HomeMy WebLinkAbout08-140 - ADMIN Resolution - City Council - 2008/11/03RESOLUTION NO. 08-140
RESOLUTION ADOPTING THE DEBT POLICY, FUND BALANCE POLICY,
AND MODIFYING THE INVESTMENT POLICY FOR
THE CITY OF ST. LOUIS PARK, MN
WHEREAS, City Council desires to establish guidelines for financial management practices;
and
WHEREAS, staff has reviewed industry best practices, guidance from the Office of State
Auditor, Government Finance Officers Association, and bond rating agency recommended policies;
and
WHEREAS, the City Council of the City of St. Louis Park has reviewed proposed policies
with the City Manager and Finance Director.
NOW THEREFORE BE IT RESOLVED by the City Council of the City of St. Louis
Park, Minnesota, that:
1. The Debt Policy, Fund Balance Policy, and Investment Policy are hereby approved as presented.
2. City staff is directed to consider the implications of these policies prior to recommending the
nual budget, capital improvement plan, and long-range financial management plan.
Reviewe4 for Administration:
Ci
Attest:
Adopted the City Council November 3, 2008
Mayor /
City of St. Louis Park
Debt Policies
October 27, 2008
It is the policy of the City of St. Louis Park to establish guidelines for the use of debt in
financing capital acquisitions, repayment of debt, and management of the overall level of
debt in the city .
r I. Credit Ratings: The City of St Louis Park seeks to maintain the highest possible
credit ratings for all categones of short- and Long -tern General Obligation debt that
can be achieved without compromising delivery of basic City services and
achievement of adopted City policy objectives.
The City recognizes that external economic, natural, or other events may from time
to time affect the creditworthiness of its debt. Nevertheless, the Mayor and City
Council are committed to ensunng that actions within their control are prudent and
consistent with the highest standards of public financial management, and supportive
of the creditworthiness objectives defined herein.
II. Financial Disclosure: The City is committed to full and complete financial
disclosure, and to cooperating fully with rating agencies, institutional and individual
investors, City departments and agencies, other levels of government, and the
general public to share clear, comprehensible, and accurate financial information
The City is committed to meeting disclosure requirements on a timely and
comprehensive basis.
Official statements accompanying debt issues, Comprehensive Annual Financial
Reports, and continuing disclosure statements will meet (at a minimum) the
standards articulated by the Municipal Standards Rulemaking Board (MSRB), the
Government Accounting Standards Board (GASB), the National Federation of
Municipal Analysts, the Secunties and Exchange Commission (SEC), and Generally
Accepted Accounting Pnnciples (GAAP). The Finance Department shall be
responsible for ongoing disclosure to established national information repositones
(NRMSRs) and for maintaining compliance with disclosure standards promulgated
by state and national regulatory bodies.
III. Debt Capacity: The City will keep outstanding debt within the limits prescnbed by
State statute and at levels consistent with its creditworthiness objectives
IV. Purposes and Uses of Debt
The City will normally rely on existing funds, project revenues, and grants from
other governments to finance capital projects such as major maintenance, equipment
acquisition, and small development projects. Debt may be used for capital projects
only when a project generates revenues over time that are used to retire the debt,
when debt is an appropriate means to achieve a fair allocation of costs between
current and future beneficiaries.
a. Asset Life: The City will consider the use of debt for the acquisition,
development, replacement, maintenance, or expansion of an asset only if it
St Louis Park Debt Policy 1
has a useful life of at least five years. Debt will not be issued for penods
exceeding the useful life or average useful lives of the project or projects
to be financed
b Project Financing: In general, the City expects to make a cash
contnbution to any project with an expected useful life of less than 10
years, rather than relying on 100% debt financing.
c Debt Standards and Structure
Debt will be structured for the shortest penod consistent with a fair
allocation of costs to current and future beneficiaries or users Debt will be
structured to achieve the lowest possible net cost to the City given market
conditions, the urgency of the capital project, net revenues expected from
the project (if any), and the nature and type of secunty provided.
Moreover, to the extent possible, the City will design the repayment of its
overall debt so as to recapture rapidly its credit capacity for future use.
The City shall stnve to repay at least 18 percent of the pnncipal amount of
its total general obligation debt within five years and at least 35 percent
within ten years.
d. Backloading: The City will seek to structure debt with level pnncipal
and interest costs over the life of the debt. "Backloading" of costs will be
considered only when natural disasters or extraordinary or unanticipated
external factors make the short-term cost of the debt prohibitive, when the
benefits derived from the debt issuance can clearly be demonstrated to be
greater in the future than in the present, when such structuring is beneficial
to the City's overall amortization schedule, or when such structuring will
allow debt service to more closely match project revenues during the early
years of the project's operation
e Variable Rate Debt: The City may choose to issue secunties that pay a
rate of interest that varies according to pre -determined formula or results
from a penodic remarketing of the securities, consistent with state law and
covenants of pre-existing bonds, and depending on market conditions.
The City will have no more than 15% of its outstanding general obligation
debt in variable rate form.
V. Refundings: Penodic reviews of all outstanding debt will be undertaken to
determine refunding opportunities. Refunding will be considered (within federal
tax law constraints) if and when there is a net economic benefit of the refunding
or the refunding is essential in order to modernize covenants to thereby improve
operations and management.
VI.
Debt Administration and Process
In general, City debt will be issued through a competitive bidding process. Bids
will be awarded on a true interest cost basis (TIC), providing other bidding
requirements are satisfied. In the event that the -City receives more than one bid
with identical TICs, the tie may be broken by a flip of a coin.
a. Financial Advisor: The City will retain an external financial advisor, to
be selected for a term of up to four years, through a competitive process
St Louis Park Debt Policy 2
administered by the City's Finance Division of the Executive Services
Department. The utilization of the financial advisor for particular bond
sales will be at the discretion of the Finance Director on a case by case
basis and pursuant to the financial advisory services contract The
financial advisors will have comprehensive municipal debt issuance
expenence with diverse financial structunng requirements and pncing of
municipal secunties.
b. Bond Counsel: The City will retain external bond counsel for all debt
issues. No debt will be issued by the City without a written opinion by
bond counsel affirming that the City is authonzed to issue the debt, stating
that the City has met all state constitutional and statutory requirements
necessary for issuance, and determining the debt's federal income tax
status.
c. Fiscal Agents: The Finance Department will utilize a fiscal agent on all
City indebtedness Fiscal agent fees for outstanding bonds will be paid
from the Bond Interest and Redemption Fund, unless specified otherwise
by the Director of Finance.
VII Arbitrage Compliance: The Finance Director shall maintain a system of record
keeping and reporting to meet the arbitrage rebate compliance requirements of
federal tax code
St Louis Park Debt Policy 3
City of St. Louis Park
Fund Balance Policy
October 27, 2008
The purpose of the fund balance policies is to establish appropnate fund balance levels for each
fund that is primarily supported by property tax revenues or user fees These policies will ensure
that adequate resources are available to meet cash flow needs for carrying out the regular
operations of the City, as well as to meet the fund balance requirements identified in the City's
long range financial plan. The funds that will be addressed in this policy are. General Fund,
Parks & Recreation, Park Improvement, Pavement Management, and Enterpnse Funds.
I. General Fund
The General Fund is established to account for all revenues and expenditures which are
not required to be accounted for in other funds. Revenue sources include property taxes,
license and permit fees, fines and forfeits, service charges, intergovernmental revenues,
investment interest earnings, and transfers The General Fund's resources finance a wide
range of functions including the operations of general government, public safety, and
public works
The City will stnve to maintain a fund balance in the General Fund in the range of 35-
50% of the subsequent year's budgeted expenditures. Since a significant source of
revenue in the General Fund comes from property taxes, maintaining a fund balance that
is equal to at least five months of operating expenditures ensures that sufficient resources
are available to fund basic City functions between property tax settlements This range is
in conformance with guidance from the Office of the State Auditor (OSA). Amounts that
exceed 40% may be transferred out to other funds. A designation of fund balance may be
used to offset revenues earned in one year where substantial services are required to be
performed in the next fiscal period
II. Parks & Recreation
The Parks and Recreation Fund is a Special Revenue Fund that provides for both passive
and active recreational activities throughout the community. It receives the majority of
its funding from property taxes and user fees which finance specific activities These
activities are separated into several divisions: Organized Recreation, Park Maintenance,
Forestry, Nature Center, Recreation Center and Vehicle Maintenance. Fees for programs
within these divisions are reviewed each year to determine the appropriate amount of
revenue to offset the costs and yet keep the program affordable for participants. In some
cases, the fee charged is either more market driven or may be based on ability or
willingness to pay, which will set the fees above or below the direct costs of running an
individual program.
St. Louis Park Fund Balance Policy . 1
•
The City will strive to maintain a fund balance in the Parks and Recreation Fund in the
range of 10-25% of the subsequent year's budgeted expenditures. This lower percentage
is deemed adequate since many of the program revenues are received earlier in the year
than property tax settlements. Amounts that exceed 15% may be transferred out to other
funds.
III. Park Improvement Fund
The Park Improvement Fund pays for land, buildings, and infrastructure for the parks
within the city Property taxes and park dedication fees make up the majonty of the
revenues for this fund.
The City will stnve to maintain a fund balance in the Park Improvement Fund in an
amount sufficient to support the ongoing capital expenditures planned in the CIP
IV. Pavement Management Fund
The Pavement Management Fund is , used to account for the financing of street
rehabilitation projects. Revenue sources are provided mainly through property taxes,
franchise fees, and transfers from the Water Utility and Sanitary Sewer Utility Funds
Street projects are programmed into the City's Capital Improvement Plan and are
generally planned five years in advance.
IDThe City will stnve to maintain the fund balance in the Pavement Management Fund in
an amount sufficient to support the ongoing capital expenditures planned in the CIP.
V. Enterprise Funds
These funds were established to account for the operation of Water, Sewer, Solid Waste,
and Storm Water operations which are designed to be self-supporting from user charges.
a. Water Utility
This fund is used to account for the provision of water services to the customers of
the City related to administration, operations, maintenance, bilking and collection.
This fund is financed predominantly through user charges and investment income
The City will strive to maintain a fund balance in the Water Utility Fund in ,the range
of 35-50% (4-6 months) of the subsequent year's budgeted expenditures. Since a
significant source of revenue in the Water Utility Fund comes from user charges,
maintaining a fund balance that is equal to at least five months of operating
expenditures ensures that sufficient resources are available to fund basic City
functions between receipts of user charges. In addition, due to the age of water
infrastructure within the City, a higher percentage of fund balance is prudent to
address any potential issues that may arise.
St. Louis Park Fund Balance Policy 2
b. Sewer Utility
This fund is used to account for the provisions of sewer services to the customers of
the City. All activities necessary to provide this utility to the customers are
administration, operations, maintenance, billing and collection This fund is financed
predominantly through user charges and investment income
The City will strive to maintain a fund balance in the Sewer Utility Fund in the range
of 35-50% (4-6 months) of the subsequent year's budgeted expenditures. Since a
significant source of revenue in the Sewer Utility Fund comes from user charges,
maintaining a fund balance that is equal to at least five months of operating
expenditures ensures that sufficient resources are available to fund basic City
functions between receipts of user charges. In addition, due to the age of sewer
infrastructure within the City, a higher percentage of fund balance is prudent to
address any potential issues that may arise
c. Solid Waste Utility
This fund is used to account for the provisions of solid waste services to the
customers of the City related to collection, disposal and recycling of solid waste
This fund is financed predominantly through user charges and investment income.
The City will strive to maintain a fund balance in the Solid Waste Utility Fund in the
range of 25-35% of the subsequent year's budgeted expenditures Because of lower
fluctuation in this revenue stream, a lower percentage balance is justifiable Since a
significant source of revenue in the Solid Waste Utility Fund comes from user
charges, maintaining a fund balance that is equal to at least three months of operating
expenditures ensures that sufficient resources are available to fund basic City
functions between receipts of user charges.
d. Storm Water Utility
This fund is used to account for the provision of storm water to the customers of the
City related to administration, operations, maintenance, bilking and collection. This
fund is financed predominantly through user charges and investment income.
The City will strive to maintain a fund balance in the Storm Water Utility Fund in the
range of 25-35% of the subsequent year's budgeted expenditures Because of lower
fluctuation in this revenue stream, a lower percentage balance is justifiable. Since a
significant source of revenue in the Storm Water Utility Fund comes from user
charges, maintaining a fund balance that is equal to at least three months of operating
expenditures ensures that sufficient resources are available to fund basic City
functions between receipts of user charges.
St. Lows Park Fund Balance Policy 3
City of St. Louis Park
Investment Policy
October 27, 2008
It is the policy of the City of St. Louis Park to establish guidelines for the investment of
all public funds. This policy is designed to ensure the prudent management of public
funds, the availability of operating and capital funds when needed and providing the
highest investment return with maximum secunty and minimum nsk.
I. SCOPE
This policy applies to all financial assets of the City of St. Louis Park While
separate investment funds are created to accommodate reporting on certain
bonded indebtedness, individual investments are purchased using a pooled
approach for efficiency and maximum investment opportunity The City's funds
are defined in the City's Comprehensive Annual Financial Report and include
• General Fund,
• Special Revenue Funds;
• Debt Service Funds;
• Capital Project Funds,
• Propnetary Funds;
• Internal Service Funds;
II. OBJECTIVES
The primary objectives in pnonty order of the City's investment activities will be:
A. Safety of Principal
Safety of principal is the foremost objective of the investment program
Investments shall be undertaken in a manner that seeks to ensure
preservation of capital in the overall portfolio. The objective will be to
mitigate credit nsk by purchasing only highly rated securities with
adequate collateral and interest rate nsk by matching matunties to cash
flow needs and holding secunties to matunty..
B. Liquidity
The investment portfolio will remain sufficiently liquid to enable the City
to meet all operating and capital requirements that might reasonably be
anticipated. A portion of the portfolio may be placed in money market
mutual funds or local government investment pools which offer same-day
liquidity.
C. Yield
The investment portfolio shall be designed with the objective of attaining
a market rate of return throughout budgetary and economic cycles, taking
into account investment nsk constraints and liquidity needs.
St Louis Park Investment Policy 1
III. STANDARDS OF CARE
The prudent person standard shall be applied to the management of the portfolio.
This standard states: "Investments shall be made with judgment and care, under
circumstances then prevailing, which persons of prudence, discretion, and
intelligence exercise in the management of their own affairs, not for speculation,
but for investment, considering the probable safety of their capital as well as the
expected income to be denved "
Investment officers acting in accordance with wntten procedures and this
investment policy and exercising due diligence shall be relieved of personal
responsibility for an individual security's credit nsk or market pnce changes,
provided deviations from expectations are reported in a timely fashion and the
liquidity and the sale of securities are carred out in accordance with the terms of
this policy.
IV. INVESTMENT AUTHORIZATION
The Director of Finance/Treasurer is designated as the Investment Officer of the
City and is responsible for investment management decisions and activities. The
Director of Finance/Treasurer shall carryout established wntten procedures and
internal controls for the operation of the investment program consistent with this
investment policy. The Director of Finance/Treasurer is authorized, as allowed
under the State Statute, to designate depositones and broker-dealers for City
Funds.
V. CONFLICT OF INTEREST
Any city official involved in the investment process shall refrain from personal
business activity that could conflict with proper execution of the investment
program or which could impair his/her ability to make impartial investment
decisions. Employees shall disclose any material interests in financial institutions
with which they conduct business. Employees and officers shall refrain from
undertaking personal investment transactions with the same individual with which
business is conducted on behalf of the City.
VI. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Director of Finance/Treasurer will maintain a list of financial institutions
authonzed to provide investment services to the City All broker/dealers who
desire to become qualified bidders for investment transactions must supply the
Director of Finance/Treasurer with:
o Audited financial statements and proof of National Association of Secunty
Dealers (NASD) certification;
o Proof of Minnesota Registration Broker Notification and Certification form
required by Minnesota Statutes 118A prior to any investment transactions
with the City. The Broker Notification must be updated annually
o The Official Broker/Dealer Questionnaire must be on file for each broker the
City is currently doing business with.
St Louis Park Investment Policy 2
o Certification of having read the City's investment policy and agreement to
conduct investment transactions in accordance with the policy and objectives,
as well as state statutes
o Wntten agreement to disclose potential conflicts of interest or nsk to public
funds that might arise out of business transactions between the firm and the
City.
Authonzed institutions must maintain an investment office within the Twin Cities
metropolitan area and have other Minnesota local government clients
VII. AUTHORIZED INVESTMENTS
The City is authonzed, under State Law Chapter 118A, to invest the secunties
listed in Exhibit A.
VIII. COLLATERALIZATION
Full collateralization will be required on non-negotiable certificates of deposit.
All deposits will be insured or collateralized in accordance with Minnesota
Statutes Chapter 118.
IX. SAFEKEEPING
Investments shall be kept at the broker/dealer in the City's name. Certificates will
be held at the financial institution in the City's name. All securities should be a
risk category one according to the Government Accounting Standard No. 3. The
broker/dealer must provide asset protection of $10,000,000 through the Secunties
Investor Protection Corporation (SIPC)
X. INVESTMENT PARAMETERS
The City's investments shall be diversified as to specific maturity, issuer and
institution in order to minimize the nsk to the portfolio. Investments should be
purchased to match expected cash flow needs, minimizing the market risk
associated with the early sale of the investments.
XI. REPORTING AND REVIEW
A The investment portfolio will be managed in accordance with the
parameters outlined in this policy. The portfolio will be designed with the
objective of obtaining a rate of return throughout budgeting and economic
cycles, commensurate with the investment nsk constraints and cash flow
needs.
B. The City's investment policy shall be adopted by resolution by the City
Council. The City's investments shall be reported to the City Council
quarterly. The information reported to the City Council should include:
1. A fisting of individual securities held at end of reporting period.
2. A listing of investments by maturity date.
3. The percentage of the total portfolio in each type of investment.
St Louis Park Investment Policy 3
4. Rate of return for quarter.
5. Market to market analysis.
C. Interest earned on investments shall be allocated to various funds based on
each fund's average monthly cash balance.
XII. STATUTORY AUTHORITY
Specific investment parameters for the investment of public funds by the City are
found in Minnesota Statutes Chapters 118A.
XIII. POLICY CONSIDERATIONS
A. Amendments
This policy shall be reviewed on an annual basis. Any changes must be
approved by City Council resolution.
B. Interest Allocation
The general fund shall be allocated a management fee equal to three
percent of the total net investment earnings of the investment pool,
excluding investments related to the Economic Development Authonty.
St Louis Park Investment Policy 4
EXHIBIT A
INVESTMENT TYPE
MAXIMUM PER
ISSUE
MAXIMUM PER
INVESTMENT
MINIMUM CREDIT
QUALITY
MAXIMUM
MATURITY
US Treasures
No more than
15% of the total
portfolio
No limit
N/A
Five years If beyond
five years, should be
related to the specific
debt payments
US Governmental
Agencies and Federally
Sponsored Agency
Securities To include
callables and step-ups
No more than
15% of the total
portfolio
No limit
N/A
Five years If beyond
five years, should be
related to specific
cash flow needs
Commercial Paper -
issued by United States
corporations or their
Canadian subsidiaries
No more than
15% of the total
portfolio
No limit
Any two of the
following national
ratings A1, P1, F1
or D1
270 days
Repurchase Agreements
or Reverse Repurchase
Agreements
No more than
15% of the total
portfolio
No limit
Provided they are
fully collater¢ed at
102% of market
value by US
Treasuries or
Agencies
30 days
,
Bankers Acceptances -
Fed eligible United
States banks
No more than
15% of the total
portfolio
No limit
Any two of the
following ratings Al,
P1, F1 or D1.
270 days
Certificates of Deposit
No more than
15% of the total
"portfolio
No limit
Provided it is
guaranteed by the
FDIC, FSLIC or is
backed by collateral
as required by M S
118A
Five years If beyond
five years, should be
related to specific
cash flow needs.
Guaranteed Investment
Contracts - issued or
guaranteed by United
States commercial banks
domestic branches of
foreign banks, United
States Insurance
Companies, or their
Canadian subsidianes.
No more than
15% of the total
portfolio
The issuer's or
guarantor's short -
term and bng term
unsecured debt must
be rated in one of
the two highest
categories by a
nationally recognized
rating agency
Should the issuer's
or guarantor's credit
quality be down-
graded below "AA" or "Aa",
St Louis Park Investment Policy
5
INVESTMENT TYPE
MAXIMUM PER
ISSUE
MAXIMUM PER
INVESTMENT
MINIMUM CREDIT
QUALITY
MAXIMUM
MATURITY
General Obligations of
state or local government
with taxing powers
No more than
15% of the total
portfolio
No more than
50% of the
portfolio
Rated "A" or better
by a national bond
rating service
Five years If beyond
five years, should be
related to specific
debt payments
Revenue Obligation of
any state or local govern-
ment with taxing powers
No more than
15% of the total
portfolio
No more than
50% of the
portfolio
Rated "AA" or better
by a national bond
rating service
Five years If beyond
five years, should be
related to specific
debt payments
General Obligation of the
Minnesota Housing
Finance Agency which is
a moral obligation of
the State of Minnesota
No more than
15% of the total
portfolio
No more than
50% of the
portfolio
Rated "A" or better
by a national bond
rating service
Five years If beyond
five years, should be
related to specific
debt payments
Money Market Mutual
Funds
No limit
No limit
Invested primarily in
the securities
allowed by this
policy
N/A
St Louis Park Investment Policy 6