AGENDA MEMORANDUM

Meeting Date: July 23, 2007

From: Bill Pfeilsticker, Finance Director

Subject: Ordinance providing definitions, amending Section 2-236, and deleting Section 2-237 of the Code of Ordinances Utility Fund Special Projects Transfer Policy

Staff Recommendation:

Finance Staff, Financial Advisor, Utility Department Directors and Management recommend adoption of the proposed Ordinance.

Analysis:

The Utility Fund Special Projects Transfer Policy adopted August 14, 2000 is ambiguous and difficult to interpret. That ambiguity has allowed management to make special project transfers without sound financial analysis.

The proposed changes clearly define definitions of Surplus Cash, Special Projects Transfers and Pro-forma Cash Flows; and it lists criteria required to be accomplished prior to a special transfer being made. The amount available within each of the enterprise funds for the purpose of making transfers to fund the costs associated with non-enterprise fund expenditures must be determined as follows:

(1) The City Commission must give consideration to the financial impact on the contributing fund

(2) Surplus Cash as defined in Section 2-229 must be realized in Pro-forma cash flow statements reflecting the results of the Special Transfer on the transferring fund for the next 5 years

(3) Pro-forma cash flow statements will take into consideration the results of operations, and projected results of operations including cash requirements of the Capital Improvement plan and all available funding resources

(4) The City Commission must give consideration to a contingency for emergencies, amounts not presently established, over and above the current reserve policy

This draft policy was reviewed by Moody’s, Fitch Ratings, and Standard and Poor’s, prior to their release of ratings. Each rating agency cited this revised fund balance policy as one of the reasons for their improved outlook on Leesburg’s finances.

Options:

1. Adopt the Ordinance as proposed; or,

2. Such alternative action as the Commission may deem appropriate

Fiscal Impact:

There will be no expenses incurred as a result of adoption of this policy.

Approval of this policy will assist the City by providing assurance that liquidity levels will be maintained by establishing minimum cash reserves within the required funds. It will also assist in providing a favorable outlook by the rating agency's responsible for oversight of the City's bond issues. Any proposed special project transfer requires careful consideration of the impact on the contributing fund as well as the receiving fund. Also, the Commssion must consider pro-forma cash flow statements prior to authorizing the special project transfer from one fund to another.

Submission Date and Time: 8/8/2007 4:38 PM7/19/2007 10:47 AM____

Department: ______________________

Prepared by: ______________________

Attachments: Yes____ No ______

Advertised: ____Not Required ______

Dates: __________________________

Attorney Review : Yes___ No ____

_________________________________

Revised 6/10/04

Reviewed by: Dept. Head ________

Finance Dept. __________________

Deputy C.M. ___________________

Submitted by:

City Manager ___________________

Account No. _________________

Project No. ___________________

WF No. ______________________

Budget ______________________

Available _____________________

ORDINANCE NUMBER _______

AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA; PROVIDING DEFINITIONS, AMENDING SECTIONS 2-236 AND DELETING SECTION 2-237 OF THE CODE OF ORDINANCES OF THE CITY OF LEESBURG, FLORIDA, ENTITLED UTILITY FUND SPECIAL PROJECTS TRANSFER POLICY; CREATING A POLICY WHICH AUTHORIZES UTILITY FUND SPECIAL PROJECTS TRANSFERS FROM EACH OF ITS ENTERPRISE FUNDS WITH PREDETERMINED CRITERIA; REPEALING CONFLICTING ORDINANCES; PROVIDING A SAVINGS CLAUSE; AND PROVIDING AN EFFECTIVE DATE

WHEREAS, the City Commission, in and for the City of Leesburg, Florida, hereinafter referred to as Commission, endorses sound financial policies and practices; and

WHEREAS, the Commission has created a total of six enterprise funds to account for the following utility services: electric, natural gas, sanitation services, communication services, water and wastewater treatment; and,

WHEREAS, the enterprise funds are relied upon from time to time to provide funding for non-enterprise fund capital improvements; and

WHEREAS, the City has enacted a policy which governs the annual operating transfers from the utility funds to the general fund, and desires by the means of this ordinance to adopt a policy which governs transfers made from the utility funds for the purpose of financing general government special projects (including but not limited to residual equity transfers);

NOW THEREFORE, BE IT ENACTED BY THE PEOPLE OF THE CITY OF LEESBURG, FLORIDA:

SECTION I.

Definitions:

Special Projects Transfer: The transfer of Surplus Cash from an Enterprise Fund to fund the costs of non-enterprise fund expenditures.

Pro-Forma Cash Flows: A forecast of expected ending cash balances taking into consideration the results of all financial activities including Personnel, Operational, Capital, Debt Service and Other. Sections 2-236, 2-237, and 2-238 are hereby amended in the Code of Ordinances of the City of Leesburg, Florida, to read as set forth below:

Section 2-236.

A. Authority for Special Projects Transfer. The City Commission of the City of Leesburg, Florida is hereby vested with the authority to approve transfers of surplus cash as defined in Section 2-229 to fund the costs associated with non-enterprise fund expenditures. Expenditures funded by transfers of Surplus Cash should be non-recurring in nature.

B. Calculation of Amount Available for Special Projects Transfers. The amount available within each of the enterprise funds now or hereafter created by the Commission, for the purpose of making a transfers to fund the costs associated with non-enterprise fund expenditures shall be determined as follows:

(1) The City Commission must give consideration to the financial impact on the contributing fund

(2) Surplus Cash as defined in Section 2-229 must be realized in Pro-forma cash flow statements reflecting the results of the Special Transfer on the transferring fund for the next 5 years

(4) The City Commission must give consideration to a contingency for emergencies, amounts not presently established, over and above the current reserve policy

Section 2-237. This section is removed

Section 2-238. Annual Review Compliance with the provisions of this ordinance shall be reviewed as a part of the annual budget adoption process.

SECTION II

If any portion of this ordinance is declared invalid or unenforceable, then to the extent it is possible to do so without destroying the overall intent and effect of this ordinance, the portion deemed invalid or unenforceable shall be severed herefrom and the remainder of this ordinance shall continue in full force and effect as if it were enacted without including the portion found to be invalid or unenforceable.

SECTION III

All ordinances or parts of ordinances which are in conflict with this ordinance are hereby repealed, to the extent necessary to alleviate the conflict, but shall continue in effect insofar as they are not in conflict herewith, unless repeal of the conflicting portion destroys the overall intent and effect of any of the conflicting ordinances, in which case those ordinances so affected shall be hereby repealed in their entirety.

SECTION IV.

This ordinance shall take effect on October 1, 2007.

PASSED AND ADOPTED at the regular meeting of the Leesburg City Commission as held on the 23rd day of July, 2007.

		THE CITY OF LEESBURG
	By:
		Sanna Henderson
		Mayor
Attest:
Betty M. Richardson City Clerk