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Res 07-62 Adopting Fiscal and Budgetary PoliciesTOWN OF WESTLAKE RESOLUTION NO. 07-62 A RESOLUTION OF THE BOARD OF ALDERMEN OF THE TOWN OF WESTLAKE, TEXAS, ADOPTING THE TOWN OF WESTLAKE FISCAL AND BUDGETARY POLICIES. WHEREAS, the Town of Westlake Board of Aldermen and staff are committed to financial management through integrity, prudent stewardship, planning accountability, full disclosure and communication; and WHEREAS, the broad purpose of the fiscal and Budgetary Policies is to enable the Town to achieve and maintain a long-term stable and positive financial condition and provide guidelines for the day-to-day planning and operations of the Town's financial affairs; and WHEREAS, the policy scope generally spans areas of accounting and financial reporting, internal controls, both operating and capital budgeting, revenue management, investment and asset management, debt management and forecasting; and NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE TOWN OF WESTLAKE, TEXAS: SECTION l: That the adoption of this resolution will (a) demonstrate to the citizens of Westlake, the investment community, and the bond rating agencies that the town is committed to a strong fiscal operation; (b) provide precedents for future policy- makers and financial managers on common financial goals and strategies; (c) fairly present and fully disclose the financial position of the Town in conformity to generally accepted accounting principals (GAAP); and (d) demonstrate compliance with finance - related legal and contractual issues in accordance with the Texas Local Government Code and other legal mandates. SECTION 2: That the Town of Westlake does hereby adopt the Town of Westlake Fiscal and Budgetary Policies, as proposed in the attached Exhibit A. SECTION 3: That this Resolution shall become effective upon the date of its passage. PASSED AND APPROVED ON THIS 24th DAY OF SEPTEMBER, 2007. ATTEST: kin/Sutter, TRMC, Town Secretary APPROVED AS TO FORM: Atanton !::�Attorney Scott Bradl y, Mayor Trent O. Petty, To anager TOWN OF WESTLAKE FISCAL AND BUDGETARY POLICIES To establish and document a policy framework for fiscal decision-making, the Town Manager will develop and maintain a comprehensive set of Financial Management Policy Statements. The aim of these policies is to ensure that financial resources are available to meet the present and future needs of the citizens of Westlake. Specifically this policy framework mandates the pursuit of the following fiscal objectives: Revenues: Design, maintain and administer a revenue system that will assure a reliable, equitable, diversified and sufficient revenue stream to support desired Town services. Expenditures: Identify priority services, establish appropriate service levels and administer the expenditure of available resources to assure fiscal stability and the effective and efficient delivery of services. Fund Balance/Retained Earnings: Maintain the fund balance and retained earnings of the various operating funds at levels sufficient to protect the Town's creditworthiness as well as its financial position from emergencies. Capital Expenditures and Improvements: Annually review and monitor the state of the Town's capital equipment and hiftastructure, setting priorities for its replacement and renovation based on needs, funding alternatives, and availability of resources. Debt: Establish guidelines for debt financing that will provide needed capital equipment and infrastructure improvements while minimizing the impact of debt payments on current revenues Investments: Invest the Town's operating cash to ensure its safety, provide for necessary liquidity and optimize yield. Intergovernmental Relations: {Coordinate efforts with other governmental agencies to achieve common policy objectives, share the cost of providing governmental services on an equitable basis and support favorable legislation at the state and federal level. Grants: Seek, apply for and effectively administer federal, state and foundation grants-in-aid which address the Town's current priorities and policy objectives. Economic Development: Initiate, encourage and participate in economic development efforts to create job opportunities and strengthen the local economy Fiscal Monitoring: Prepare and present regular reports that analyze, evaluate, and forecast the Town's financial performance and economic condition. Financial Consultants: With available resources, seek out and employ the assistance of qualified financial advisors and consultants in the management and administration of the Town's financial functions. Accounting, Auditing and Financial Reporting: Comply with prevailing federal, state and local statutes and regulations. Conform to generally accepted accounting principles as promulgated by the Governmental Accounting Standards Board (GASB), the American Institute of Certified Public Accountants (AICPA), and the Government Finance Officers Association (GFOA). Operating Budget: Prepare, present and approve the Town's annual operating plan. Asset Management: Establish guidelines for all areas of asset management, e.g. Investments, Fixed Assets. I. Revenues To design, maintain and administer a revenue system that will assure a reliable, equitable, diversified and sufficient revenue stream to support desired Town services. ■ Balance and Diversification in Revenue Sources - The Town shall strive to maintain a balanced and diversified revenue system to protect the Town from fluctuations in any one source due to changes in local economic conditions which adversely impact that source. • User Fees -For services that benefit specific users the Town shall establish and collect fees to recover the costs of those services. The Town Board shall determine the appropriate cost recovery level and establish the fees. Where feasible and desirable, the Town shall seek to recover full direct and indirect costs. User fees shall be reviewed on a regular basis to calculate their full cost recovery levels, to compare them to the current fee structure, and to recommend adjustments where necessary. • Property Tax Revenues - The Town shall endeavor to avoid a property tax by revenue diversification, implementation of user fees, and economic development. ■ Utili ;/Enterprise Funds User Fees - Utility rates and Enterprise Fund's user fees shall be set at levels sufficient to cover operating expenditures, meet debt obligations, provide additional funding for capital improvements, and provide adequate levels of working capital. The Town shall seek to eliminate all fortes of subsidization to utility/enterprise funds from the General Fund. ■ Administrative Services Charge - The Town shall establish a method to determine annually the administrative services charges allocated to all funds for overhead and`staff support. ■ Revenue Estimates for Budgeting - In order to maintain a stable level of services, the Town shall use a conservative, objective, and analytical approach when preparing revenue estimates. The process shall include analysis of probable economic changes and their impacts on revenues, historical collection rates, and trends in revenues. This approach should reduce the likelihood of actual revenues falling short of budget estimates during the year and should avoid mid -year service reductions. • Revenue Collection and Administration - The Town shall maintain high collection rates for all revenues by keeping the revenue system as simple as possible in order to facilitate payment. In addition, since revenue should exceed the cost of producing it, the Town shall strive to control and reduce administrative costs. The Town shall pursue to the full extent allowed by state law all delinquent taxpayers and others overdue in payments to the Town. H. Expenditures To assure fiscal stability and the effective and efficient delivery of services, through the identification of necessary services, establishment of appropriate service levels, and careful administration of the expenditure of available resources. ■ Current Funding Basis - The Town shall operate on a current funding basis. Expenditures shall be budgeted and controlled so as not to exceed current revenues plus the planned use of fund balance accumulated through prior year savings. (The use of fund balance shall be guided by the Fund Balance/Retained Earnings Policy Statements.) ■ Avoidance of Operating Deficits - The Town shall take immediate corrective actions if at any time during the fiscal year expenditure and revenue re -estimates are such that an operating deficit (i.e., projected expenditures in excess of projected revenues) is projected at year-end. Corrective actions can include a hiring freeze, expenditure reductions, fee increases, or use of fund balance within the Fund. 2 Balance/Retained Earnings Policy. Expenditure deferrals into the following fiscal year, short-term loans, or use of one-time revenue sources shall be avoided to balance the budget. ■ Maintenance of Capital Assets - Within the resources available each fiscal year, the Town shall maintain capital assets and infrastructure at a sufficient level to protect the Town's investment, to minimize future replacement and maintenance costs, and to continue service levels. ■ Periodic Program Reviews - The Town Manager shall undertake periodic staff and third -party reviews of Town programs for both efficiency and effectiveness. Privatization and contracting with other governmental agencies will be evaluated as alternative approaches to service delivery. Programs which are determined to be inefficient and/or ineffective shall be reduced in scope or eliminated. ■ Purchasing - The Town shall make every effort to maximize any discounts offered by creditors/vendors. Staff shall also use competitive bidding in accordance to State law to attain the best possible price on goods and services. ■ Prompt Payment —All invoices will be paid within 30 days of receipt in accordance with the prompt payment requirements of State law. III. Fund Balance/Retained Earnings To maintain the fund balance and retained earnings of the various operating funds at levels sufficient to protect the Town's creditworthiness as well as its financial positions from priforesecable emergencies. General Fund Undesignated Fund Balance - The Town shall strive to maintain the General Fund undesignated fund balance at 90 days of operation. ■ Retained Earnings of Other Operating . Funds - In the Utility Fund, the Town shall strive to maintain positive retained earnings positions to provide sufficient reserves for emergencies and revenue shortfalls. ■ Use of Fund Balance/Retained Earnings - Fund Balance/Retained Earnings shall be used only for emergencies, not recurring expenditures, or major capital purchases that cannot be accommodated through current year savings. Should such use reduce the balance below the appropriate level set as the objective for that fund, reconnnendations will be made on how to restore it. I V . Capital Expenditures and Improvements To annually review and monitor the state of the Town's capital equipment and iinfrastrueture, setting priorities for its replacement and renovation based on needs, funding, alternatives, and availability of resources. ■ Capital Improvement Planning Program - The Town shall annually review the needs for capital improvements and equipment, the current status of the Town's infrastructure, replacement and renovation needs, and potential new projects. All projects, ongoing and proposed, shall be prioritized based on an analysis of current needs and resource availability. For every capital project, all operation, maintenance and replacement costs shall be fully costed. ■ Replacement of Capital Assets on a Regular ar Schedule - The Town shall annually prepare a schedule for the replacement of its non -infrastructure capital assets. Within the resources available each fiscal year, the Town shall replace these assets according to the aforementioned schedule. N Capital Expenditure Financing - The Town recognizes that there are three basic methods of financing its capital requirements. It can budget the funds frorn current revenues; it can take the funds from fund balance/retained earnings as allowed by the Fund Balance/Retained Earnings .Policy; or it can borrow money through debt. Debt financing includes general obligation bonds, revenue bonds, certificates of obligation, lease/purchase agreements, certificates of participation, and commercial paper. Guidelines for assuming debt are set forth in the Debt Policy Statements. V. Debt To utilize debt financing which will provide needed capital equipment and infrastructure improvements while minimizing the impact of debt payments on current revenues. ■ Use of Debt Financing - Debt financing, to include general obligation bonds, revenue bonds, certificates of obligation, certificates of participation, commercial paper, and lease/purchase agreements, shall only be used to purchase capital assets that can not be financed from either current revenues or fund balance/retained earnings and to fund infrastructure improvements and additions. The useful life of the asset or project shall exceed the payout schedule of any debt the Town assumes. ■ Assumption of Additional Debt - The Town shall not assume more tax -supported general purpose debt than it retires each year without conducting an objective analysis as to the community's ability to assume and support additional debt service payments. Affordability Targets - The Town shall use an objective analytical approach to determine whether it can afford to assume new general purpose debt beyond what it retires each year. This process shall compare generally accepted standards of affordability to the current values for the Town. The process shall also examine the direct costs and benefits of the proposed expenditures. The decision on whether or not to assume new debt shall be based on these costs and benefits and on the Town's ability to "afford" new debt as determined by the aforementioned standards. The Town shah strive to achieve and/or maintain these standards at a low to moderate classification. Debt Structure - The Town shall structure its debt payment schedules for general purpose debt to ensure level principal repayment schedules. The Town shall not assume any debt with "balloon' repayment schedules which consist of low annual payments and one large payment of the balance due at the end of the term. While balloon payment structures minimize the size of debt payments during the period, they force a large funding requirement on the budget of the final year. Given the uncertainties of the future, level payment schedules improve budget planning and financial management. ■ Sale Process - The Town shall use a competitive bidding process in the sale of debt unless the nature of the issue warrants a negotiated bid. The Town shall award bonds based on a true interest cost (TIC) basis as long as the financial advisor agrees that the TIC basis can satisfactorily determine the lowest and best bid. ■ Bond Rating Agencies Presentations - Full disclosure of operations and open lines of communication shall be made to the bond rating agencies. Town staff, with assistance of financial advisors, shall prepare the necessary materials and presentation to the bond rating agencies. ■ Continuing Disclosure - The Town is committed to continuing disclosure of financial and pertinent credit information relevant to the Town's outstanding securities. ■ Debt Refunding - Town staff and the financial advisor shall monitor the municipal bond market for opportunities to obtain interest savings by refunding outstanding debt. As a general rule, the present value savings of a particular refunding should exceed 3.5% of the refunded maturities. 4 VI. Investments To invest the Town's cash in such a manner so as to insure the absolute safety of principal and interest, to meet the liquidity needs of the Town, and to achieve the highest possible yield. Interest earned from investments shall be distributed to the operating and other Town funds from which the money was provided. VII. Intergovernmental Relations To coordinate efforts with other governmental agencies to achieve common policy objectives, share the cost of providing government services on an equitable basis, and support favorable legislation at the state and federal levels. ■ Inter -local Cooperation in Delivering Services - In order to promote the effective and efficient delivery of services, the Town shall actively seek to work with other local jurisdictions in joint purchasing consortia, sharing facilities, sharing equitably the costs of service delivery, and developing joint programs to improve service to its citizens. ■ Legislative Program - The Town shall cooperate with other jurisdictions to actively oppose any state or federal regulation or proposal that mandates additional Town programs or services and does not provide the funding to implement them. Conversely, as appropriate, the Town shall support legislative initiatives that provide more funds for priority local programs. VIII. Grants To seek, apply for and effectively administer federal, state and foundation grants-in-aid that address the Town's current priorities and policy objectives. ■ Grant Guidelines - The Town shall apply, and facilitate the application by others, for only those grants that are consistent with the objectives and high priority needs previously identified by Council. The potential for incurring ongoing costs, to include the assumption of support for grant funded positions from local revenues, will be considered prior to applying for a grant. ■ Grant Review - All grant submittals shall be reviewed for their cash match requirements, their potential impact on the operating budget, and the extent to which they meet the Town's policy objectives. If there are cash match requirements, the source of finding shall be identified prior to application. ■ Grant Program Termination - The Town shall terminate grant funded programs and associated positions when grant funds are no longer available unless alternate funding is identified. IX. Economic Development To initiate, encourage and participate in economic development efforts to create job opportunities and strengthen the local economy. ■ Positive Business Environment - The Town shall endeavor, through its regulatory and administrative functions, to provide a positive business environment in which local businesses can grow, flourish and create jobs. The Town Board and Town staff will be sensitive to the needs, concerns and issues facing local businesses. Commitment to Business Expansion, _Diversification and Job Creation - The Town shall encourage and participate in economic development efforts to expand Westlake's economy to increase local employment. M These efforts shall not only focus on newly developing areas but also on other established sections of Westlake where development can generate additional jobs and other economic benefits. ■ Coordinate Efforts with Other Jurisdictions - The Town's economic development program shall encourage close cooperation with other local jurisdictions, chambers of commerce, and groups Interested in promoting the economic well-being of this area. X. Fiscal Monitoring To prepare and present regular reports to analyze, evaluate and forecast the Town's financial performance and economic condition. ■ Financial Status and Performance Reports - Quarterly reports comparing expenditures and revenues to current budget, projecting expenditures and revenues through the end of the year, noting the status of fund balances to include dollar amounts and percentages, and outlining any remedial actions necessary to maintain the Town's financial position shall be prepared for review by the Town Manager and the Council. ■ Compliance with Board Policy Statements - The Financial Management Policy Statements will be reviewed annually by the Board and updated, revised or refined as deemed necessary. Policy statements adopted by the Board are guidelines, and occasionally, exceptions may be appropriate and required. However, exceptions to stated policies will be specifically identified, and the need for the exception will be documented and fully explained. Xl. Financial Consultants To employ the assistance of qualified financial advisors and consultants as needed in the management and administration of the Town's financial functions. These areas include but are not limited to investments, debt administration, financial accounting systems, program evaluation, and financial impact modeling. Advisors shall be selected on a competitive basis using objective questionnaires and requests for proposals based on the scope of the work to be performed, XII. Accounting, Auditing, and Financial Reporting To comply with prevailing local, state, and federal regulatiora.s relative to accounting, auditing, and financial reporting. Accounting practices and financial reporting shall conform to generally accepted accounting principles as promulgated by the Governmental Accounting Standards Board (GASB), the American Institute of Certified Public Accountants, (AICPA), and the Government Finance Officers Association (GFOA). The Board shall select an independent firm of certified public accountants to perform an annual audit of all operations ■ Accounting - Town's Finance Director is responsible for establishing the chart of accounts and for properly recording financial transactions. External Auditing - Town will be audited annually by outside independent accountants (auditors). The auditors must be a CPA firm and must demonstrate significant experience in the field of local government auditing. They must conduct the town's audit in accordance with generally accepted auditing standards and be knowledgeable in the Government Finance Officers Association Certificate of Achievement program. The auditors' report on town's financial statements will be completed within a timely period of the Town's fiscal year-end. The Town will not require auditor rotation, but will circulate request for proposal for audit services on a periodic basis as deemed appropriate. 0 ■ External Financial Reporting - Town will prepare and publish a comprehensive annual financial report (CAFR). The CAFR will be prepared in accordance with generally accepted accounting principles and will be presented annually to the Government Finance Officers Association (GFOA) for evaluation and awarding of the Certificate of Achievement for Excellence in Financial Reporting. ■ Internal Financial Reporting - The Finance Department will prepare internal financial reports sufficient for management to plan, monitor, and control Town's financial affairs. XIII. Operating Budget ■ Preparation — Town's annual operating budget will be prepared by a budget team consisting of the Town Manager, Finance Director and other staff members appointed by the Town Manager to participate. A budget preparation calendar and timetable will be established and followed in accordance with State law. ■ Balanced Budget - Current operating revenues including Property Tax Reduction Sales Tax transfers, which can be used for operations, will be sufficient to support current operating expenditures. Annually recurring revenue will not be less than annually recurring operating budget expenditures (operating budget minus capital outlay. Debt or bond financing will not be used to finance current expenditures. ■ Budget Amendments - The Finance Department will. monitor all financial operations. The budget team will decide whether to proceed with the budget amendment and, if so, will then present the matter to the Board of Aldermen. If the Board decides a budget amendment is necessary, the amendment is adopted in ordinance format and the necessary budgetary changes are then made. ■ Reporting - Monthly financial reports will be prepared by the Finance Department and distributed to and reviewed by each department head. hnformation obtained from financial reports and other operating reports is to be used by department heads to monitor and control the budget as authorized by the Town Manager. • Performance Measures & ProductivitIndicators - Where appropriate, performance measures and productivity indicators will be used as guidelines and reviewed for efficiency and effectiveness. This information will be included in the annual budget process. XIV. Asset Management ■ Investments — The Town's Board of Alden -nen have formally approved a separate Investment Policy for the Town of Westlake that meets the requirements of the Public Funds Investment Act (PFIA), Section 2256 of the Texas Local Government Code. Town's investment practices will be conducted in accordance with this policy. ■ Cash Management - Town's cash flow will be managed to maxiunize the cash available to invest. ■ Investment Performance - As per state law, the Finance Director will issue quarterly reports on investment activity to the Board of Aldermen. ■ Fixed Assets and hnventory - Such assets will be reasonably safeguarded and properly accounted for and prudently insured. The fixed asset inventory will be updated regularly. VA Capitalization Criteria — For purposes of budgeting and accounting classification, the following criteria must be capitalized: o The asset is owned by the Town of Westlake o The expected useful life of the asset must be longer than one year, or extend the life on an identifiable existing asset by more than one year o The original cost of the asset must be at least $5,000 o The asset must be tangible o On-going repairs and general maintenance are not capitalized Q New Purchases — All costs associated with bringing the asset into working order will be capitalized as part of the asset cost. This will include start up costs, engineering or consultant type fees as part of the asset cost once the decision or commitment to purchase the asset is made. The cost of land acquired should include all related costs associated with its purchase o Improvements and Replacement — linprovem:;nt will be capitalized when they extend the original life of an asset or when they make the asset more valuable than it was originally. The replacement of assets components will normally be expenses unless they are a significant nature and meet all the capitalization criteria. 8