonds
– Variable Bonds
– IEPA Loans
– Lines of Credit
• PENSION DEBT
17. Five Year History of Debt
• Why Five Years?
– Everything changed in 2008 in Debt World
– City adopted new approach to Pension Funding
– Does not include other debt (e.g. IEPA Loans)
Fiscal Year Total Bond Debt Total Pension Debt
Total Bond and
Pension Debt
FY 2003-04 $ 190,740,000 $ 78,939,178 $ 269,679,178
FY 2008-09 $ 174,110,000 $ 187,712,291 $ 361,822,291
FY 2009-10 $ 151,470,000 $ 203,246,731 $ 354,716,731
FY 2010-11 $ 153,535,000 $ 168,243,070 $ 321,778,070
FY 2011 $ 157,695,000 $ 173,913,528 $ 331,608,528
FY 2012 $ 154,159,999 $ 177,493,388 $ 331,653,387
19. Future Considerations/Strategy
• City Pension Funding will require continued
high funding levels.
• City Infrastructure (roads, water mains, sewer
lines, etc) are on minimum replacement
schedules currently – difficult to stretch any
further.
• City Facilities in need of repair and/or
replacement which will increase debt or current
revenues to fund.
• To address both Capital needs, debt will still be
needed.
20. Basic Capital Funding Strategy
• Split capital funding into two categories
• Infrastructure systems moved gradually to
current revenue or “pay as you go” funding.
• Facilities maintenance/ongoing upkeep also
covered through current revenues.
• Facilities renovation/replacement funded
through long-term debt issuance.
• Grants, and all other revenue will be
aggressively pursued.
21. Current Debt Plus Capital
Improvements “Pay as You Go”
--
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Fiscal and Calendar Year Ending December 31st
Capital
Improvements
2013A (Abated)
Abated Debt
Service
2013A (Levy)
22. Sources of “Pay as You Go”
• Gradual reduction of bond issuance, with difference in
Debt Levy becoming a new Capital Levy or other
ongoing revenue source.
• One-time Revenues.
– Used as reserve set aside for future facilities
replacement
– Used to “catch up” on infrastructure replacement
– Not used as a replacement for other revenue
sources.
• Increasing ratio of Capital expenses compared to
Operating expenses without increasing revenues.
• New Revenues or increases in the rates of current
revenues, dedicated to Capital Funds only.
23. Implementation
• Gradual reduction of bond issuance, with
difference in Debt Levy becoming a new
Capital Levy.
• Gradual Increase in new capital revenue
sources.
• Mix of Debt and “Pay as you Go” funding.
24. Projected Debt Service Debt and
Capital Levy
--
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Fiscal and Calendar Year Ending December 31st
Levy Suported Debt Service 2013A (Levy)
Abated Debt Service 2013A (Abated)
Pay as You Go Debt ServiceLevel New Capital Levy-No Debt
25. Projected Debt Service Debt Only
Funding for Capital
--
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Fiscal and Calendar Year Ending December 31st
Levy Suported Debt Service 2013A (Levy)
Abated Debt Service 2013A (Abated)
Debt only
27. Next Steps
• Update Inventory of Facilities/Needs
– Current Facilities Status Report
– Utilization by Facilities
• Prioritization
• Determine if alternatives exisit
• Update Infrastructure Replacement Schedules
– Roadway/Sidewalk/Alley
– Trees
– Water/Sewer/Parking