23. Fiscal Strategic Plan Cmte.
City Hall
10300 Torre Avenue
Cupertino, CA 95014-3255
Telephone: (408) 777-3220
Fax: (408) 777-3366
DEPARTMENT OF ADMINISTRATIVE SERVICES
CI OF
CUPEIUINO
SUMMARY
Agenda Item No: .~
Meeting Date: November 5, 2007
SUBJECT AND ISSUE
Review and Accept the Recommendation from the Fiscal Strategic Plan Committee on General
Fund and Capital Improvement Fund Reserves.
BACKGROUND
In 2000, the City Council established a formal reserve policy for the General Fund. Various
reserves were identified and a dollar amount assigned to each as noted below:
)> Economic Uncertainty I
)> Economic Uncertainty II
)> PERS Reserve
)> Capital Improvements (CIP)
$2,500,000
7,500,000
1,000,000
5,000,000
This $16 million reserve level is reviewed each year in conjunction with the budget process. The
reserves for Economic Uncertainty and PERS have not been drawn upon to date. The Capital
Improvements reserve, however, is considered an opportunity fund for Council to utilize for
desired CIP projects as they become available and has fluctuated over the years (see Attachment
A).
In conjunction with the fiscal year 07/08 budget discussions, Council asked that the Fiscal
Strategic Plan Committee review our reserve levels and make recommendations as to revised
categories and funding amounts, if necessary. The Committee met several times and reviewed
reserves. The review process consisted of identifying and comparing reserve levels to other
cities, applying inflation factors to our 2000 reserve amounts, reviewing what is currently
approved and unfunded in our Capital Improvement Program, and discussing actual needs of
Cupertino based on the last recession and our current revenue mix. Survey and Best Practice
Recommendations were as follows:
> Government Finance Officers' Association
(min of 5-15% of operating revenues), or
(min of one-two months of op exp)
> Cal Municipal Finance Officers' Association
(10-30% of op exp for cities surveyed)
$ 2,031,050 - $ 6,093,150
$ 3,336,000 - $ 6,672,000
$ 4,003,100 - $12,009,300
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Printed on Recycled Paper
> Caporicci & Larson, CPA survey
Average in California - 32%
Average in Santa Clara County - 43%
>. Current City of Cupertino Policy
with CIP Reserve
without CIP Reserve
without CIP and inflation factor
$12,809,920
$17,213,330
$16,000,000
$11,000,000
$17,486,000
Based on discussion and the information above, the Committee is recommending the following
as a funding goal for our reserves. Since the city is not in a position to immediately fund this
level, such increases, if approved by Council, will be funded over several years.
1. Eliminate the PERS reserve and move the $1 million into the Economic Uncertainty
Reserve I;
2. Increase Economic Uncertainty Reserve I by an additional $1.5 million;
3. Combine both Economic Uncertainty Reserves to result in a total of $12.5 million
(consistent with the average in California and the 30% or operating expenditure survey);
and
4. Retain the $5 million goal in the CIP Reserve but move this reserve to the CIP Fund.
5. First priority of funding will be the Economic Uncertainty Reserve, then a small-
unallocated amount in the General Fund for necessary midyear budget adjustments (up
to $500,000) and fmally the CIP Reserve.
RECOMMENDATION
Staff recommends the Council review and accept the recommendation from the Fiscal Strategic
Plan Committee on General Fund and Capital Improvement Fund Reserves.
Submitted by:
Approved for submission:
~a~
Carol A. Atwood
Director of Administrative Services
David W. Knapp
City Manager
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Ci of Cupertino
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General Fund Actual & Recommended Reserve Levels Attachment A
Fiscal CIP PERS Economic Economic Infrastructure
Year Reserve Reserve Uncertainty I Uncertainty II Sinking Fund Total
99/00 $5,000,000' $0 $2,500,000 $7,500,000. $0 $15,000,000 Actual
00/01 5,000,000 I 0 2,500,000 7,500,000 0 $15,000,000, Actual
01/02 5,000,000 0 2,500,000 7,500,000 0 $15,000,000 I Actual
02103 3,099,000 0 2,500,000, 7,500,000 0: $13,099,000 Actual
03/04 481,000 1,000,000 2,500,000 ' 7,500,000 0 $11,481,000 Actual
04/05 5,000,000 1,000,000 2,500,000 ! 7,500,000 0 $16,000,000 Actual
05/06 5,000,0001 1,000,000 2,500,0001 7,500,000 0 $16,000,000 Actual
06/07 5,000,0001 1,000,000 3,500,000 ! 7,500,000 500,000 $17,500,000 ' Actual
07/08 4,235,OOOt 0 5,000,000 ! 7,500,000 600,000 $17,335,000 Pro. ected
08/09 Or 0 5,000,000 7,500,000 700,000 $13,200,000 Pro'ected
09/10 1,310,0001 0 5,000,000 7,500,000 800,000 $14,610,000 ' Projected
10/11 1,783,000 ! 0 5,000,000' 7,500,000 900,000 $15,183,000 Pro'ected
11/12 1,828,0001 0 5,000,000 7,500,000 1,000,000 $15,328,000, Pro'ected
I
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
I m Series1 I
99/00 00/01 01102 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12
,
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