HomeMy WebLinkAboutResolutions - 2021.07.22 - 34730MISCELLANEOUS RESOLUTION #21301 July 22, 2021
BY: Commissioner Gwen Markham, Chairperson, Finance Committee
IN RE: BOARD OF COMMISSIONERS — REVISED FUND BALANCE POLICY FOR THE GENERAL
FUND
To the Oakland County Board of Commissioners
Chairperson, Ladies and Gentlemen:
WHEREAS maintaining an adequate general fund balance mitigates the risk of immediate reductions in
critical County services or revenue enhancements being required in the event of an unanticipated decline
in County revenues, unanticipated expenditure requirements, or other budget emergency situation; and
WHEREAS the Oakland County Board of Commissioners adopted a fund balance policy for the general
fund in 2015 through the approval of Miscellaneous Resolution #15175, codifying the County's longstanding
practice of maintaining a general fund balance equal to at least 20 percent of its annual general fund
expenditures; and
WHEREAS best practices published by the Government Finance Officers Association (GFOA)
recommends for general purpose governments that unrestricted fund balance should be no less than two
months of regular general fund operating revenues or regular general fund operating expenditures; and
WHEREAS the bond rating agencies consider a government's fund balance policy, history of use of fund
balance, and policy and practice of replenishment of fund balance when assigning their ratings; and
WHEREAS Oakland County's multi -year financial planning and management practices, which include
maintaining a general fund balance well in excess of the GFOA recommended level, has resulted in
retaining the highest bond rating of AAA since 1998, thereby reducing the cost of borrowing for capital
projects, including water and sewer systems maintained on behalf of the County's local units of government;
and
WHEREAS one recommended revision, in particular, by the County Executive that strengthens and clarifies
the current policy is an increase of the County's minimum general fund balance to 25% of annual ongoing
general fund expenditures (equal to three months of expenditures), to be designated as the County's
Budget Stabilization Reserve (a.k.a. Rainy Day Fund); and
WHEREAS strengthening the requirements of the fund balance policy is a key component of the continuing
commitment by the County Executive and the Board of Commissioners to ensuring Oakland County's long-
term financial sustainability.
NOW THEREFORE BE IT RESOLVED that the Oakland County Board of Commissioners adopts the
attached Fund Balance Policy for the General Fund.
Chairperson, on behalf of the Finance Committee, I move the adoption of the foregoing resolution.
Gwen Markham, District #9
Chairperson, Finance Committee
FINANCE COMMITTEE VOTE:
Motion carried on a roll call vote with Moss voting no and Cavell and Long absent.
Oakland County, Michigan
Fund Balance Policy for the General Fund
As Revised July 22, 2021
Policy
An appropriate level of fund balance shall be maintained in the General Fund to ensure continued
delivery of County services. Fund balance is an important measure of financial stability. It is essential
that the County maintain adequate levels of fund balance to mitigate financial risk that can occur from
unforeseen revenue fluctuations, unanticipated expenditure requirements, or other emergency. The
fund balance also provides cash flow liquidity for the County's general operations. Determination of the
appropriate targeted level of fund balance shall be based on the principles, guidelines, and process set
forth below.
Principles
Consideration and projection of fund balance is a critical component of financial planning. The
appropriate level of required fund balance should be determined within the context of long-term
forecasting and should avoid the risk of placing too much emphasis upon the level as measured at any
one point in time. A long-term fund balance forecast shall be developed in conjunction with the County's
multi -year budget and long-term financial plan.
In general, use of fund balance should be limited to one-time expenditures, such as for capital projects
or projects of limited duration, that have measurable benefits for county operations and residents. It
should be recognized that continued use of fund balance to support ongoing program expenditures is
not sustainable in the long term. Thus, the County's guiding principle is to reduce and eliminate the use
of fund balance to resolve ongoing structural operating shortfalls. If special conditions exist that
necessitate use of fund balance to support ongoing programs (caused by events such as a catastrophic
emergency or a prolonged economic downturn), it shall be for a limited duration to provide essential
citizen services with a requirement that the County's long-term financial plan shall include a strategy to
restore or maintain fund balance in accordance with the guidelines of this policy.
Guidelines
Fund balance assignments for the General Fund shall consist of three major categories:
• Budget Stabilization Reserve
• Other revenue and expenditure risks
• The long-term Strategic Investment Plan
The minimum long-term fund balance level for the Budget Stabilization Reserve — also referred to as the
county's "Rainy Day Fund" —should be no less than 25% of annual ongoing operating expenditures,
equal to three months of county operating expenditures, to protect the continuity of county services
during an economic downturn.
The Board of Commissioners and County Executive shall not take budgetary action that lowers the
projected fund balance below this level unless county General Fund revenues have fallen by a
cumulative amount equal to 5% or greater of annual ongoing operating expenditures compared to the
most recent peak level or a formal determination is made that substantial county expenditures are
needed due to an immediate emergency.
If the fund balance is less, or projected to be less, than the minimum required amount, a fiscal plan shall
be developed by the County Executive and adopted by the Board of Commissioners so that the fund
balance will be replenished to the minimum required amount within a period that should not exceed
five years.
In addition to the required minimum fund balance level, approximately 5% of annual ongoing operating
expenditures shall be assigned for other expenditure risks that may arise such as natural disasters.
If the total level of these two fund balance assignments exceeds the overall target level of 30% of annual
ongoing operating expenditures, then consideration shall be given to the one-time strategic
investments. However, prior to approval of such investments, the County's operating budget should be
forecasted to be structurally balanced on a long-term basis (annual ongoing revenues are sufficient to
fund annual ongoing expenditures).
Strategic investments shall consist of capital projects, technology purchases, or other one-time
expenditures that have comprehensive project plans and documented long-term return on investment
for county operations and residents. Specific investments shall be budgeted and approved by the County
Executive and Board of Commissioners prior to the commencement of any project activities.
Investments should be planned and approved over a multi -year period to ensure that they are carried
out in an effective manner.
Priority should be given to one-time investments in the following areas:
• Improving government services, including addressing county facility and technology needs
• Enhancing public safety preparedness, campus security, and emergency response
• Investing in environmental and energy sustainability
• Improving the health of the community
• Fostering economic and workforce development
• Advancing funding for future outstanding debt service payments of current obligations
Any proposed increases in ongoing county expenditures or proposed reductions in ongoing county
revenues should be considered and approved or disapproved during the annual budget process so as to
achieve and maintain structural balance for the County's budget.
Process
The amount of available fund balance is determined with the official close of the County's accounting
records as of September 30 of each year. In accordance with financial reporting requirements of the
Government Accounting Standards Board (GASB), fund balance is reported according to the following
accounting distinctions.
1) Nonspendable fund balance — includes amounts that are not in a spendable form or are
required to be maintained intact.
2) Restricted fund balance — includes amounts that can be spent only forthe specific purposes
stipulated by external resource providers either constitutionally or through enabling legislation.
3) Committed fund balance — includes amounts that can be used only for the specific purposes
determined by a formal action of the government's highest level of decision -making authority.
Commitments may be changed or lifted only by the government taking the same formal action
that imposed the constraint originally.
4) Assigned fund balance — comprises amounts intended to be used by the government for
specific purposes. Intent can be expressed by the governing body or by an official or body to
which the governing body delegates the authority.
5) Unassigned fund balance — is the residual classification of the General Fund and includes all
amounts not contained in other classifications. Unassigned amounts are technically available for
any purpose.
The requirements of this fund balance policy apply to the unrestricted portion of the General Fund
balance (excludes the nonspendable and restricted portions of fund balance).
The Board of Commissioners shall adopt a resolution annually to accept the results of the year-end
closing of the accounting records and to approve the assignments of General Fund balance consistent
with this policy.
Use of fund balance requires an appropriation by the Board of Commissioners as authorized by the
adoption of an enabling resolution.
Resolution #21301 July 22, 2021
Moved by Markham seconded by Long the resolution be adopted.
Moved by Moss seconded by Spisz the resolution be amended as follows:
Under the Principles heading the following paragraph —
In general, use of fund balance should be limited to one-time expenditures, such as for capital
projects or projects of limited duration, that have measurable documented and objective return
on investmentbeneflisfor county operations and residents. It should be recognized that continued
use of fund balance to support ongoing program expenditures is not sustainable in the long term.
Thus, the County's guiding principle is to reduce and eliminate the use of fund balance to resolve
ongoing structural operating shortfalls. If special conditions exist that necessitate use of fund
balance to support ongoing programs (caused by events such as a catastrophic emergency or a
prolonged economic downturn), it shall be for a limited duration to provide essential citizen services
with a requirement that the County's long-term financial plan shall include a strategy to restore or
maintain fund balance in accordance with the guidelines of this policy.
Under the Guidelines heading the following paragraph —
Strategic investments shall consist of capital projects, technology purchases, or other one-time
expenditures that have comprehensive project plans and documented and objective long-term
return on investment for county operations and residents. Specific investments shall be budgeted
and approved by the County Executive and Board of Commissioners prior to the commencement
of any project activities. Investments should be planned and approved over a multi -year period to
ensure that they are carried out in an effective manner.
Discussion followed.
Vote on amendment:
AYES: Gingell, Hoffman, Joliet, Kochenderfer, Kowall, Kuhn, Long, Moss, Spisz, Weipert. (10)
NAYS: Jackson, Luebs, Markham, McGillivray, Miller, Nelson, Powell, Woodward, Cavell, Charles,
Gershenson. (11)
A sufficient majority not having voted in favor, the amendment failed.
Moved by Kowall seconded by Spisz the resolution be amended as follows:
Insert the following language after the NOW THEREFORE BE IT RESOLVED:
BE IT FURTHER RESOLVED that all appropriations from the General Fund - Fund Balance
shall require a 213 majority vote of members elected and serving of the Board of
Commissioners.
Amend the following language in the Fund Balance Policy for the General Fund:
Use of fund balance requires an appropriation by the Board of Commissioners as authorized by
213 majority vote by those members elected and serving for the adoption of an enabling
resolution.
Vote on amendment:
AYES: Hoffman, Joliat, Kochenderfer, Kowall, Kuhn, Long, Moss, Spisz, Weipert, Gingell. (10)
NAYS: Jackson, Luebs, Markham, McGillivray, Miller, Nelson, Powell, Woodward, Cavell, Charles,
Gershenson. (11)
A sufficient majority not having voted in favor, the amendment failed.
Moved by Markham seconded by Charles the resolution be amended as follows:
In the attached Fund Balance Policy, add the following on Strike out and insert the following
language on Page 2:
Priority should be given to one-time investments in the following areas:
• Improving government services, including addressing county facility and technology needs
• Enhancing public safety preparedness, campus security, and emergency response
• Investing in environmental and energy sustainability
• Improving the health of the community
• Fostering economic and workforce development
• Advancing funding for future outstanding debt service payments of current obligations
• Matching grant funding for priority local infrastructure projects
Discussion followed.
Vote on amendment:
AYES: Jackson, Joliat, Kochenderfer, Kowall, Kuhn, Long, Luebs, Markham, McGillivray, Miller,
Moss, Nelson, Powell, Spisz, Weipert, Woodward, Cavell, Charles, Gershenson, Gingell,
Hoffman. (21)
NAYS: None. (0)
A sufficient majority having voted in favor, the amendment carried.
Moved by Spisz seconded by Gingell the resolution be amended as follows:
Amend the following language in the Fund Balance Policy for the General Fund:
Under the Guidelines heading the following paragraph —
The minimum long-term fund balance level for the Budget Stabilization Reserve — also referred to
as the county's "Rainy Day Fund" — sheuld shall be no less than 25% of annual ongoing operating
expenditures, equal to three months of county operating expenditures, to protect the continuity of
county services during an economic downturn.
A sufficient majority having voted in favor, the amendment carried.
Vote on resolution, as amended:
AYES: Joliet, Kochenderfer, Kowall, Kuhn, Long, Luebs, Markham, McGillivray, Miller, Moss,
Nelson, Powell, Spisz, Weipert, Woodward, Cavell, Charles, Gershenson, Gingell, Hoffman,
Jackson. (21)
NAYS: None. (0)
A sufficient majority having voted in favor, the resolution, as amended, was adopted.
4,,QL
I HEREBY APPROVE THIS RESOLUTION
CHIEF DEPUTY COUNTY EXECUTIVE
ACTING PURSUANT TO MCL 45.559A (7)
STATE OF MICHIGAN)
COUNTY OF OAKLAND)
I, Lisa Brown, Clerk of the County of Oakland, do hereby certify that the foregoing resolution is a true and
accurate copy of a resolution adopted by the Oakland County Board of Commissioners on July 22, 2021,
with the original record thereof now remaining in my office.
In Testimony Whereof, I have hereunto set my hand and affixed the seal of the Circuit Court at Pontiac,
Michigan this 22" day of July, 2021.
Lisa Brown, Oakland County