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Rate Stability and User Fees

To minimize {nancial impacts on residents, the City stabilizes rates and avoids sudden increases in taxes and user fees.
User fees recover costs where ser vices exceed basic municipal functions. In cases where full cost recovery is impractical,
fees are set to par tially offset costs. Utility rates are reviewed annually to cover operating costs, bond covenant
requirements, and capital improvements, ensuring the sustainability of ser vices.

Reser ves

The City of Colleyville maintains reser ves equivalent to three months of operating expenses for the General Fund and
Utility Fund. These reser ves provide {nancial stability and allow the City to manage unforeseen {scal challenges, such as
economic |uctuations, legal matters, changes in tax rolls, variations in sales tax receipts, and revenue |uctuations from
city- operated utilities. This reser ve policy applies to all major operating funds of the City.

While the target reser ve balance is generally set at three months of operating expenses, the City may increase this target
when large {scal challenges, signi{cant capital needs, or other emergencies are anticipated. The reser ves ensure the City
can meet unexpected {nancial needs without disrupting the provision of essential ser vices or long- term goals.

In calculating reser ves, the City uses the concept of Available Funds rather than Fund Balance. Available Funds are
de{ned as those items readily conver tible to cash, less liabilities and encumbrances. Items such as inventories and
unrealized gains or losses on investments are excluded from Available Funds. Inventories are maintained at stable levels
from year to year and are not available for appropriation, while unrealized investment changes are excluded because the
City generally holds its investments to maturity.

Reser ves greater than the three -month target are generally transferred to capital project funds, used for capital items, or
saved for future one - time expenses, depending on the City ’s current and future needs.

General and Administrative Charges

The General Fund is compensated by enterprise funds for administrative ser vices such as management , {nance, and
personnel. The City will also recover allowable indirect costs from grants to offset administrative costs.

Grant-in-Aid Policy

Federal and state assistance is evaluated based on:

Community bene{t .
Future {nancial impact and local funding requirements.
Alignment with current operations and future plans.

Grants are expected to cover their share of City administrative costs through an indirect cost rate, where applicable.

Capital Acquisition/Improvement Policy

The City plans for capital replacements and improvements through an annually updated {ve -year Capital Improvement
Plan (CIP). Capital replacements are budgeted in depar tment operating budgets, limited to items no longer functional,
repairable, or safe. Major capital projects may use debt {nancing, with repayment schedules designed to align with the
asset's useful life. The City employs a pay-as-you- go approach for minor capital replacements, passing a por tion of utility
extension costs to developers. Capital projects over $50,000 are prioritized based on asset condition, usage, classi{cation,
available funding, alignment with the City ’s long- term vision, project bene{ts, and risk management .

FY 2025-2026 Annual Budget | Colleyville Page 26