So it's for the point of order to say a road finance committee today is September 15th of 2025.

Would you please take our agenda?

Mayor Gonzalez.

Present.

Council Members Walton.

Councilmember Aguilar.

Present.

Okay, would you please make your announcement?

After each agenda item is presented, the mayor will ask for committee member comments and then take public comment.

You will have two minutes for your comment, a countdown timer will appear for the convenience of the speaker and attendees.

This is my time.

So good afternoon.

The first item on our agenda this afternoon is the presentation of proposed uh changes to the city's general fund resource policy.

So just to kind of kick us off as a reminder of why we have a fund balance, our student where we have a reserve policy, it's really important to understand what fund balance is and why we have it.

These slides are similar to what we saw during the budget development process in the spring, but what is a fund balance essentially represents the difference between the city's total assets and current or future liabilities, essentially showing the net available resources that a fund has at any given point.

There are five categories when we're talking about fund balance.

There's uh non-spendable, which are resources that cannot be spent.

Those are typically related to loans and things of that nature.

Um there is restricted, which are resources with external restrictions, those are usually centered around things like grants, committed, which is set aside for specific purposes that were um essentially committed by a governing action by the city council.

There's the assigned, which is intended for specific purposes but not legally restricted, so there is a little bit of flexibility with assigned, and those are typically associated with our encumbrances, and then assigned, which is the available for any purpose.

And so when we're talking about the reserve policy, we're really focused on the assigned uh category.

Um, so again, what is what is a fund balance target?

Um balance target is a percentage that refers to the desired level of reserves that a government or an organization aims to maintain in its general fund.

Um we do uh leverage ourselves in and refer to the government finance officers association or GFOA, kind of as our guide for making recommendations to policy changes within the industry.

Their uh recommendation is to have at least two months worth of your total expenditures available in your reserve, which is approximately 16.7 percent, um, and that is just your regular operating expenses, excluding transfers.

Um, so why is the 20% uh fund balance important, which is what the city's current policy is, it does um provide us the ability to pivot for unexpected expenses.

Um it also uh improves our ability to weather economic uh downturns or time of uncertainty, ability to remain operational during any kind of disaster, including natural disasters.

Um it may have an impact or improve our credit ratings again and shows the city um monitors its uh funding availability on any given point, and then of course it enhances the city's financial stability in resilience.

Um so wanting to provide an update on the general fund fire forecast.

This looks slightly different from what we saw in the spring, but this does uh currently show what the city's I should say what shows our current fund balance policy is.

So what we'll see here, focusing really on our column C and D.

Row eight shows what the um projected use of fund balance.

What has changed here specifically are that we have updated our revenues.

Um our revenues are trending uh in a decline in some key areas, and so we have adjusted our revenues based on information that we know as of today, which is different from the information that we do in the spring.

So this reflects some changes in those revenues, and we'll talk about those in a couple agenda items uh later.

Uh this also reflects the uh operational costs for Moford library and the potential acquisitions that are pending under further discussion, and so those are additional expenses that were not reflected during the spring.

And so the fund balance projection or use of fund balance in fiscal year 26 in column C row eight is um 7.9 million and then 11.4 uh in fiscal year 26-27.

Um, what we're looking at is that ending balance um on line 10.

Um, we are showing an ending balance projected for fiscal year 26 for the end of this year at 46.8 million and 35.5 million in the following year.

When we look at our fund balance categories in rows 13 through 17, and really 20, but 15, student 14 through 17 are those categories that are either restricted or have other committed assignments.

And so when we're talking about what we have available for fund balance use, we're looking at line 20, which is the unassigned.

And so fiscal year 26, our current year, we have a projected use or availability of 33.8 million.

For compensated absences, we have to account for about 700,000, or excuse me, yeah, 700,000.

And then the city's current policy right now is to also set aside 5 million dollars in the major emergencies.

And so that's line 22.

Line 23 represents the available percentage that we have set aside for economic uncertainty.

So that's that 20% policy that we're talking about.

So right now, based on the adjustments of the revenue and the adjustments in projected expenditures, the city is below that 20%.

It's 18.8% of total expenditures.

And so wanting to provide an update to this committee as far as what the forecast looks with our current policy today.

So again, I spoke a little bit about it on the previous slide, but as a reminder, when we're talking about the categories, we're really looking at that fine for our fund balance policy.

And what's in that is the 20% for economic uncertainties, $5 million for major emergencies, and then anything that's left over, which there is none in this fiscal year beyond currently, any fund balance would remain in the general fund until it was allocated by the city council for another designated reserve or for another purpose.

So that's kind of what our policy is right now.

The intent is again to ensure fiscal stability and to maintain operations in time of economic uncertainty.

So wanting to just provide kind of an overview of best practices and comparable policy levels, you'll see the city of San Leandro is kind of in the middle at 20% in that purple line.

These are all the cities in Alameda County.

The bottom is that green, which is recommended by GFOA, which is 16.7%.

There are a little anomalies in some of these that you'll see.

So the city of Fremont has a policy of 16.7%.

It also has a policy that includes budget uncertainty reserve, but there's no set reserve level.