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FIN-2.03 - Financial Planning

FINANCIAL PLANNING

Binding City Policy

BCP-FIN-2.03


 

Policy

 

The City of Portland will prepare long-range financial plans to guide City Council in adopting the City budget and to assist Council in ensuring the delivery of needed services through all types of economic cycles.  The plans will help Council and the community evaluate the impact of financial needs of all programs within the regional and local economic conditions.  The plans will also assist in coordinating funding needs among enterprise, special revenue and General Fund functions and needs.

 

Financial planning and budgeting will be based on the following principles:

 

•  Revenue estimates will be prepared on a conservative basis to minimize the possibility that economic fluctuations could jeopardize ongoing service delivery during the fiscal year.
Expenditure estimates will anticipate needs that are reasonably predictable.
Forecasts will rely on a common set of basic economic assumptions that will be established, updated and distributed by the Financial Planning Division of the OMF Bureau of Financial Services. The forecasts will also identify other assumptions used in their preparation and associated risks. Examples of risks can include rates, legislation and legal rulings that affect City liability, pension systems or health benefit plans, as well as regional economic trends that affect City revenues. The City will constantly test both its financial planning methodology and use of planning tools in order to provide timely and accurate information that is widely disseminated throughout the City.

 

Financial Plans and Forecasts

 

•  The Financial Planning Division will prepare an annual City financial assessment report. This report will include a comprehensive overview of the City's financial condition.
Five-year financial plans will be prepared annually for the General Fund, General Fund bureaus, major enterprise funds, special revenue funds and internal service funds. See list of bureaus and funds required to prepare plans. Plans will be based on current service levels and funding sources, as well as anticipated changes to service levels and funding. If appropriate, the plans will identify additional resources needed to continue current service levels or identified service adjustments.
General Fund bureaus will forecast and monitor their own revenues and expenditures. The Financial Planning Division will assist bureaus in developing appropriate systems, will retain fiscal oversight responsibility for the General Fund and will publish regular General Fund status reports on revenues and expenditures.
Enterprise and special revenue fund forecasts will identify any impact on rates. The forecasts will discuss how standards for debt service coverage and operating reserves are established and maintained. Bureaus that manage enterprise, special revenue and internal service funds will prepare and coordinate with the Financial Planning Division on the presentation of regular status reports on revenues and expenditures. Fiduciary fund forecasts will identify the impact on tax rates.

 

Capital Plans

 

Each bureau that has major capital assets will develop and maintain five-year capital improvement plans.
•  The City will annually prepare a Citywide five-year Capital Improvement Plan that includes prioritized bureau needs for capital replacement, additions and major maintenance. The plan will include estimated project costs and operating costs and will identify funding sources.
The City will annually adopt a Capital Budget that will include estimated resources and capital expenditures based on the first year of the current Capital Improvement Plan.

 

Operation and Maintenance

 

•  The City will preserve its current physical assets and plan in an orderly manner for future capital investments, including the operating and maintenance costs associated with new or additional capital improvements or major equipment.
The City will identify and include full costs of future maintenance needs and operating costs of new capital improvements and equipment prior to funding as part of the Capital Budget.
In general, all assets will be maintained at a level that protects capital investment and minimizes future maintenance and replacement costs. A high priority should be placed on maintenance where deferring maintenance will result in greater costs to restore or replace neglected facilities.
Each bureau with major capital assets will maintain accurate information on the condition and lifespan of its major assets to assist in long-term planning. Each bureau with major capital assets will develop replacement cost data for major assets to assist in City asset management and investment decisions.
Maintenance and operations of major capital assets should be given priority over acquisition of new assets, unless an analysis indicates a net benefit or the funding source to acquire or develop a new asset cannot be used for operations and maintenance.
Factors that reduce operating and maintenance costs, such as upgrades, remodels and/or technological advances, will be considered when reviewing operation and maintenance requests. Priority may be given to projects that do not require operation and maintenance adjustments or that reduce those costs.
The budget will provide sufficient funding for adequate operations, maintenance, scheduled replacement and enhancements of capital assets and equipment. Whenever bureaus identify that there is a significant discrepancy between the need to maintain or modernize City infrastructure or facilities and the funds available for such improvements, the fund manager will present a strategy for meeting these needs to the Financial Planning Division and the Commissioner in Charge.
Bureaus will identify operating and maintenance costs at the time a capital project or asset is planned or requested.
City bureaus will work with the Portland Development Commission (PDC) to identify operating and maintenance requirements of projects funded in part or whole by PDC. General Fund bureaus with projects funded by PDC will receive a discretionary revenue increase to fund ongoing operating and maintenance costs when applicable.

 

Capital Asset Management

 

•  The City will annually prepare a Citywide Capital Asset Management Report for Council consideration. The report will be delivered to Council prior to the annual budget discussions.
The Planning Bureau will convene a Capital Asset Managers Group to assist in the preparation of the report. See list of bureaus in Capital Asset Managers Group. The report will provide a "City as a whole" perspective and will include all physical assets for those bureaus preparing Capital Improvement Plans. It will provide an accounting of the number, condition and replacement value of existing capital assets and an assessment of current service levels and cost of unmet needs. The report will also identify the amount of funding needed on an annual basis to keep an asset from deteriorating, the annual funding gap over current service levels needed to bring assets up to a sustainable level of maintenance and those assets which are currently in poor condition.
The Council will address the funding needs identified in the report when considering and adopting the budget.
At least 25 percent of General Fund discretionary revenue that exceeds budgeted beginning balance (adjusted) will be allocated to infrastructure maintenance or replacement in the fall budget monitoring process. The percentage calculation will be based on any discretionary funds in excess of the budgeted beginning balance, adjusted for the difference in encumbrances carried over from the prior year. Infrastructure maintenance projects to be considered for funding will be projects requested but not funded in the prior year's budget and projects that are underway but still require funding.

 

Responsibility

 

The Financial Planning Division of the OMF Bureau of Financial Services will coordinate the presentation of the City's financial plans; bureau directors will prepare bureau plans.  The Financial Planning Division will develop and issue the list of bureaus and funds required to submit financial and capital improvement plans, define the required elements for the plans and determine the membership of the Asset Managers Group.

 


HISTORY

 

Resolution No. 35005, adopted by City Council June 17, 1992.

Replaced by Ordinance No. 181829, passed by City Council May 14, 2008 and effective July 1, 2008.