Page 27 - 2020-21 Budget Summary

FUND STRUCTURE

GENERAL FUND

The General Fund is the primary operating fund of the City. It is used to account for all financial resources
except those required to be accounted for in other funds. General Fund revenues are derived from such
sources as taxes, licenses, permits, fees, fines, intergovernmental revenues, charges for services, special
assessments, interest income, and other resources available for discretionary funding. Expenditures are
made for functions of general government, protection of persons and property, public works, health and
sanitation, transportation, cultural and recreational services, community development, capital outlay, and
debt service.

For purposes of the budget, the General Fund is separate and distinct from the Reserve Fund and other
special funds created for a variety of restricted purposes.

RESERVE FUND

The Reserve Fund is an account in which unrestricted cash is set aside outside the budget for unforeseen
expenditures and emergencies. The funds can be transferred into the budget for such purposes as
necessary. At fiscal year-end, the unreserved and undesignated fund balance in the General Fund is
transferred to the Reserve Fund and reported as “Reversion to Reserve Fund.” The reversion to the
Reserve Fund consists of excess general revenues and other unspent appropriations, as well as lapsed
encumbrances.

Excess revenue or unallocated general revenue, excluding one-time receipts, reverting to the Reserve Fund
is due to higher than anticipated revenue estimated in the current year. The resulting larger revenue base
suggests that the revenue realized in the current year would recur the following year and are not fully one-
time.

The City’s Financial Policies establish a minimum Reserve Fund balance of five percent of General Fund
revenues. Pursuant to the City Charter, a portion of the Reserve Fund is set aside for use in emergencies.

There are two accounts established within the Reserve Fund:

Emergency Reserve Account. This account is required to include 2.75 percent of General Fund revenues.
In order to remove funds from this account, two-thirds of the City Council, with concurrence from the Mayor,
must make a finding of “urgent economic necessity.” A finding of urgent economic necessity is to be based
on a significant economic downturn after the budget is completed, an earthquake or other natural disaster,
or a significant unanticipated event requiring the expenditure of General Fund resources.

Contingency Reserve Account. After the allocation to the Emergency Reserve Account, the remainder of
the Reserve Fund is to be allocated to the Contingency Reserve Account. This account is to be used for
unanticipated expenditures or revenue shortfalls impacting programs already approved in conjunction with
the current year budget. It is not to be used to fund new programs or positions added outside of the current
year budget. Such funding must come from other sources.

BUDGET STABILIZATION FUND

The Budget Stabilization Fund establishes a method to prevent overspending during prosperous years and
to provide resources to help maintain service levels during lean years. This Fund is comprised of excess
revenue from seven economy-sensitive taxes, Property Tax, Utilities Users’ Tax, Business Tax, Sales Tax,
Transient Occupancy Tax, Documentary Tax, and Parking Users’ Tax.

The rules of the Fund establish a growth threshold for these taxes based on the previous 20 years of actual
ongoing growth, which the City Council and Mayor approve annually. If cumulative ongoing receipts from
these taxes exceed the established growth threshold from the prior year’s adopted budget level, a portion
of those excess receipts are directed to the Budget Stabilization Fund. Similarly, if the cumulative ongoing
receipts fall below the growth threshold, the Budget Stabilization Fund may be used to offset a portion of
the lost revenue. The City Council and Mayor can suspend the policy if they declare a fiscal emergency or
find that it is in the interest of the City to do so.

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