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FIN-2.03 - Financial Planning

FINANCIAL PLANNING

Binding City Policy

BCP-FIN-2.03


 

Policy

 

The City of Portland shall prepare short- and 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.

 

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

 

  Revenue estimates shall be prepared on a conservative basis to minimize the possibility that economic fluctuations could jeopardize ongoing service delivery during the fiscal year.

 

  Expenditure estimates shall anticipate needs that are reasonably predictable.

 

  Forecasts shall rely on a common set of basic economic assumptions that shall be established, updated, and distributed by the City Budget Office. The forecasts shall also identify other assumptions used in their preparation and associated risks. Examples of risks can include inflation 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. OMF Public Finance and Treasury shall produce interest rate forecasts and debt service forecasts that are part of the common set of economic assumptions for Citywide use. The City Budget Office, with input from OMF Public Finance and Treasury, shall 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 Bureau of Revenue and Financial Services, in consultation with the City Budget Office, shall prepare an annual City financial assessment report. This report shall include a comprehensive overview of the City’s financial condition.

 

  Five-year financial plans shall be prepared annually for the City bureaus and funds outlined in FIN 2.03.01. Plans shall be based on current service levels and funding sources, as well as anticipated changes to service levels and funding. If appropriate, the plans shall identify additional resources needed to continue current service levels or identified service adjustments.

 

  All City bureaus shall forecast and monitor their own revenues and expenditures. The City Budget Office shall assist bureaus in developing appropriate systems to monitor budgets and identify any impact on rates or operating reserves. OMF Public Finance and Treasury shall advise bureaus on how standards for credit rating and debt service coverage are established and maintained. The City Budget Office shall retain fiscal oversight responsibility for the General Fund, and shall publish regular General Fund status reports on revenues and expenditures. All other funds shall coordinate with the City Budget Office on the presentation of regular status reports on revenues and expenditures.

 

Capital Improvement Plans

 

  Each bureau that has capital projects shall develop and maintain five-year capital improvement plans (CIPs).

 

  During the fiscal year, each bureau with a CIP shall provide narrative explanations for capital program variances.

 

  The City shall annually prepare a five-year Citywide Capital Improvement Plan that includes prioritized bureau needs for capital replacement, additions, and major maintenance. The plan shall include estimated project costs and net changes in operating costs, and shall identify funding sources.

 

  The City shall annually adopt a Capital Budget that shall include estimated resources and capital expenditures based on the first year of the current Citywide Capital Improvement Plan. All borrowing plans shall be in conformance with the City’s debt management policies. See FIN 2.12 Debt Management Policy.

 

CIP Operations and Maintenance

 

  The City shall preserve its current 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 shall identify full costs of future maintenance needs and operating costs of new capital improvements and equipment prior to funding as part of the Capital Budget. An approved funding plan for the operations and maintenance costs shall be included as part of the Adopted Budget.

 

  In general, all assets shall 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 deteriorated City assets.

 

  Each bureau with major capital assets shall maintain accurate information on the condition and lifespan of its major assets to assist in long-term planning. Each bureau with major capital assets shall 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.

 

  Priority may be given to projects that do not require operation and maintenance adjustments or that reduce those costs.

 

  The budget shall provide sufficient funding for adequate operations, maintenance, scheduled replacement, and enhancements of capital assets and equipment. Whenever bureaus identify that there is a significant gap between the need to maintain or modernize capital assets and equipment and the funds available for such improvements, the bureau director shall present a strategy for meeting these needs to the City Budget Director and the Commissioner in Charge.

 

  Bureaus shall submit an estimated operations and maintenance (O&M) costs schedule at the time a capital project or asset is planned or requested. See FIN 2.03.02 Operations and Maintenance Costs.

 

Capital Asset Management

 

  The City shall annually prepare a Citywide Capital Asset Management Report for Council consideration. The report shall be delivered to Council during the annual budget discussions.

 

  The Bureau of Planning and Sustainability shall convene a Citywide Asset Managers Group to assist in the preparation of the report. See list of bureaus in FIN 2.03.03 Citywide Asset Managers Group. The report shall provide a Citywide perspective and shall include all physical assets for those bureaus preparing capital improvement plans. It shall 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 shall 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.

 

  City Council shall address the funding needs identified in the report when discussing and adopting the budget.

 

  At least 25 percent of General Fund discretionary revenue that exceeds budgeted beginning balance (adjusted) shall be allocated to infrastructure maintenance or replacement in the fall budget monitoring process. The percentage calculation shall 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.

 

Responsibility

 

The City Budget Office (CBO) shall coordinate the presentation of the City’s financial plans. The CBO shall develop and issue the list of bureaus and funds that are required to submit five-year financial and capital improvement plans, define the required elements for the plans, and determine the membership of the Citywide Asset Managers Group. Bureau directors shall be responsible for the development and submission of bureaus’ plans. OMF Public Finance and Treasury shall be responsible for providing interest rate and debt service forecasts and for working in consultation with City bureaus on debt service issues.

 


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.

Amended by Resolution No. 37086, adopted by City Council August 6, 2014.