6.5. SR 10-03-2011 - Laserfiche WebLink

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Exhibit 3: San Luis Obispo's Budget and Fiscal Policy Areas • Financial Plan Purpose and Organization • Balanced Budget • Financial Reporting • General Revenue Management • User Fee Cost-Recovery Goals • Enterprise Fund Fees and Rates • Revenue Distribution • Investments • Appropriations Limits • Minimum Fund Balance • Capital Improvement Management • Capital Financing and Debt Management • Human Resource Management • Productivity • Contracting for Services As Exhibit 1 shows, not all cities with policies had the same ones, or had fully achieved them. However, those cities with articulated policies were clearly in better financial condi- tion than those without them. Exhibit 2 shows the results of a follow-up survey ten years later, when all of these cities in the county had adopted minimum reserve policies and were closely following them. San Luis Obispo has used formal policies as an integral part of its financial planning and budgeting process for more than 20 years, which has served the city well in both good times and bad. (The fact is that for most governments, the roots of fiscal adversity take hold in the good times, when they make commitments that are not sustainable.) As shown in Exhibit 3, the ciys's budget and fiscal polices, which are included in its budget document, cover a broad range of areas. (The document is available for download on the city's Web site at www.slociry.org/finance/policies.asp.) Of these, the debt management policies have played an especially important role in preserving the city's long-term fiscal health. PRPARII'~ i.3~Bl` MANA;~~~ Pt~LiiFS There are no right answers in preparing debt management policies, only right questions. These include: Who prepares them? Who approves them? Who sees them? Exhibit 4: Fitch Ratings: Best Practices Impact on Ratings Very Significant • Fund balance policy • ebt a~aabflity reviews and po Signif cant • Pay-as-you-go capital financing • Multi-year forecasting • Monthly or quarterly reporting/monitoring • Quick debt retirement Influential • Contingency plans • Non-recurring revenue policy • Depreciation of fixed assets (GASB 34 implementation) • 5-year capital improvement plan integrating operating cost impacts • GFOA financial reporting award • GFOA budgeting award Who is the audience? How detailed should they be? How often are they reviewed and updated? The importance of effective debt management policies is reflected Exhibits 4 and 5, which summarize the role fiscal polices play in the formal assessment process of two major credit ratings agencies, Standard & Poor's and Fitch Ratings. In each case, debt affordability is a key factor in assessing financial strength. Exhibit 5: Standard & Poor's Top 10 Practices Financial Management Assessment Methodology • Established budget reserve • Regular economic and revenue reviews • Prioritized spending plans and established contingency plans • Formal capital improvement plan • Lon~term~lann'Ing~,~~, `Debt affordabilit model • Payl~as-you-go financing • Multi-year financial plan • Effective management and information systems • Well-defined and coordinated economic development plan 50 Government Finance Review I August 2011