Page 321 - City of Colleyville FY22 Adopted Budget

City of Colleyville
General and Utility Fund Balance Policy
Updated at the May 2017 Audit Committee meeting

General:

The objective of this policy is to ensure adequate fund balances are maintained,
to have funding available for expenses in the event of unforeseen emergencies
and to preserve the credit worthiness of the City for borrowing monies at
favorable interest rates. After designations of the available General and Utility
Fund Balances are authorized, the remaining respective amount is defined as
Unassigned Fund Balance. Operating revenues will sufficiently fund current year
operating expenditures. (Operating deficits are normally contrary to City policy
as well as reasonable financial prudence.) All Unassigned Fund Balance are
eligible for use at the discretion of the City Council. Such determinations will be
handled by the City Council on a case-by-case basis. Operating revenues are
defined as both (a) current year revenues and (b) revenues generated in prior
fiscal years.

Purpose:

Establishing a policy for the fund balance in the General and Utility Funds is to
provide a guideline for budgeting decisions and to insure that an adequate
unassigned balance is provided to fund operations, by providing sufficient
protection against uncollected taxes and shortfalls from municipal revenue
sources. The General Fund is the primary operating fund of the City for its non-
utility related operations. In addition, the City of Colleyville desires to maintain its
current debt rating of AAA. Rating agencies are concerned about a
government’s credit worthiness and the level of unassigned General and Utility
Fund balances are a part of the rating agencies evaluation.

There is no formula for determining an appropriate fund balance. Items to
consider include the timing of revenue collections, the local and national
economic environment, the volatility of the major revenue sources, and the
degree of protection desired to mitigate current and future financial risks. The
City of Colleyville obtains a substantial portion of its revenue from property taxes,
sales taxes, franchise fees and utility fees.

While the most stable of revenue sources, property tax growth over the coming
years will stabilize in growth as the city nears build-out. Sales tax collections are
derived from local retail sales and are dependent upon both the local and
national economies. The collection of franchise fees, particularly those based
upon sales of electricity and natural gas, vary widely depending upon local
weather conditions. Utility fees, similar to franchise fees, are subject to weather
conditions. As a result, the desired level of unassigned General and Utility Fund

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