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Home My WebLink AboutPACKET Town Board Study Session 2021-09-28 September 28, 2021 5:20 p.m. – 6:45 p.m. Board Room 5:00 p.m. -Dinner In Person Meeting – Mayor, Trustees, Staff and Public To view or listen to the Study Session by Zoom Webinar ONLINE (Zoom Webinar): https://zoom.us/j/91077906778 Webinar ID: 910 7790 6778 CALL-IN (Telephone Option): 877-853-5257 (toll-free) Meeting ID: 910 7790 6778 If you are joining the Zoom meeting and are experiencing technical difficulties, staff will be available by phone for assistance 30 minutes prior to the start of the meeting at 970-577-4777. 5:20 p.m. The Future of Fire Safety in the Estes Valley. (Chief Wolf) 5:50 p.m. Policy 660 - Fund Balance Periodic Review. (Director Hudson) 6:20 p.m. Trustee Talks and Mayor’s Chat Meetings. (Board Discussion) 6:35 p.m. Trustee & Administrator Comments & Questions. 6:40 p.m. Future Study Session Agenda Items. (Board Discussion) 6:45 p.m. Adjourn for Town Board Meeting. Informal discussion among Trustees concerning agenda items or other Town matters may occur before this meeting at approximately 5:00 p.m. AGENDA TOWN BOARD STUDY SESSION Page 1 Page 2 9/28/2021 Cameron Peak Fire, Glen Haven Burn Out Operation, October 17, 2020 David Wolf, Ph.D., Fire Chief TOEP Board September 2021 Outline Estes Valley Fire Protection District The District & Origins Scope of Services The Fire Problem in the Estes Valley What’s Being Done The Future of Fire Safety Anticipated Needs 2 Page 3 9/28/2021 What Do We Do? Fulfill the mission of the organization Provide the residents and guests of the Estes Valley with superior Fire Prevention, Fire Protection, and Emergency Medical Services in a safe and efficient manner 7 full time employees and 40 volunteers 3 Who Do We Serve? Data from: CRAIG NFPA Dashboard 4 Page 4 9/28/2021 District Origins 5 Estes Park Volunteer Fire Department All volunteer, founded in 1907 Formation of Estes Valley Fire District Passed in 2010 Cover nearly 70 sq mi, including Estes Park and unincorporated Larimer County Mutual aid agreements with adjacent jurisdictions RMNP Glen Haven Big Elk Pinewood Lyons Loveland LCSO LCSO LCSO Estes Valley 7172 Organization Elected Board of Directors Three Divisions: Admin, Operations, Prevention Mostly volunteer workforce (40) 6 BOARD OF DIRECTORS Elected FIRE CHIEF David Wolf DIVISION CHIEF OF PREVENTION Kevin Sullivan OFFICE MANAGER Erika Goetz VOLUNTEER CAPTAIN VOLUNTEER CAPTAIN FIRE INSPECTOR Raina Eschelman DIVISION CHIEF OF OPERATIONS Paul Capo VOLUNTEER ASSISTANT CHIEF TRAINING LIEUTENANT / VOLUNTEER COORDINATOR Chris Thomas FIRE INSPECTOR Sandy Garber Page 5 9/28/2021 Administration Division Finances $1.9 million annual budget Revenues from sales and property taxes Contracts, procurement, billing Human Resources Responsible for all staff and volunteers Agency compliance, policies Public Information Officer 7 Revenue – Historic 8 Source 2016 2017 2018 2019 2020 2021 Adopted 2021 Updated Property Tax $583,100 $593,587 $625,517 $629,104 $718,784 $727,100 $727,100 Sales Tax $731,853 $775,260 $838,413 $915,003 $847,430 $846,378 $1,071,595 Other Revenue $173,351 $159,524 $133,568 $291,029 $324,275 $285,936 $326,376 TOTAL $1,488,305 $1,528,371 $1,599,680 $1,835,136 $1,890,489 $1,859,414 $2,125,072 •Specific Ownership Tax •Plan reviews •Training •Grants •Donations •Investment income •Wildfire reimbursement 35% 50% 15% Page 6 9/28/2021 Prevention Division Safety of existing occupancies (commercial) Safety of new construction Plan Review Site inspections Education Wildfire Public Life Safety Arson investigations 9 Prevention – Range of Services Code Adoption International Fire Code (IFC) in place since 2011 Currently on 2018 IFC (since 2019) Stay in alignment with Town of Estes Park Requires ratification by TOEP and LC Plan Review Inspect all new constructions and remodels against IFCrequirements in Town & County 2021 Q1&2 exceeded all of 2016 Inspection Program (existing occupancies) Prioritize based on risk Goal: reduce violations through education 10 Page 7 9/28/2021 Communication – Businesses Education first – want buy in to process Developing resources to help show what right looks like 11 Operations Division Emergency response Structure fires Wildland fires Emergency Medical Motor Vehicle Crashes Search & Rescue / Technical Rope Rescue Water Rescue (swiftwater & ice) Hazardous Materials Training Weekly Training Fire Academies Specialty training 12 Page 8 9/28/2021 Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total 516 451 649 651 602 611 667 755 621 609 570 13 Impacts On Our Call Response WildfiresFloodChange in EMS protocol COVIDCall Type Breakdown 14 FIRES Structure Fires – 14 Vegetation Fires – 18 Trash Fires – 4 RESCUES MVCs – 64 (91) Tech Rescue – 16 Water Rescue – 1 SERVICE/INTENT Smoke Invest. – 77 Smoke/CO Alarm – 93 Cancelled Enroute – 30 No Incident Found – 18 Since 2016: 90% of structure fires in residential structures 60% of structure fires in short-term rentals 880 / 7,390 = 12% of occupancies Page 9 9/28/2021 Call Seasonality Strongly driven by tourism 15 Long History 2020 1. Cameron Peak 208,663 2. East Troublesome 192,560 3. Calwood 10,106 4. Lefthand Canyon 460 5. Lewstone 165 2012 6. High Park 87,284 7. Fern Lake 3,500 2010 8. Cow Creek 1,500 2002 9. Big Elk 4,800 2000 10. Bobcat Ridge 10,599 (EVFPD ≈ 45,000 acres)16 Maps available on NIFC FTP 1 2 3 4 56 7 8 9 10 2 Page 10 9/28/2021 2000 – 2020 The problem is NOT going away… Of the 20 largest fires in Colorado state history: 20 (100%) in last 20 yrs 15 (75%) in last 10 yrs 11 (55%) in last 5 yrs 4 (20%) last year (plus 2020 Mullen Fire that burned in from WY) 17 Communication – Wildfire If you’re fortunate to live in or visit the Estes Valley, you’re within the Wildland Urban Interface (WUI) with elevated risk of wildfire Property owners must take responsibility, ideally following FireWise principles Visitors and Guests should be educated about the risk and how they can help be safe with fire 18 Page 11 9/28/2021 So What Can We Do About It? Goal 1: Keep Fire Out Fuel treatments Large-scale partnerships Community responsibility Goal 2: Be Ready When Fires Occur Ready, Set, Go! Program Resources available Personal responsibility Fire response (reactionary) 19 Fuel Treatments 20 Estes Valley Fire Protection District (this buffer has prevented disaster more than once) Maps available on NIFC FTP Page 12 9/28/2021 Home hardening (FireWise) Fuels thinning Is my home easy for a firefighter to defend? 21 Gathered important information Signed up for alerts Assemble emergency supply kit Prepared to evacuate Following pertinent news and information Consider multiple routes Visitor & Guest Education Not everyone understands wildfire risk How can we communicate the need to protect our beautiful community? Safety with campfires Safety with smoking materials (place to discard) Ability to get emergency alerts Unaware, Unable, Unwilling – DC Frank Viscuso 22 Page 13 9/28/2021 Current Projects Update of Community Wildfire Protection Plan (CWPP) Working with Estes Valley Watershed Coalition (EVWC) Contracting with Ember Alliance Community Planning Assistance for Wildfire (CPAW) National grant program supporting Town Ready, Set, Go! Program Funded by International Association of Fire Chiefs National grant program for visitor education Fuels reduction project coordination Working with federal partners (RMNP and USFS) and EVWC 23 The Future of Fire Safety Ultimate Win – No Emergencies (probably not realistic, thanks to the three leading causes of fire…) Realistic Hope Prevent as many emergencies as possible Keep small incidents small Effective response to large incidents (utilizing mutual aid relationships) 24 Page 14 9/28/2021 How Do We Accomplish? Adoption and application of codes International Fire Code (Fire District) International Residential Code (Town/County) International Business Code (Town/County) International Wildland Urban Interface Code (??) Majority of codes only applies to new construction after adoption Requires adequate staff for plan review, inspections, follow up 25 Anticipated Needs – EVFPD Prevention Adoption of updated codes (3-year cycle) and possibly IWUIC Consistency between Town and County Staff to keep up with new construction Staff to keep up with existing occupancies Wildfire Risk Community needs to take more active role in mitigation work Public / Private partnerships to do fuels reduction work (EVWC leading the way) Sort yard / slash collection in Valley (Town/County partnership) Operations Maintain equipment and staffing to handle emergencies, growing as needed Emergency Management / Planning with partners Education Educate residents and guests of risks 26 Page 15 9/28/2021 27 Page 16 FINANCE DEPARTMENT Report To: Honorable Mayor Koenig Board of Trustees Through: Town Administrator Machalek From: Duane Hudson, Finance Director Date: 9-28-2021 RE: Policy 660 - Fund Balance Periodic Review Purpose of Study Session Item: Perform a periodic review of Fund Balance Policy # 660 as requested by the Town Board. Town Board Direction Requested: Fund Balance Policy # 660 requires annual review and if any changes are recommended, revisions to be presented to the Town Board for formal approval. The Finance Department does not have any recommended changes to the current policy. However, at the request of Town Board, this policy is being presented at this time for your review and discussion. Present Situation: Fund Balance Policy # 660 was last updated effective July 31, 2019. The policy currently requires a 25% reserve in the General Fund based on unassigned fund balance divided by total expenditures less capital outlay. It also provides guidance on the other funds of the Town. Capital outlay is removed from the General Fund reserve calculation since in the time of financial crisis, capital projects can be put on hold. The 25% reserve should then be sufficient to cover normal operations for 3 months with zero revenue coming in. Most likely, revenue would still come in at a reduced rate, depending on the nature of the event, allowing the Town even more time to take appropriate measures as deemed necessary. The Government Finance Officers Association (GFOA) recommends a minimum of 2 months of normal operating expenditures (approx. 17%) in the General Fund and then adjust this up based on local economic conditions such as volatility or seasonality of revenues, etc. The 25% reserve meets this best practice. A copy of the GFOA best practice guidance is attached for your consideration. Page 17 Proposal: The Finance Department does not have any recommended changes at this time. The policy and reserve levels are being presented for Town Board discussion and consideration of possible revisions. Advantages: Existing reserve requirements provide at least a 3 month operating reserve, and probably longer, to provide time for the Town to develop appropriate responses to any future event. Disadvantages: Without detailed explanations, large reserves can make a negative impression to cost conscious residents and other interested parties. Finance/Resource Impact: General Fund 25% Reserve Requirement at Dec 31 Actual 2019 - $4,253,141 Actual 2020 - $4,145,869 Projected 2021 - $5,063,053 Proposed 2022 - $5,694,919 Level of Public Interest No comments or concerns have been received. Attachments: 1.Policy 660 - Fund Balance 2.GFOA Best Practice – Fund Balance Guidelines for the GF Page 18 Effective Period: Until superceded Review Schedule: Annually Effective Date: 07/31/2019 References: Finance Policies Manual 601 FINANCE 660 Fund Balance 1.PURPOSE The purpose of this policy is to establish appropriate levels of reserves (fund balance) for each fund within the Town's operations, recognizing the unique needs and differing situations for the various funds. 2.POLICY 1.Definitions: a.Fund balance is the net position of a governmental fund (difference between assets, liabilities, deferred outflows of resources, and deferred inflows of resources), 2012 GAAFR. p1066. Fund balance is the cumulative difference over time of all revenues and expenditures. Fund balance is accumulated when revenues exceed expenditures and decreased when revenues are less than expenditures. It serves as a measure of financial resources available for current operations. Available fund balance can be dramatically affected by levels of restriction on a fund (see Supplementary Information section of policy). b.Fund balance percentage is defined as <funassigned fund balance divided by total expenditures less capital outlay". TABOR reserves may be used as part of the calculation (added to numerator). 2.Specific Fund Balance policies a.Governmental Fund Types Document: Fund Balance Revisions: 1.0 i.General Fund -Town Board has established that fund balance percentage should not fall below 25%. This provides a minimum of 3% as the Tabor reserve and 22% for economic downturns and other financial emergencies that may result from unanticipated disasters. General Fund fund balance percentage can be dramatically affected by timing resulting from grant-related incomes and expenditures. Grant income/expenditures may be taken into account as part of capital outlay when calculating fund balance percentage. Town of Estes Park, Finance 7/31/2019 Page 1 of 7 Attachment 1 Page 19 ii.Capital Fund (Community Reinvestment) -In general, no minimum reserve requirement. Funds can be spent to zero balance annually. Fund balance should never be less than the total of funds collected, but not yet spent, that are restricted for a specific purpose (bond proceeds, grants, donations). iii.Special Revenue Funds (Conservation Trust, Open Space, Emergency Response, Community Center, Trails. Streets) -In general, no minimum reserve requirement. Funds can be spent to a zero balance annually. Fund balance should never be less than the total of funds collected, but not yet spent, that are restricted for a specific purpose. b.Proprietary Fund Types -Enterprise i.Light and Power Fund - 1.The L&P Fund has a rate maintenance covenant (restricted funds) of 1.25 (total revenues -operation and maintenance expenses (total expenditures -capital -future vehicle replacement -capital-related engineering costs depreciation)/debt service). 2.The Town also seeks to maintain a self-imposed 90-day operating coverage ratio of > 1.00, as defined by ((fund balance I ((total expenditures -capital -future vehicle replacement-capital-related engineering costs) x .25). 3.The L&P Fund seeks to maintain and replace its infrastructure, through rate studies/implementation, at a pace that at least matches asset depreciation rates. ii.Water Fund - 1.The Water Fund has operations and maintenance (O&M) requirements (restricted funds) as defined by the Water Loan covenants. 2.The Town also seeks to maintain a self-imposed debt coverage ratio of 1.10 (same definition as in L&P Fund). 3.The Water Fund seeks to maintain and replace its infrastructure, through rate studies/implementation, at a pace that at least matches asset depreciation rates. c.Proprietary Fund Types -Internal Service Document: Fund Balance Revisions: 1.0 i.Medical Insurance Fund -This fund is designed to cover premiums, claims and other operating expenses related to the Town's self funded plan to provide employees medical and dental insurance. Employees and user departments are charged appropriately to cover these costs. Reserves shall be maintained at between 30%-40% of the 3-year rolling average of annual claims. ii.Fleet Fund -This fund is designed to provide for ongoing maintenance and repair of the Town (and other contracted) fleet of vehicles. The fund is designed to cover its operating and capital Town of Estes Park, Finance 7/31/2019 Page 2 of 7 Page 20 costs annually through charges for services to the user departments. Due to potential fluctuations in operating costs for fuel and unexpected repairs, etc., the Fleet Fund shall maintain an operating reserve of at least 10%. The Fleet Fund should also maintain a capital replacement program commensurate with the rate of depreciation within the Fund. iii.IT Fund -The IT fund is designed to provide ongoing upgrades and maintenance to the Town's IT infrastructure and operating systems. The fund is designed to cover its operating and capital costs annually through charges for services to the user departments. Reserves shall be maintained between $100,000-$200,000 to allow for emergencies or unanticipated technology needs. The IT Fund should also maintain a capital replacement program commensurate with the estimated replacement costs of existing equipment. iv.Vehicle Replacement Fund -This fund is designed to provide replacement vehicles to appropriate user departments. Funds are accumulated at rates approximating depreciation over the life of vehicle, at estimated replacement value of the vehicle. Reserves will fluctuate based on the replacement schedule, but the unrestricted reserve balance should maintain a balance of at least 15% of the fleet replacement value. v.Risk Management Fund -This fund is designed to accumulate risk management costs, such as insurance costs, in one cost center for all Town operations. Charges to the individual funds for each cost center's proportion of the risk management costs provide revenues to the Risk Management Fund to pay operating costs. In general, there are no minimum reserve requirements and reserves will be accumulated to mitigate unexpected claims, deductibles and other liability costs as deemed appropriate. d.Fiduciary Fund-Currently, the Town does not have any Fiduciary Funds but these funds are held by the Town in a fiduciary capacity and are available for specific restricted purposes. Similar to Special Revenue Funds above, there are, in general, no minimum reserve requirements. Funds can be spent to a zero balance annually. Fund balance should never be less than the total of funds collected, but not yet spent, that are restricted for the specific purposes. Supplementary information: 3.Fund Balance Classifications: The appropriate fund balance classifications shall be included in each governmental fund as necessary or required by GAAP. In the CAFR, all governmental funds report various fund classifications that comprise a hierarchy primarily based on the extent to which the Town is bound to Document: Fund Balance Revisions: 1.0 Town of Estes Park, Finance 7/31/2019 Page 3 of 7 Page 21 honor constraints on the specific purposes for which amounts in those funds can be spent. The Town may or may not report all fund balance types in any given reporting period, based on actual circumstances and activity. It is not expected or required that all funds report all possible fund balance classifications. Provisions of GASS 54 need not be applied to immaterial items. Policy cannot consider every situation that could occur; therefore, the Finance Director or designee shall have discretion to deviate should circumstances warrant. However, the following descriptions are a guideline of what can be expected to be appropriate in each fund balance classification. The categories within each classification will be reported in alphabetical order and not listed in any other order of significance. a.Non-spendable Fund Balance -The portion of fund balance that cannot be spent because it is either not in a spendable form (not expected to be converted to cash) or is legally or contractually required to be maintained intact (corpus or principal of a permanent fund). Non-spendable amounts should not be reported in a fund if the proceeds from the collection, conversion or sale of the asset are restricted, committed, or assigned. In such a situation, they should be included in the appropriate fund balance classification (restricted, committed or assigned) rather than as non spendable. i.Advances to Other Town Funds -The amount any Town fund owes the General Fund not expected to be repaid within two months of year end. The payments back to the General Fund will be av ailable for immediate appropriation by the Board for any purpose. ii.Inventories -The value of inventories that are not expected to be converted into cash. iii.Long-term Receivables -Long-term receivables for loans and notes, if not setup with an offsetting liability. iv.Prepaid Items -The value of prepaid assets. v.Property Acquired for Resale -The value of property acquired for resale. b.Restricted Fund Balance -The portion of fund balance constrained for a specific purpose by external parties (creditors-debt covenants, granters, contributors, or laws and regulations of other governments), constitutional provisions, or enabling legislation. Effectively, restrictions on fund balance may only be changed or lifted with the consent of the resource providers. Document: Fund Balance Revisions: 1.0 i.Capital Projects -Any amounts restricted by federal, state, or local governments or by enabling legislation for capital projects. ii.Citizen Initiatives -Any amounts restricted by citizens through enabling legislation. iii.Restricted Donations -Any amounts restricted by the donor for specific purposes. iv.Debt Service -Any amounts required to be held according to creditor requirements. Town of Estes Park, Finance 7/31/2019 Page 4 of 7 Page 22 v.Intergovernmental Agreements -Unspent intergovernmental grant/allocation/contract funding that must be used for specific programs as stipulated by the agreement. This includes any matching funds needed to spend the funds. If a deferred revenue amount has been recorded for any unearned revenue, this would result in no fund balance to report. vi.Legislative Restrictions -Any amounts restricted by federal, state, or local governments or by enabling legislation other than citizen initiatives or restrictions for capital projects. vii.TABOR Reserves -As set forth in the state constitution, Article X, Section 20 Taxpayer's Bill of Rights, passed by voters in 1992, requires that reserves equal to 3% of the fiscal year spending be established for declared emergencies. c.Committed Fund Balance -The portion of fund balance that can only be used for specific purposes according to limitations imposed by the Town Board by majority vote at a public meeting prior to the end of the fiscal year. The Board's commitment will therefore constitute "committed funds," a designation which will follow the funds even when transferred to another special revenue fund. If the actual amount of the commitment is not available by the end of the fiscal year, the actual amount should be calculated as soon as information is available but no later than March 1st of the subsequent year. The constraint may be removed or changed only by the same formal action of the Town Board. The restricted or committed proceeds of specific revenue sources should be expected to continue to comprise a substantial portion of the inflows reported in the fund. Other resources (eg. investment earnings, transfers in) also may be reported in the fund if those resources are restricted, committed, or assigned to the specified purpose of the fund. The Town should discontinue reporting a special revenue fund, and instead report the fund's remaining resources in the General Fund, if the Town no longer expects that a substantial portion of the inflows will derive from restricted or committed revenue sources. i.Capital Projects -Any unspent funds for a Board approved ongoing capital project that remain at fiscal year-end. This does not necessarily mean the assets will be capitalized. ii.Other Commitments -Any other funds approved by the Board using fund balance reserves. These will be reported by functions: i.e. general government, health and human services, judicial and public safety, recreation, or streets and highways. d.Assigned Fund Balance -The portion of fund balance set aside for planned or intended actions. The intended use may be expressed by the Board of Town Trustees or other individuals delegated by the Board (Town Administrator, Assistant Town Administrator, Finance Director) to assign funds to be used for a specific purpose. Fund balance may be assigned Document: Fund Balance Revisions: 1.0 Town of Estes Park, Finance 7/31/2019 Page 5 of 7 Page 23 after the end of the reporting period any time prior to March 1 st of the subsequent year. In governmental funds other than the general fund, assigned fund balance represents the amount that is not non-spendable, restricted, or committed. This indicates that resources in these funds are, at a minimum, "assigned" to be used for the purpose of that fund. Assigned funds cannot cause a deficit in the unassigned fund balance. i.Advances to Other Town Funds -The amount any Town fund owes another Town fund not expected to be repaid within two months of year end is an advance. Advances to other Town funds besides the General Fund should be reported as Assigned since the payments back to those funds will be used for the purpose of that fund. ii.Capital Projects -The estimated cost of planned or desired, but not approved, specific projects as requested by the Board of Town Trustees or other authorized individuals. This does not necessarily mean the assets will be capitalized iii. Subsequent Year Expenditures -Appropriation of existing fund balance to eliminate a projected budgetary deficit in the subsequent year's budget. This includes any carry-over funds which are intended to be used for a specific purpose. iv.The adopted budget resolution generally authorizes a government to spend budgeted revenues and other financing sources and, therefore, does not impose constraints on the use of existing resources. However, if a portion of existing fund balance is included as a budgetary resource in the subsequent year's budget to eliminate a projected excess of expected expenditures over expected revenues, then that portion of fund balance (in an amount no greater than is necessary to eliminate the excess) should be classified as assigned. The amount should not be classified as committed because the Board of Town Trustees does not have to take formal action to remove or modify that specific use -the purpose of the assignment expires with the appropriation. e.Unassigned Fund Balance -This is the residual portion of General Fund balance that does not meet any of the above criteria. It represents resources available for immediate appropriation by the Board for any purpose. Only the General Fund can report a positive unassigned fund balance. Although there is generally no set spending plan for the unassigned portion, there is a need to maintain a certain funding level to cover unexpected expenditures and revenue shortfalls. In funds other than the General Fund, the unassigned classification should be used only to report a deficit balance. 4.Order of Fund Balance Use -When multiple categories of fund balance are available for expenditure, the Town will start with the most restricted category and spend those funds first before moving down to the next category with available Document: Fund Balance Revisions: 1.0 Town of Estes Park, Finance 7/31/2019 Page 6 of 7 Page 24 funds. Therefore, fund balance is generally depleted in the order of restricted, committed, assigned, and unassigned. For example, if a construction project was being funded by bond proceeds and assigned fund balance, the Town would first use the bond proceeds to pay expenditures since use of bond proceeds is more restrictive than use of assigned fund balance. One exception is if the restricted funds have legal requirements that disallow it being spent first or that require matching funds. 3.PROCEDURE Funds are reviewed annually for policy compliance following production of the CAFR. Fund balance policy compliance is a required component of the annual Budget process. Todd� Document: Fund Balance Revisions: 1.0 Town of Estes Park, Finance 7/31/2019 Page 7 of 7 Page 25 9/20/21, 12:24 PM Fund Balance Guidelines for the General Fund https://www.gfoa.org/materials/fund-balance-guidelines-for-the-general-fund 1/6 In the context of nancial reporting, the term fund balance is used to describe the net position of governmental funds calculated in accordance with generally accepted accounting principles (GAAP). Budget professionals commonly use this same term to describe the net position of governmental funds calculated on a government’s budgetary basis.1 While in both cases fund balance is intended to serve as a measure of the nancial resources available in a governmental fund; it is essential that dierences between GAAP fund balance and budgetary fund balance be fully appreciated. 1. GAAP nancial statements report up to ve separate categories of fund balance based on the type and source of constraints placed on how resources can be spent (presented in descending order from most constraining to least constraining): nonspendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance.2 The total of the amounts in these last three categories (where the only constraint on spending, if any, is imposed by the government itself) is termed unrestricted fund balance. In contrast, budgetary fund balance, while it is subject to the same constraints on spending as GAAP fund balance, typically represents simply the total amount accumulated from prior years at a point in time. BEST PRACTICES Fund Balance Guidelines for the General Fund Governments should establish a formal policy on the level of unrestricted fund balance that should be maintained in the general fund for GAAP and budgetary purposes. Attachment 2 Page 26 9/20/21, 12:24 PM Fund Balance Guidelines for the General Fund https://www.gfoa.org/materials/fund-balance-guidelines-for-the-general-fund 2/6 2. The calculation of GAAP fund balance and budgetary fund balance sometimes is complicated by the use of sub-funds within the general fund. In such cases, GAAP fund balance includes amounts from all of the subfunds, whereas budgetary fund balance typically does not. 3. Often the timing of the recognition of revenues and expenditures is dierent for purposes of GAAP nancial reporting and budgeting. For example, encumbrances arising from purchase orders often are recognized as expenditures for budgetary purposes, but never for the preparation of GAAP nancial statements. The eect of these and other dierences on the amounts reported as GAAP fund balance and budgetary fund balance in the general fund should be claried, understood, and documented. It is essential that governments maintain adequate levels of fund balance to mitigate current and future risks (e.g., revenue shortfalls and unanticipated expenditures) and to ensure stable tax rates. In most cases, discussions of fund balance will properly focus on a government’s general fund. Nonetheless, nancial resources available in other funds should also be considered in assessing the adequacy of unrestricted fund balance in the general fund. GFOA recommends that governments establish a formal policy on the level of unrestricted fund balance that should be maintained in the general fund for GAAP and budgetary purposes.3 Such a guideline should be set by the appropriate policy body and articulate a framework and process for how the government would increase or decrease the level of unrestricted fund balance over a specic time period.4In particular, governments should provide broad guidance in the policy for how resources will be directed to replenish fund balance should the balance fall below the level prescribed. Appropriate Level. The adequacy of unrestricted fund balance in the general fund should take into account each government’s own unique circumstances. For example, governments that may be vulnerable to natural disasters, more dependent on a volatile revenue source, or potentially subject to cuts in state aid and/or federal grants may need to maintain a higher level in the unrestricted fund balance. Articulating these risks in a fund balance policy makes Page 27 9/20/21, 12:24 PM Fund Balance Guidelines for the General Fund https://www.gfoa.org/materials/fund-balance-guidelines-for-the-general-fund 3/6 it easier to explain to stakeholders the rationale for a seemingly higher than normal level of fund balance that protects taxpayers and employees from unexpected changes in nancial condition. Nevertheless, GFOA recommends, at a minimum, that general-purpose governments, regardless of size, maintain unrestricted budgetary fund balance in their general fund of no less than two months of regular general fund operating revenues or regular general fund operating expenditures.5 The choice of revenues or expenditures as a basis of comparison may be dictated by what is more predictable in a government’s particular circumstances.6 Furthermore, a government’s particular situation often may require a level of unrestricted fund balance in the general fund signicantly in excess of this recommended minimum level. In any case, such measures should be applied within the context of long-term forecasting, thereby avoiding the risk of placing too much emphasis upon the level of unrestricted fund balance in the general fund at any one time. In establishing a policy governing the level of unrestricted fund balance in the general fund, a government should consider a variety of factors, including: 1. The predictability of its revenues and the volatility of its expenditures (i.e., higher levels of unrestricted fund balance may be needed if signicant revenue sources are subject to unpredictable uctuations or if operating expenditures are highly volatile); 2. Its perceived exposure to signicant one-time outlays (e.g., disasters, immediate capital needs, state budget cuts); 3. The potential drain upon general fund resources from other funds, as well as, the availability of resources in other funds; 4. The potential impact on the entity’s bond ratings and the corresponding increased cost of borrowed funds; 5. Commitments and assignments (i.e., governments may wish to maintain higher levels of unrestricted fund balance to compensate for any portion of unrestricted fund balance already committed or assigned by the government for a specic purpose). Governments may deem it appropriate to exclude from consideration resources that have been committed or assigned to some other purpose and focus on unassigned fund balance, rather than on unrestricted fund balance. Page 28 9/20/21, 12:24 PM Fund Balance Guidelines for the General Fund https://www.gfoa.org/materials/fund-balance-guidelines-for-the-general-fund 4/6 Use and Replenishment. The fund balance policy should dene conditions warranting its use, and if a fund balance falls below the government’s policy level, a solid plan to replenish it. In that context, the fund balance policy should: 1. Dene the time period within which and contingencies for which fund balances will be used; 2. Describe how the government’s expenditure and/or revenue levels will be adjusted to match any new economic realities that are behind the use of fund balance as a nancing bridge; 3. Describe the time period over which the components of fund balance will be replenished and the means by which they will be replenished. Generally, governments should seek to replenish their fund balances within one to three years of use. Specically, factors inuencing the replenishment time horizon include: 1. The budgetary reasons behind the fund balance targets; 2. Recovering from an extreme event; 3. Political continuity; 4. Financial planning time horizons; 5. Long-term forecasts and economic conditions; 6. External nancing expectations. Revenue sources that would typically be looked to for replenishment of a fund balance include nonrecurring revenues, budget surpluses, and excess resources in other funds (if legally permissible and there is a defensible rationale). Year-end surpluses are an appropriate source for replenishing fund balance. Unrestricted Fund Balance Above Formal Policy Requirement. In some cases, governments can nd themselves in a position with an amount of unrestricted fund balance in the general Page 29 9/20/21, 12:24 PM Fund Balance Guidelines for the General Fund https://www.gfoa.org/materials/fund-balance-guidelines-for-the-general-fund 5/6 fund over their formal policy reserve requirement even after taking into account potential nancial risks in the foreseeable future. Amounts over the formal policy may reect a structural trend, in which case governments should consider a policy as to how this would be addressed. Additionally, an education or communication strategy, or at a minimum, explanation of large changes in fund balance is encouraged. In all cases, use of those funds should be prohibited as a funding source for ongoing recurring expenditures. Notes: 1. For the sake of clarity, this recommended practice uses the terms GAAP fund balance and budgetary fund balance to distinguish these two dierent uses of the same term. 2. These categories are set forth in Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Denitions. 3. Sometimes restricted fund balance includes resources available to nance items that typically would require the use of unrestricted fund balance (e.g., a contingency reserve). In that case, such amounts should be included as part of unrestricted fund balance for purposes of analysis. 4. See Recommended Practice 4.1 of the National Advisory Council on State and Local Budgeting governments on the need to "maintain a prudent level of nancial resources to protect against reducing service levels or raising taxes and fees because of temporary revenue shortfalls or unpredicted one-time expenditures" (Recommended Practice 4.1). 5. In practice, a level of unrestricted fund balance signicantly lower than the recommended minimum may be appropriate for states and America’s largest governments (e.g., cities, counties, and school districts) because they often are in a better position to predict contingencies (for the same reason that an insurance company can more readily predict the number of accidents for a pool of 500,000 drivers than for a pool of fty), and because their revenues and expenditures often are more diversied and thus potentially less subject to volatility. Page 30 9/20/21, 12:24 PM Fund Balance Guidelines for the General Fund https://www.gfoa.org/materials/fund-balance-guidelines-for-the-general-fund 6/6 6. In either case, unusual items that would distort trends (e.g., one-time revenues and expenditures) should be excluded, whereas recurring transfers should be included. Once the decision has been made to compare unrestricted fund balance to either revenues and/or expenditures, that decision should be followed consistently from period to period. This best practice was previously titled Appropriate Level of Unrestricted Fund Balance in the General Fund. Board approval date: Wednesday, September 30, 2015 Page 31 Page 32 TOWN BOARD STUDY SESSION MEETING September 28, 2021 Item 3. Trustee Talks and Mayor’s Chat Meetings. No Packet Material will be provided for this item. Page 33 Page 34 October 12, 2021 • Trailblazer Broadband Project Update • Distributed Energy Discussion • Pre-Election Town Board Compensation • Vacation Home Waitlist Discussion October 26, 2021 • Paid Parking Program Results and Recommendation for 2022 • Estes Park Grand Prix • Ballot Questions Discussion Items Approved – Unscheduled: • 2019 Stormwater Recommendation Overview • Quarterly CompPAC Update • Park Planning and Pocket Parks • Downtown Loop Updates as Necessary Items for Town Board Consideration: None Future Town Board Study Session Agenda Items September 28, 2021 Page 35 Page 36