Auburn updates policy for reserve funding

The Auburn City Council officially adopted a new Fiscal Management Policy last week, updating the city's reserve levels. The city updated the policy to set guidelines for future General Fund balance and reserves, establishing fund balance classifications which indicate what specific fund categories can be spent on. One element of the Fiscal Management Plan includes Economic Uncertainty, which aims to protect the General Fund against unpredictable fluctuations in major revenues such as property, sales and transient occupancy taxes and grant funding. The proposed target of this reserve is to be up to 40 percent of anticipated sales tax in the coming fiscal year. For the most recently adopted budget, the money set aside for economic uncertainty grew from $2.77 million to $3.4 million. "This builds us that opportunity in case something were to change dramatically in our tax base, it would give us some time to react," said Nathan Bagwill, administrative services director. The economic uncertainty portion of the policy will be reviewed annually. The plan also includes a Pension Stability reserve, currently set at $1 million. These funds go toward unanticipated pension-related expenses that would otherwise cause a strain on city resources. Self-insurance balances represent future unemployment and workers compensation claims against the city. This portion of the Fiscal Management Plan did not change. At the conclusion of a fiscal year, any general funds in excess of the expenditures from the previous year will be programmed to replenish or modify the city's four reserve categories. Any remaining funds will be available for capital expenditures, including one-time projects and major equipment and vehicle replacements through the city's Capital Improvement Plan. The staff report on the Fiscal Management Plan stated the city has vehicle and equipment needs such as fire apparatuses and police and transit vehicles. "With the anticipated state requirements of electric vehicles in the coming future, these funds are important to the position of the City to proactively schedule and replace its fleet as needed," the staff report stated. This Fiscal Management Policy updates a previous Fund Balance Policy which was last adopted in 2015. The newly adopted plan splits the city's reserve between an economic contingency reserve, pension unfunded liability reserve, prepaid insurance cost and employee unfunded liability reserve. Any excess funds go toward a fund balance for future projects and major equipment replacement. City Manager Sean Rabé said these categories are very similar to other cities. In Auburn's most recently adopted budget, the city has nearly $8.6 million set aside in these categories.