PortlandOnline

POL Government Elected Officials Auditor Griffin-Valade Charter, Code & Policies Policies & Rules (PPD) Finance Comprehensive Financial Management Policies
FIN-2.07 - Reserve Funds

RESERVE FUNDS

Binding City Policy

BCP-FIN-2.07


 

Policy

 

Reserve funds will be established and maintained to ensure the continued delivery of City services to address emergencies, address a temporary revenue shortfall or provide stability during economic cycles.  Sufficient reserve funds will be managed to provide adequate cash flow, stabilize the City's interest rates and provide continuity in service delivery.

 

The City shall maintain adequate cash reserves in each fund to maintain a positive cash position at any time during a fiscal year and at year-end.

 

General Reserve Fund

 

The City will maintain a General Reserve Fund to:

 

•  Insulate General Fund programs and current service levels from large and unanticipated one-time expenditure requirements, a revenue reduction due to a change in state or federal legislation, adverse litigation or any similar unforeseen action.
Temporarily insulate General Fund programs and current service levels from slower revenue growth that typically occurs during an economic recession.

 

The level of the General Reserve Fund shall be 10 percent of the General Fund revenues less any short-term borrowing receipts, intrafund and grant revenues.

 

There are two parts to the General Reserve Fund:  the emergency reserve and the countercyclical reserve.

 

General Reserve Fund:  Emergency Reserve

 

The Council reserves one half of the General Reserve Fund as an emergency reserve.  The emergency reserve is available to address one-time emergencies and unanticipated expenditure requirements or to offset unanticipated revenue fluctuations occurring within a fiscal year.  The Council may withdraw funds from the emergency reserve when the Council has declared an emergency by ordinance and after the General Fund's budgeted contingency is exhausted.  The emergency reserve will be accessed only when emergency expenditures or an unexpected revenue reduction would result in a negative General Fund ending fund balance.

 

The Council will begin to restore emergency reserves used under this policy within 24 months after their first use.

 

General Reserve Fund:  Countercyclical Reserve

 

The second half of the General Reserve Fund is designated as a countercyclical reserve.  The Council may use this to either maintain current General Fund services and programs or transition expenditure growth to match slower revenue growth during the first 18 to 24 months of a recession.

 

The countercyclical reserve is designated for use as "bridge funding" necessary to offset slower revenue growth during a recession.  For purposes of the policy, slower revenue growth triggers the Council's assessment of use of this reserve when basic revenue growth falls to below 3 percent for two consecutive quarters or the financial forecast estimates that basic revenue growth will be below 3 percent for the next fiscal year.  Basic revenue is defined as the sum of General Fund property tax, business license, utility license/franchise fees, cigarette and liquor taxes, transient lodging taxes and interest income.

 

In addition, one or more of the following conditions must occur in conjunction with slower basic revenue growth:

 

1.  The Portland Metropolitan Area (PMSA) unemployment rate is reported above 6.5 percent for two consecutive quarters, or the financial forecast estimates PMSA unemployment will average in excess of 6.5 percent for the next fiscal year.

2.  The property tax delinquency rate exceeds 8 percent.

3.  Business license year-to-year revenue growth falls below 5.5 percent for two consecutive quarters or the financial forecast estimates business license revenue growth at less than 5.5 percent for the next fiscal year.

 

The Council will begin to restore countercyclical reserves used under this policy within 24 months after their first use.

 

Authorized Uses of the General Reserve Fund

 

Prior to the use of General Reserve Fund resources for either emergency or countercyclical purposes, the Financial Planning Division of the OMF Bureau of Financial Services will prepare and distribute a report to Council addressing the requirements for use of the reserve and the amount of funds requested.  The report shall be presented to the Council prior to the meeting at which the Council makes a decision on use of General Reserve Fund resources.

 

Unauthorized Uses of the General Reserve Fund

 

Revenue shortfalls associated with bureau service reimbursement income, contract income or cost recovery revenues may not be offset by a transfer of resources from the General Reserve Fund.  The General Reserve Fund is not intended to be used to fund labor contract settlements.

 

Responsibility

 

The Financial Planning Division of the OMF Bureau of Financial Services will manage and monitor the General Reserve Fund and report on the current and projected level of the reserve funds during each budget process.

 


HISTORY

 

Resolution No. 34722, adopted by City Council May 3, 1990.

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