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File Number: 11 -327 The City Council initially established a philosophy for financial reserve funds over twenty years ago. In 1989 -90, the City Council adopted a series of financial values that were utilized to develop the budget. The Financial Goals Statement identifies and formalizes the financial principles by which the organization is guided. The Statement provides direction for preparing annual budget strategies and budgets and for conducting the day -to -day and long -term municipal affairs. Related to Fund Balance Designations and Reserves Management, the Financial Goals Statement spells out the following: C. Fund Balance Designations and Reserves Management 1. The City will maintain fund or working capital balances of at least 20% of operating expenditures in the General Fund and Enterprise Funds. This is considered the minimum level necessary to maintain the City's credit worthiness and to adequately provide for- (i) Economic uncertainties, local disasters, and other financial hardships or downturns in the local or national economy. (ii) Contingencies for unseen operating or capital needs. (iii) Cash flow requirements. Q611911M1[a]0I The General Fund finances the operations of the City that have no special or dedicated revenue sources and pays for all basic municipal operations. The General Fund reserve, based on City Council direction, sets aside savings for economic uncertainty, emergencies, and other future contingency. Reserves allow for the designation of funds received for the Kaiser Hospital development, Street Improvement Funds and Community Impact Fund, Plaza loan repayment, and Other Designations (including equipment acquisitions and encumbrances) on the worksheet. Together, the Major Emergencies and Economic Uncertainty designations reflect the General Fund reserves set aside for future unplanned contingencies. The amount of the Major Emergencies reserve has remained unchanged during the recent years of depressed economics. The reserve has remained at $5,000,000 since 2007 -08. The Economic Uncertainty reserve, at $10,033,000 in 2007 -08, has since been partially utilized for operations over the past several years. The balance in the Economic Uncertainty is $3,796,500. This amount reflects the June 30, 2011 unaudited balance and the 2011 -12 budget was approved without any further draw -down of the reserve. The Major Emergencies and the Economic Uncertainty reserves totaled $15,033,000 in 2007 -08, about 19% of the General Fund operating expenditures ($77,397,000). The percentage has declined over the past several years and was recorded at 13% as of June City of San Leandro Page 2 Printed on 11/1/2011