Page 47 - CityofColleyvilleFY23AdoptedBudget

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 de ned as Unassigned Fund Balance. Operating
revenues will suf ciently fund current year operating expenditures. (Operating de cits are normally contrary to
City policy as well as reasonable nancial 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 de ned as both (a) current year revenues and (b) revenues generated in prior scal
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 suf cient protection against uncollected taxes and shortfalls from municipal revenue sources. The
General Fund is the primary operating fund of the City for its nonutility 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 nancial 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 General and Utility Fund Balance Policy

balances are higher than the minimum level designated by the Government Finance Of cers Association
recommended practice on determining the appropriate level of unassigned fund balance for the General and
Utility Funds.

De{nitions

Fund Equity - A fund's equity is generally the difference between its assets and its liabilities.
Fund Balance - An accounting distinction is made between the portions of fund equity that are spendable and
nonspendable. These are broken up into ve categories:

. Nonspendable fund balance - includes amounts that are not in a spendable form or are required to be
maintained intact. Examples are inventory or permanent funds.

. Restricted fund balance - includes amounts that can be spent only for the speci c purposes stipulated by
external resource providers either constitutionally or through enabling legislation. Examples include

City of Colleyville | Budget Book 2023 Page 47