05-05-2020 - AGENDA ITEM 07 CONSIDER APPROVAL OF UPDATED BUDGET AND FINANCIAL POLICIESAGENDA ITEM NO.7
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AGENDA STAFF REPORT
City of West Covina I Office of the City Manager
DATE: May 5, 2020
TO: Mayor and City Council
FROM: David Carmany
City Manager
SUBJECT: CONSIDER APPROVAL OF UPDATED BUDGET AND FINANCIAL POLICIES
RECOMMENDATION:
It is recommended that the City Council adopt Resolution No. 2020-35 Approving Updated Financial and Budget
Policies.
BACKGROUND:
On February 4, 2020, the City Council initiated the process for the issuance of Pension Obligation Bonds (POB's)
to refund outstanding obligations to the California Public Employees Retirement System (CalPERS). The ultimate
issuance of those bonds requires further approval by the City Council.
DISCUSSION:
Staff has been working with the finance team to assure that the City obtains the best possible bond rating and the
lowest borrowing costs. One of the best management practices is to review and assure that the City has updated
policies related to city finances. Staff is recommending that the City Council update the following policies:
• Budget Policy - This policy establishes a budget process to help decision makers make informed choices
about the provision of services and capital assets and to promote stakeholder participation in the process.
• Debt Management - This policy establishes guidelines for the issuance and management of debt
• Disclosure - This policy is intended to ensure that the City remains in compliance with all applicable
securities laws.
• Computer/IT Backup - This policy is designed and implemented with disaster recovery/business continuity as
key deliverable and is not designed as a method of archiving material for extended periods of time.
• Pension Funding Policy (New) - This policy provides guidance in making annual budget decisions;
demonstrates prudent financial management practices; create sustainable and affordable budgets for
pensions; and reassures bond rating agencies.
These policies show that the City has strong internal controls and will be beneficial as the City moves forward
toward issuing the Pension Obligation Bonds.
Prepared by: Mark Persico, Assistant City Manager
Additional Approval: Robbeyn Bird, CPA, Finance Director
Attachments
Attachment No. 1 - Resolution 2020-35 (Budget and Financial Policies)
• Identify the changes in community conditions or other factors that
may result in a program or service no longer addressing the needs it
was intended to serve. Also, identify any changes in the operating
environment that may affect the cost or effectiveness of service
delivery in the future.
• The review will involve each department's assessment of the
programs'
• purposes, beneficiaries and needs served, their success in achieving
goals, and issues, challenges, and opportunities affecting theirfuture
provision.
• The inventory of programs and services will identify the organization
responsible for service delivery if it is not the City itself. An evaluation
of factors affecting service delivery will also be undertaken, such as
funding issues; changes in technology; economic, demographic, or
other factors that may affect demand; and legal or regulatory
changes. These reviews will typically utilize a variety of information
sources.
• Stakeholder involvement in these reviews is encouraged, such as
through budget study workshops.
B. Assess Capital Assets, and Identify Issues, Opportunities, and Challenges
• The City will identify and conduct an assessment of its capital assets,
including the condition of the assets and factors that could affect the
need for or ability to maintain the assets in the future. The capital
assets of the City and their condition are critical to the quality of
services provided, and hence are important in determining whether
the needs and priorities of stakeholders can be met.
• The City shall establish a process for inventorying its capital assets
and assessing the need for and the condition of these assets. (See
Capital Asset Management Policy)
• The City will assess and evaluate issues, challenges, and opportunities
affecting the provision of capital assets in the future, such as
community needs and priorities; the impact ofdeferred maintenance;
funding issues; changes in technology; economic, demographic, or
other factors that may affect demand; and legal or regulatory changes.
This review may be undertaken in conjunction with an evaluation of
the program or service utilizing the particular assets.
• The assessment of capital asset condition must consider the impact
of any deferred maintenance and needed improvements.
Identification or development of measurement standards for the
condition of capital assets (including what is regarded as acceptable)
are a valuable output of this practice.
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C. Assess City Management Systems, and Identify Issues, Opportunities, and
Challenges
• The City will identify and analyze its organization and management
systems, including system strengths and weaknesses and factors
that could affect these systems in the future. The support systems
established to manage the City are integral to the achievement of
goals.
• The City will inventory management systems by department and
routinely identify, analyze, and address issues related to the City's
organization and management systems and the environment in
which these systems operate.
• Each department will include an examination of strengths and
weaknesses of the organizational structure, interdepartmental
communication and cooperation, communication of goals and
directives, motivation of staff, conflict management, and provision
of other internal needs and supportsystems.
• The reviewwill alsoinclude an assessment ofmanagement policies,
procedures, and systems that support achievement ofgoals.
iii. Develop and Disseminate Broad Goals
A. Identify Broad Goals
• The City is to identify broad goals based on its assessment of the
community it serves and its operating environment. Broad goals
define the priorities and preferred future state of the community or
area served. They provide a basis for making resource allocation
decisions during the budget process and serve as a focal point for
assessing and coordinating various long-range or strategic plans.
• Goals are to be expressed in written form and should reflect
stakeholder concerns, needs, and priorities as well as factors
affecting the community and the City.
• They must be sufficiently specific to help define the services to be
emphasized and make difficult resource allocation decisions in the
budget process.
• Define priorities among goals to improve their usefulness in
allocating resources.
B. Disseminate Goals and Review with Stakeholders
• The City will disseminate broad goals and review them with
stakeholders. Disseminating and reviewing goals helps foster
participation, awareness, consensus, pride, and a sense of direction.
• Dissemination may occur by conducting public forums and by
publishing goals in key public documents, such as strategic and other
planning documents and budget documents. Electronic media may
also be used including the City website.
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Goal # 2 - Develop Approaches to Achieve Goals
i. Adopt and Review Financial Policies
A. Develop Policy on Stabilization Funds
• The City developed policies to guide the creation, maintenance, and
use of resources for financial stabilization purposes. (See Fund
Balance Policy2).
• The policy establishes how and when the City builds up stabilization
funds and will identify the purposes for which they may beused.
B. Develop Policy on Fees and Chacges3
• The City has established a master fee schedule that identifies the
manner in which fees and charges are set and the extent to which
they cover the cost of the service provided.
• The fee schedules are to be evaluated annually in the budget process
to review all fees and charges, the level of cost recovery for services
and the reasonfor any subsidy, and the frequency with which cost-
of- services studies will be undertaken.
• Policies on fees and charges are publicly available and summarized
in materials used in budget preparation.
C. Develop Policy on Debt Issuance and Management
• The City has established a Debt Management Policy to guide the
issuance and management of debt. Issuing debt commits the City's
revenues several years into the future and may limit the City's
flexibility to respond to changing service priorities, revenue inflows, or
cost structures. Adherence to a debt policy helps ensure that debt is
issued and managed prudently in order to maintain a sound fiscal
position and protect credit quality. compliance.
z The Fund Balance Policy is reviewed annually to assess the alignment with set goals
established in the budget process. The City should evaluate reserves set in the fund balance
policy. These funds may be used at the City's discretion to address temporary cash flow
shortages, emergencies, unanticipated economic downturns, and one-time opportunities.
3 Costs of service include direct and indirect costs such as operating and maintenance costs,
overhead, and charges for use of capital. The City may choose not to recover all costs, but
it must identify such costs. Reasons for not recovering full costs will be identified and
explained. State and local law may govern the establishment of fees and charges.
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• Debt policies are available to the public and other stakeholders.
Because these policies are essential to budget decision making,
particularly capital budgets, they will be reviewed by decision makers
during the annual budget process and as an appendix in the budget
document. Debt Policy will be reviewed for every debt issuance for
The City Council has a debt policy and compiles it with other financial
policies.
D. Evaluate the Use of Unpredictable Revenues
• One-time or short-term revenues will be identified clearly in the
budget process. Unpredictable revenue sources cannot be relied on
as to the level of revenue they will generate.
• For each major unpredictable revenue source, the City identifies those
aspects of the revenue source that make the revenue unpredictable.
Such as, grant supported operating costs.
• One-time revenues will never cover the costs of continuing operating
budgets. One-time revenues will only cover one-time costs such as
matching requirements, one-time purchases, one-time payments to
unfunded liabilities, etc.
E. Develop Policy on Balancing the Operating Budget
• The City defines its Balanced Operating Budget as uses of resources
for operating purposes does not exceed available resources over the
budget period, July 1 to June 30th
• The City is committed to a balanced budget under normal
circumstances and will provide disclosures when a deviation from a
balanced operating budget is planned or when it occurs. A balanced
budget is a basic budgetary constraint intended to ensure that the City
does not spend beyond its means.
• Operating resources (revenues) includes all taxes, licenses and
permits, fines and forfeitures, use of money and property, charges for
services, interdepartmental charges, miscellaneous revenues and
intergovernmental revenues in the General Fund, Special Revenue
Funds, Capital Projects, Debt Service Funds, and Internal Service
Funds.
• Operating uses (expenditures) are personnel service costs, material and
service costs, capital purchases, and interdepartmental allocations.
H. Develop Programs, Services, Operating, and Capital Policies and Plans
A. Prepare Policies and Plans to Guide the Design of Programs and Services
• Service and programs directly relate to strategies identified by the City
to achieve set goals.
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Each department of the City, such as City Council, City Manager, City
Clerk, Police, etc. identify the programs and services along with groups
or populations to be serviced, service delivery issues, specific
programs listed with standards of performance (including level of
service standards or other measures to gauge success), expected
costs, time frames for achievement of goals, issues pertaining to
organization structure, and priorities for service provision.
Each department identifies their goals and achievements by
department which should correlate to overall goals of the City.
Each department identifies the resources (revenues) used to obtain the
goals.
B. Prepare Policies and Plans for Capital Asset Acquisition, Maintenance,
Replacement, and Retirement
• The City will annually evaluate the need to budget for acquisition,
maintenance, replacement, and retirement of capital assets to help
ensure that needed capital assets or improvements receive
appropriate consideration in the budget process and that older capital
assets are considered for retirement or replacement. This is necessary
to plan for large expenditures and to minimize deferred maintenance.
• Annual budget evaluation may address inventorying capital assets and
evaluating their condition, criteria for acceptable condition, criteria for
continued maintenance versus replacement or retirement of an
existing asset, and identification of funding for adequate maintenance
and scheduled replacement of capital assets.
• Any assets identified as corning due for replacement will be addressed
in multi -year budgets to address replacement and renewal schedules
and must recognize the linkage of capital expenditures with the annual
operating budget.
• Plans for addressing deferred maintenance may also be an output of
this practice. Once adopted, which may be included in the Capital
Improvement Program (CIP) Budget, the plan will be made publicly
available, particularly as set forth in budget, management, and
planning documents.
C. Develop Options for Meeting Capital Needs and Evaluating Acquisition
Alternatives°
• The City develops Capital Improvement Program Budgets to address
City is to conduct quarterly reviews of existing capital projects in relation to goal attainment
and to maintain, renovate, and replace, City facilities. Various considerations to be part of
evaluation (i.e. costs, impacts on service, funding levels, use of non -General Funds, stakeholder
input etc.).
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capital needs that are consistent with financial, programmatic, and
capital policies and to evaluate alternatives for acquiring the use of
capital assets. Capital project planning is necessary to give adequate
consideration to longer -range needs and goals, evaluate funding
requirements and options, and achieve consensus on the physical
development of the community.
Annually in the budget process the City evaluates alternative
mechanisms to help ensure that the best approach for providing use of
acapital assetorfacility is chosen based on the policies and goals ofthe
City.
The City uses the CIP Budget to identify capital projects that are
needed to achieve goals and a general time frame in which these assets
will be needed.
Develop Performance Measures
• The City will annually, during the budget process, review and develop
and utilize performance measures for functions, programs, and/or
activities. Performance measures are used for assessing how
efficiently and effectively functions, programs, and activities are
provided and for determining whether program goals are being met.
• Performance measures may be linked to specific program goals and
objectives.
• The measures are to be valid, reliable, and verifiable.
• Whenever feasible, they should be expressed in quantifiable terms.
• Measures will be reported in periodic reviews of functions and
programs, staff reports, and should be integral to resource allocation
decisions.
• They also are to be reported in the budget document and may be
reported in separate management reports or reports to residents.
• Different aggregations of performance measures may be appropriate
for different audiences.
iii. Develop Management Strategies
A. Develop Strategies to Facilitate Attainment of Program and Financial Goals
• The City has an organizational structure and management strategies
that facilitate attainment of program and financial goals. Goals are
more likely to be achieved if organizational and management
strategies are developed to support and encourage organizational and
individual performance directed toward goal attainment.
• The City has developed a means to review, improve, and implement
strategies that encourage the City and its employees to work toward
achievement of goals.
• These strategies include both positive incentives and penalties.
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• They also include support systems such as technology support,
education, and training.
Develop Mechanisms for Budgetary Compliance
• Finance provides monthly budget to actual reports to each
department head and City Manager to ensure proper review for
compliance with the adopted budget. Appropriate management
processes and systems allow the City to detect and correct significant
deviation if it occurs.
• On a quarterly basis Finance provides budget to actual reports to
department heads and City Council.
• These reports provide measures of departments' budget.
• Budgetary compliance is encouraged through use of data collection and
reporting systems that control disbursements of funds and that
facilitate the evaluation of revenue and expenditure trends and
financial projections.
• City Manager will address any deviation of the budget to actual report
(i.e. budget amendments).
• The City has instituted procedures to review the budget quarterly and
decide on actions to bring the budget into balance, if necessary.
C. Develop the Type, Presentation, and Time Period of the Budget
• The City will annually present the budget, which will cover the fiscal
year July 11 through June 30th. The type of budget, the time period
covered, and the manner of presenting materials in the budget
documents can have a significant practical impact on the City's
approach to planning, control, and overall management of its
programs, services, and finances, and on the quality of information
provided to stakeholders.
• The output of the budget will provide fund level and department level
program information for the full fiscal year. The adopted budget will
be provided to all stakeholders on the City website.
• A formal review will be undertaken periodically to ensure that the
budget type, time period, and approach to presenting the budget
continue to meet the needs and priorities of the City. Such a review
will be broadly focused, and not directed simply at the format of
individual pages.
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Goal# 3-Develop a Budget Consistent with Approaches to Achieve Goals
L Develop a Process for Preparing and Adopting a Budget
A. Develop a Budget Calendar
• The City publishes a comprehensive budget calendar that specifies
when budget tasks are to be completed and that identifies timelines
forthose tasks. This includes budgetworkshops available tothe public.
Stakeholders need to be aware of when key budget tasks, events, and
decisions will occur so they have an opportunity to plan and to
participate in the process. The preparation of a calendar helps ensure
that all aspects of the budget process have been considered and that
adequate time has been provided.
• Multiple calendars can be produced, each with different levels of
detail and emphasis to meet the needs of the different types of
stakeholders. (i.e. Internal Calendar and Public Calendar).
• Calendars list the dates of key events and deadlines.
• At least one calendar describes the overall budget and planning
process and identify roles, responsibilities, and assignments.
• To ensure the greatest impact, calendars will identify when and how
stakeholders can participate in the process.
B. Develop Budget Guidelines and Instructions
• The City will develop annual general policy guidelines and budget
preparation instructions for each budget cycle and accompany the
internal budget calendar. Budget guidelines and instructions help
ensure that the budget is prepared in a manner consistent with
government policies and the desires of management and the City
Council. Instructions are necessary so that all participants know what
isexpected, thereby minimizing misunderstanding and extra work.
• Budget guidelines are specific to the particular budget under
development and will incorporate relevant aspects of the City's
financial policies.
• Each department is required to provide the Projected Actuals for
revenues and expenditures of the current year for their respective
department.
• Each department is required to provide Proposed Revenues and
Appropriations for the upcoming fiscal year for their respective
department.
• Guidelines and instructions may set forth financial constraints and key
assumptions that will be used to guide development of the budget, as
well as policy direction.
• Instructions often include sample forms to be completed by the
operating departments. Guidelines and instructions are prepared in a
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written format but may also be presented in an electronic format or
through training and/or an oral presentation.
C. Develop Mechanisms for Coordinating Budget Preparation and Review
• The City has developed mechanisms and assigned responsibilities to
provide for overall coordination of the preparation and review of the
budget. The complete budget process involves many levels,
departments, and individuals in the City, as well as a number of
distinct processes and disparate groups of stakeholders. Coordination
is needed to ensure that processes move forward as planned, to
prevent confusion and misinformation, and to ensure appropriate
stakeholders are involved.
• The Finance Department is the single point of coordination for all
departments.
• The Finance Department's coordination process will involve a number
of tasks: developing a calendar, identifying responsibilities for
completing various tasks, ensuring that various parts of the budget
process are properly integrated, keeping the process on schedule,
producing reports, identifying issues and problems, and ensuring that
other requirements are met and quality standards are maintained.
• The Finance Director has ultimate responsibility for coordinating the
budget process and will respond to stakeholder issues and concerns
that arise in the context of the budget process with direction from the
City Manager and City Council.
Develop Procedures to Facilitate Budget Review, Discussion, Modification,
and Adoption
• The City has a process to facilitate the review, discussion,
modification, and adoption of a proposed budget. Appropriate
procedures are needed to resolve conflicts, to promote acceptance
of the proposed budget by stakeholders, and to assist in timely
adoption of the budget.
• This process allows stakeholders to be informed of the budget
proposal and to allow the legislative body to achieve consensus and
adopt a budget.
• Some examples include: small group meetings, hearings, workshops,
independent analysis, specific decision -making techniques and
procedures, conflict resolution processes, and methods for
presenting portions of the budget.
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E. Identify Opportunities for Stakeholder Input
• The City provides opportunities in the budget process for obtaining
stakeholder input.5 By definition, stakeholders are affected by the
City's resource allocation plans and service and program decisions.
Stakeholders should have clearly defined opportunities to provide
input. This helps ensure that stakeholder priorities are identified and
enhances stakeholder support for the approved budget.
• Stakeholder input can be obtained in a number of ways, including
public hearings, advisory commissions, informal conversations,
roundtable briefings, televised and live online broadcast, opinion
surveys, neighborhood meetings, office hours, letter writing,
telephone calls, and e-mail.
• The budget calendar should identify specific opportunities for
resident input where City officials are available to explain issues and
choices and to receive comments.
ff. Make Choices Necessary to Adopt a Budget
A. Prepare and Present a Recommended Budget
• The City will prepare and present a recommended comprehensive
program and financial plan (the "budget") for review by stakeholders
and consideration for adoption by the City Council. A complete plan
is necessary to allow stakeholders to be informed on how well all the
different aspects of the plan fit together and whether there is an
appropriate balance of resources and assigned uses.
• The proposed budget will consist of a set of recommended actions
regarding programs and services to befunded, including service level,
quality, and goals to be achieved.
• It will also identify funding requirements and sources of funds and
provide the supplemental information necessary to review the plans.
• The budget is to be consistent with policies and goals set by the City.
• The recommended budget must also comply with any statutory
requirements.
5 The budget process should include opportunities for all stakeholders to participate. A
general-purpose public hearing shortly before final decisions are made on the budget is not
adequate as the sole means of soliciting stakeholder input especially on major issues. The
process developed for obtaining stakeholder input should ensure that information is gathered
in a timely and complete manner to be useful in budget decision making, such as City
workshops.
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CITY COUNCIL GOALS & OBJECTIVES: Achieve Fiscal Sustainability and Financial Stability
Enhance the City Image and Effectiveness
B. Present the Budget in a Clear, Easy -to -use Format
• Budget documents and related materials made available to
stakeholders is to be presented in a clear and readily comprehensible
format. The budget is the guide that determines the direction of the
City. It is arguably the single most important document routinely
prepared by the City. To be usable, it not only must contain the
appropriate information, but must also be prepared in a manner that
is clear and comprehensible.
• Some items in a budget document that will assist the reader include:
a table of contents, summaries, a consistent format, high-level
summary information that describes overall funding sources and the
organization as a whole, a description of the overall planning and
budgeting process and the interrelationships of those various
processes, supplementary information about the City and the area for
which it has responsibility, charts and graphs to better illustrate
important points, succinct and clearly- written summaries,
uncluttered pages, and detailed information placed in appropriate
locations so that it does not overwhelm the reader.
• Similar requirements apply to the non -written means (e.g., audio,
video) of presenting budget material to stakeholders at various times
during the budget process.
C. Adopt the Budget
• The City should adopt a budget that meets all statutory requirements
prior to the beginning of the fiscal year.6 The timely adoption of a
budget permits the City to proceed with implementing programs and
services that further the achievement of goals.
• The adopted budget will clearly present the financial, operating, and
capital plan.
• It includes all operations and funds, although not necessarily at the
same level of detail.
• Non -appropriated funds, revolving funds, and any other planned
revenues and expenditures are alsoincluded.
• Whenever feasible, the adopted budget should include (though not
necessarily in a single document) all statutorily required materials
such as the appropriation ordinance.
• Legally required documents that otherwise do not contribute to an
understanding of the budget may be included as an appendix.
6 If there are delays in adopting the budget, actions are to be taken to minimize uncertainty
when the new budget period starts, as appropriate. A continuing appropriation may be
legally required.
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Goal# 4 - Evaluate Performance and Make Adiustments
i. Monitor, Measure, and Evaluate Performance
A. Monitor, Measure, and Evaluate Program Performance
• The City quarterly evaluate the performance of the programs and
services it provides. The City functions, programs, and activities will
also be periodically reviewed to determine whether they are
accomplishing intended program goals and making efficient use of
resources.
• Performance measures, including efficiency and effectiveness
measures, are to be presented in basic budget materials, including the
operating budget document, and be available to stakeholders.
• Performance measures should be reported using actual data, where
possible.
• At least some of these measures should document progress toward
achievement of previously developed goals and objectives.
• More formal reviews and documentation of those reviews should be
carried out as part of the overall planning, decision -making, and
budget process.
B. Monitor, Measure, and Evaluate Budgetary Performance
• At a minimum, the City will, on a quarterly basis, evaluate its financial
performance relative to the adopted budget. Regular monitoring of
budgetary performance provides an early warning of potential
problems and gives
decision makers time to consider actions that may be needed if major
deviations in budget -to -actual results become evident. It is also an
essential input in demonstrating accountability.
• Budget -to -actual or budget -to -projected actual comparisons of
revenues, expenditures, cash flow, and fund balance will be reviewed
quarterlyduringthe budget period. Staffing levels are also monitored.
• Comparisons for at least the current year will be included in the
budget document and be generally available to stakeholders during
discussions related
to budget preparation and adoption.
• Expenditures shall be limited to the amount budgeted. Expenditures
shall be continuously monitored and projected to the end of the year.
If the projected expenditures exceed the budget, appropriate
remedies shall be implemented immediately.
C. Monitor, Measure, and Evaluate Financial Conditions
• The City will monitor and evaluate its financial condition at least
quarterly. The financial health ofthe City is critical to its abilityto meet
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• the needs of stakeholders. Financial condition should be evaluated to
identify potential problems and any changes that may be needed to
improve performance over both the short and long terms.
• Financial indicator measures often are developed to monitor financial
condition and achievement of explicitly set financialgoals.
• Indicators to monitor factors that affect financial performance are also
reported.
• A report on financial condition will be periodically prepared and
updated.
• The report may be a separate document or incorporated into other
relevant documents, including the budget document.
D. Monitor, Measure, and Evaluate External Factors
• The City is to constantly monitor and evaluate external factors that
may affect budget and financial performance and achievement of
goals at least quarterly. Factors outside the City's control, such as the
national or regional economy, demographic changes, statutory
changes, legislation, mandates, and weather, may affect
achievement of stated goals. Monitoring these factors helps the City
to evaluate and respond to the effect ofthese external influences on
goals, programs, and financial plans.
• External factors that are likely to be important in achieving goals are
to be identified and monitored regularly.
• The results of this analysis will be factored into the assessment of
program and financial performance and considered in adjusting these
programs.
• Trends and significant issues may be described in reports to
stakeholders discussing program, budget, and financial performance.
• The assessment of external factors is to be reported, at least in
summary form, and available to stakeholders.
E. Monitor, Measure, and Evaluate Capital Improvement Program
Implementation
• The City will monitor, measure, and evaluate capital improvement
program implementation at least quarterly. Monitoring the status of
capital projects helps to ensure that projects progress as planned,
problems (such as delays in key milestones and cost overruns) are
identified early enough to take corrective action, funds are available
when needed, and legal requirements are met.
• Reports on capital project implementation will be prepared for
decision makers and other stakeholders.
• Summary information is to be considered for projects that are
progressing as planned.
• Project milestones, such as dates for completion of such tasks as
planning, land acquisition, engineering and design, and construction,
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should be identified and progress in meeting these milestones should
be reported at least annually, and as available.
• The City will monitor quality compliance and financial performance.
H. Make Adjustments as Needed
A. Adjust the Budget
• The budget may be adjusted during the budget period should
unforeseen events require changes to the original budget plan. The
budget isa plan based on a set of assumptions that may not always
match actual experiences during the execution phase. The City should
watch for significant deviations from expectations and make timely
adjustments so that the plan is consistent with revised expectations.
• The City has procedures in place to determine when deviations from
the budget plan merit adjustments to the budget.
• Budget adjustments, whether to programs or to revenues and
expenditures,are to be made as appropriate in a timely manner.
• Any changes to the budget are to be reported.
• The timing and waythis is done depends on the stakeholder group
and the level of materiality of the changes.
B. Adjust Policies, Plans, Programs, and Management Strategies
• The City may adjust its policies, plans, programs, and management
strategies during the budget period, as appropriate. Changing
conditions or programs and services that are not producing the
desired results or efficiently utilizing resources may require
adjustments forthe Cityto continue to meet the needs of stakeholders
and to meet its own goals.
• The City's management team will evaluate their monthly budget to
actual report for review, decision making, and implementation of
changes to policies, plans, programs, and management strategies
during the budgetperiod.
• Adjustments are based on findings obtained from monitoring and
assessing program and financial results, stakeholder input, and
external circumstances.
• Regular briefings to management and elected officials on the
contents of the reports permit timely adjustments as needed to the
plan or program activities.
7 Budget adjustments may be administrative or legislative depending on the adjustment needed
and on statutory requirements such as the legal level of control of the budget appropriations.
City Manager may make adjustment within the fund across departments as long as the overall
appropriation is not changed.
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C. Adjust Broad Goals, if Appropriate
• The City will modify or change its broad goals if conditions change
sufficiently that these goals are no longer appropriate. Goals may
need to be adjusted in response to new information about program
results, stakeholder needs, and external circumstances in order to be
more relevant for the community or more practically attainable.
The City department heads meet to evaluate performance or
changes in the annual budget plan to ensure that goals are reviewed
duringthe budget period
and adjusted when appropriate.
Adjustments are based, in part, on findings obtained from monitoring
and assessing program and financial results, stakeholder input, and
external circumstances.
Opportunities and challenges facing the City are also to be considered.
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City of West Covina
Debt Management Policy
Adopted — May 5, 2020
Page 1 of 6
CITY OF WEST COVINA
DEBT MANAGEMENT POLICY
Section 1— Introduction
The purpose of this Debt Management Policy (Policy) is to establish guidelines for the issuance and management
of debt for the City of West Covina and all affiliated city entities (collectively, the "City"). While the City prefers
to finance projects on a pay-as-you-go basis, in the event debt is necessary, this Policy confirms the commitment
ofthe Council, management, staff, advisors and other decision makers to adhere to sound financial management
practices, including full and timely repayment of borrowing, and achieving the lowest possible cost of capital
within prudent risk parameters.
Debt Issuance Priorities:
1. Achieve the lowest cost of capital while maintaining compliance with state and federal laws and
regulations
2. Maintain a prudent level of financial risk and maintain the City's sound financial position
3. Preserve future financial flexibility
4. Ensure that all debt is structured to maximize the benefit to both current and future taxpayers,
ratepayers, and constituents of the City
5. Maintain full and complete financial disclosure and reporting
6. Obtain and maintain the highest practical credit ratings consistent with maximizing the benefit to both
current and future taxpayers, ratepayers and constituents of the City.
7. Maintain good relations with all investors in City debt
8. Ensure that the City's debt is consistent with the City's planning goals and objectives and capital
improvement program or budget, as applicable
This policy shall govern the issuance and management of all debt and lease financing funded from the capital
markets (including private placement and bank loans), including the selection and management of related
financial services and products and investment of bond and lease proceeds. While adherence to this policy is
required in applicable circumstances, it is recognized that changes in the capital markets, agency programs and
other unforeseen circumstances may from time to time produce situations that are not covered by this policy
and will require modifications or exceptions to achieve policy goals. In these cases, management flexibility is
appropriate, provided specific authorization from the City Manager and City Council is obtained.
Section 2 — Responsibilities
The City's debt program for all City funds shall be operated in conformance with applicable federal, state, and
other legal requirements, including the West Covina Municipal Code.
Responsibility for managing the coordinating of all activities related to the structure, issuance and administration
of all long and short-term debt obligations shall rest with the Finance Director.
No debt obligations shall be presented to the City Council for their authorization without the joint assessment
and recommendation of the City Manager, Finance Director and the City Attorney. Departments planning debt -
financed capital programs or equipment acquisitions shall work closely with the City Manager, Finance Director
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and City Attorney to provide information and otherwise facilitate the issuance and on -going administration of
debt.
The Finance Director shall have the authority to periodically select service providers as necessary to meet legal
requirements and minimize debt costs. Such services may include financial advisory, underwriting, trustee,
verification agent, escrow agent, arbitrage consulting, special tax consulting, bond and disclosure counsel, and
other consultants as needed. To achieve an appropriate balance between service and cost, the Finance Director
is authorized to select such service providers through sole source selection or a competitive process using a
Request for Proposals.
The Finance Director shall be responsible for maintaining good communications with rating agencies, investors
and other debt related service providers about the City's financial condition and will follow a policy of full
disclosure.
The Finance Director shall conduct an annual review of the Policy and bring forward to the City Council any
amendments deemed necessary and appropriate.
Section 3 — Debt Considerations
The City will evaluate the need for debt financing a project compared to a pay-as-you-go financing methodology.
The City prefers to fund projects on a pay-as-you-go basis.
A. Factors favoring a pay-as-you-go methodology include:
a. Current projected revenues and fund balances available are sufficient to fund the project
b. Long term total costs are lower due to the avoidance of interest expense
c. Existing debt capacity is insufficient to absorb the additional debt without adverse impact to
credit ratings
d. Market conditions are unfavorable or present difficulties in marketing
Factors favoring debt financing include:
a. Current and projected revenues available for debt service are sufficient and reliable so that
financing can be marketed with investment grade credit ratings
b. Market conditions present favorable interest rates and demand for the City financings
c. A project is mandated by state or federal requirements, and current resources are insufficient
or unavailable to fully fund the project
d. The project is immediately required to meet or relieve capacity needs or emergency conditions
and current resources are insufficient or unavailable
e. The savings from the project are sufficient to pay for the debt service costs
The City will review debt limits in conjunction with any proposed financing. It is the City's goal to limit debt
service costs in the General Fund to no more than twenty-five (25%) percent of revenues, including transfers.
Payments on bonds that are tied to a specified revenue stream other than General Fund resources (e.g.
enterprise revenue bonds, tax allocation bonds, and land secured bonds) are not subject to the twenty-five (25%)
percent limit. The debt limit will exclude pension obligation bonds and other refunding bonds. Each proposed
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financing will be individually assessed by the Finance Director and subject to the approval policies contained
herein.
Section 4 — Debt Term
The City Council recognizes that any new debt obligation will have an impact on the long-term affordability of
all outstanding debt and anyfuture planned debt, as well as budgetary impacts associated with the maintenance
and operating costs of debt financed facilities.
A. Term of Debt— Debt will be structured for the shortest period possible, consistent with a fair allocation
of costs to current and future beneficiaries or users. The weighted average maturity of the debt (or the
portion of the debt allocated to the project) shall not exceed the useful life of the project.
B. Debt Repayment — Typically, the City desires level debt service payments over the term of the debt.
However, the cost of capital, financial risk, current economic conditions, future financial flexibility, credit
ratings and available cash flow will be evaluated to determine the most appropriate method of debt
amortizations for each debt issue. Notwithstanding the above, back loading of debt service will be
evaluated as the circumstances dictate. Back loading occurs when debt service payments are lower in
the initial years of a debt term and higher toward the later years of a debt term.
Section 5 — Debt Issuance
The City has the capacity to issue long and short-term debt and to refund any outstanding debt. The following
section details the purposes of debt issuance and the method of determining the type of sale for such debt.
A. Long-term Debt — Long-term debt financings are appropriate when the project to be financed is
necessary to provide basic services and long-term debt may be used to finance the acquisition or
improvement of land, infrastructure, facilities or equipment for which it is appropriate to spread the
costs of such over more than one budget year. Long-term debt may be used to fund capitalized interest,
cost of issuance, required reserves and any other financing related costs that may be legally capitalized.
Long-term debt shall not be used to fund City operating costs.
B. Short-term Debt— Short-term debt will be considered as an interim source of funding in anticipation of
long-term debt. Short-term debt may be issued for any purpose for which long-term debt may be issued,
including capitalized interest and financing related costs. Short-term debt is also appropriate to address
legitimate short-term cash flow requirements during a given fiscal year to fund the operating costs of
the City to provide necessary public services. The City will not engage in short-term borrowing solely for
the purpose of generating investment income.
C. Financings on Behalf of Other Entities - The City may also find it beneficial to issue debt on behalf of
other governmental agencies or private third parties to benefit the public purposes of the City. In such
cases, the City shall take reasonable steps to confirm the financial feasibility of the project to be financed
and the financial solvency of any borrower and that the issuance of such debt is consistent with the
policies set forth herein.
D. Refunding — Refunding opportunities will be identified by periodic reviews of outstanding debt
obligations. Refunding will be considered when there is a net economic benefit from the refunding of a
least three (3) percent on a net present value basis. Non -economic refunding may be undertaken to
achieve City objectives relating to changes in covenants, call provisions, operational flexibility, tax status,
issuer, or other non -economic factors related to the debt.
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Method of Sale —The City shall have the flexibility to determine which method of sale is appropriate for
each debt issuance in light of market interest rates and City objectives. Determination of the appropriate
method of sale will rest collectively with the City Manager, Finance Director, and City Attorney. Potential
methods of sale include:
a. A competitive bidding process through which interested underwriters submit proposals to
purchase an issue of bonds and the award is based on, among other factors, the lowest offered
true interest cost.
b. A negotiated sale process through which a selected underwriter, or team of underwriters,
negotiate the terms of an issue and sell bonds in the municipal market. Negotiated sales are
often used where there are unusual conditions or unique considerations related to the bond
sale. A negotiated sale is subject to approval by the City to ensure that interest costs are in
accordance with comparable market interest rates.
c. A private (or direct) placement sale typically occurs when the financing can or must be
structured for a single or limited number of purchasers or where the terms of the private
placement are more beneficial to the City than either a negotiated or competitive sale.
Pooled Financing — The City may also consider use of pooled financing as a method of accessing the
capital markets. Use of pooled financing will be evaluated collectively by the City Manager, Finance
Director, and City Attorney.
Section 6 - Debt Structure
A. Credit Ratings — The City seeks to obtain and maintain the highest possible credit rating when issuing
debt. The City will seek credit ratings from at least one major credit rating agency on all debt, as
appropriate. Ratings from multiple rating agencies may be sought for a single debt issue based upon the
market conditions at the time of the issuance.
B. Fixed Rate and Variable Rate Debt — The City prefers to issue fixed rate debt. Variable rate debt may be
used, if market conditions warrant at the time of issuance. It is acknowledged that variable rate debt
passes an unknown obligation onto future budget cycles.
C. Debt -related Derivatives — Derivative products may have application with regard to certain City
borrowing programs. The City acknowledges the increased complexity associated with use of derivatives
and the City Manager, Finance Director and the City Attorney will evaluate the use of derivative products
on a case -by -case basis.
D. Call Provisions — The timing for when bonds are callable varies and is determined at the time of pricing
such bonds. The City's preferred structure is to negotiate for optional redemption at par in order to
maintain flexibility in the future, but a final decision will be made on a case by case basis after evaluation
of the marketability of the City's bonds.
E. Credit Enhancements —The City may use credit enhancements (letters of credit, bond insurance, surety
bonds, etc.) when such credit enhancements prove to be cost effective. The City will consider the use of
credit enhancements on a case -by -case basis.
F. Reserve Funds —A debt service reserve fund provides an added measure of securityto bond holders and
may improve the credit rating and thus lower the costs of borrowing. Reserve funds may be necessary
for specific transactions, or the City may choose to create one if it is determined to be cost effective.
When cost beneficial, the City may consider the use of surety bonds, lines of credit, or similar
instruments to satisfy the reserve requirements.
Section 7 — Private Activity Use Limitations on Tax Exempt Debt
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RESOLUTION NO.2020-35
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF WEST COVINA, CALIFORNIA, ADOPTING
FINANCIAL AND BUDGET POLICIES
WHEREAS, the City Council of the City of West Covina, California is adopting
financial and budget policies as a best management practice.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF WEST COVINA,
CALIFORNIA DOES HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City Council has reviewed and approved the following policies:
A. Budget Policy
B. Debt Management Policy
C. Disclosure Policy
D. Information Technology Backup Policy
E. Pension Funding Policy
SECTION 2. The City Clerk shall certify to the adoption of this resolution and shall
enter the same in the book of original resolutions and it shall become effective immediately.
PASSED AND ADOPTED this 5th day of May, 2020.
Tony Wu
Mayor
APPROVED AS FORM ATTEST
Thomas P. Duarte Lisa Sherrick
City Attorney Assistant City Clerk
IRS Tax Code Section 141 sets forth private activity tests for the purpose of limiting the volume of tax-exempt
bonds that finance activities of persons other than state and local governmental entities. These tests serve to
identify arrangements that actually or reasonably expect to transfer the benefits of tax-exempt financing to non-
governmental persons. The law includes tests of private use, security and payment as well as private loan
financing tests. The law also provides for various safe harbors and nuances to the application of these limits. The
City will manage a processto ensure private use compliance and will consult with bond counsel to obtain federal
tax advice regarding whether anticipated project use will be consistent with the restrictions on private business
use of the bond financed property and, if not, whether any "remedial action" permitted under §141 of the code
may be taken as means of enabling that use arrangement to be put into effect without adversely affecting the
tax-exempt status of the bonds.
With respect to tax-exempt bonds, the City pledges in each bond issuance that it will monitor and control the
receipt, investment, expenditure, and use of all bond proceeds and will take or omit to take any actions as
necessary to cause interest on tax-exempt bonds to remain excludable from the gross income of bond holders.
City staff will ensure appropriate lease and building use policies to maintain compliance with this pledge.
Section 8 — Interfund Borrowings
The City may borrow internally from other funds with temporary cash surpluses to meet short term cash needs
in lieu of issuing debt. Interfund borrowing extending for more than one year will be brought to Council for
approval.
Section 9 — Debt Administration
The Finance Director shall be responsible for administering the City's debt management program. To that end,
this position shall:
A. Ensure compliance with all disclosure and reporting requirements outlined in the City's Disclosure Policy
B. Periodically review outstanding debt for refunding opportunities
C. Maintain positive working relationships with rating agencies and other financial professionals
D. Review and recommend appropriate structures for all new debt issuances
E. Ensure compliance with the Investment Policy and bond documents regarding investing bond proceeds
Section 10 —Arbitrage Compliance
Arbitrage is defined as the profit earned when tax-exempt bond proceeds are invested in higher yielding
securities than the interest rates of the bonds issued. To ensure compliance with federal arbitrage laws, the City
will monitor ongoing activities, including remittance of any required arbitrage rebate. If necessary, the City will
utilize a consultant for arbitrage rebate calculations and preparation of the required Internal Revenue Service
forms. Arbitrage rebate calculations on outstanding bond issues will be performed periodically, but never longer
than the 5t" year after a bond issuance.
Section 11— Disclosure Policy
The Finance Director will be the disclosure coordinator for the City and will have the responsibility of complying
with the City's Disclosure Policy document, as adopted by City Council.
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�Di:
City of West Covina
Disclosure Policy
Adopted — May 5, 2020
Page 1 of 4
CITY OF WEST COVINA
DISCLOSURE POLICIES
Section 1- General
These debt -related disclosure policies and procedures (the "Disclosure Policies") are intended to ensure that
the City of West Covina and all affiliated city entities (collectively, the "City") remain in compliance with all
applicable federal and state securities laws.
Section 2 — Disclosure Coordinator
The Finance Director of the City shall be the disclosure coordinator of the City (the "Disclosure Coordinator").
Section 3 — Review and Approval of Official Statements
The Disclosure Coordinator oft he City shall review any Official Statement prepared in connection with any debt
issuance by the City in order to ensure there are no misstatements or omissions of material information in any
sections that contain descriptions of information prepared by the City.
In connection with the review of the Official Statement, the Disclosure Coordinator shall consult with third
parties, including outside professionals assisting the City, and all members of City staff, to the extent that the
Disclosure Coordinator concludes they should be consulted so that the Official Statement will include all
"material" information (as defined for purposes of federal securities law).
As part of the review process, the Disclosure Coordinator shall submit all Official Statements to the City Council
for approval. The approval of an Official Statement by the City Council shall be placed on the agenda as a new
business matter and shall not be approved as a consent item. The City Council shall undertake such review as
deemed necessary by the City Council, following consultation with the Disclosure Coordinator, to fulfill the City
Council's responsibilities under applicable federal and state securities laws. In this regard, the Disclosure
Coordinator shall consult with the City's disclosure counsel to the extent the Disclosure Coordinator considers
appropriate.
Section 4—Continuing Disclosure Filings
Underthe continuing disclosure undertakings that the City has entered into in connection with its debt offerings,
the City is required each year to file annual reports with the Municipal Securities Rulemaking Board's Electronic
Municipal Market Access ("EMMA") system in accordance with such undertakings. Such annual reports are
required to include certain updated financial and operating information, and the City's audited financial
statements.
The City is also required under its continuing disclosure undertakings to file notices of certain events with EMMA
The Disclosure Coordinator is responsible for establishing a system (which may involve the retention or one or
more consultants) by which:
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(i) the City will make the annual filings required by its continuing disclosure undertakings on a
complete and timely basis, and
(ii) the City will file notices of events enumerated in Exhibit A on a timely basis.
At their sole discretion, the Disclosure Coordinator may engage a consultant that specializes in continuing
disclosure compliance to assist the City in maintaining compliance with all covenanted continuing disclosure
requirements.
Section 5 —Annual Reporting to the State of California
At the time of adoption of these Disclosure Policies, there are three primary categories of annual reporting
required by the State of California, as outlined below:
1. With the adoption of Senate Bill No. 1029 (which became effective January 1, 2017 and applies to all
debt sold on or after January 21, 2017), debt issuers in the State of California are required to file annual
debt transparency reports ("ADTRs") that cover a reporting period of July 1 to June 30. These ADTRs are
to include specified information about debt authorized, issued, and outstanding and regarding the use
of proceeds from debt during the reporting period. These ADTRs are due by January 31" of each year
for any debt outstanding in the prior fiscal year and are to be filed with the California Debt and
Investment Advisory Commission ("CDIAC").
2. Mello -Roos Reporting: All issuers that have sold community facilities district bonds after January 1, 1993
are required to report certain information about the bond issues through by completing a Yearly Fiscal
Status Report ("YFSR") and/or a Draw on the Reserve Fund or Default Report. Issuers are required to file
all YFSRs if they have sold bonds on or before June 301h of each year and each year thereafter until the
bonds are no longer outstanding. All issuers, regardless of when bonds are sold, are required to report
any draw on reserve or default that occurs throughout the calendar year. These reports must be
submitted to CDIAC no later than October 301h each year.
3. Marks -Roos Reporting: Any joint powers authority selling bonds on or after January 1, 1996 that uses
the proceeds to acquire one or more local obligations is required to report annually on the fiscal status
of the Authority Bonds and the local obligations acquired until the final maturity of the bonds. CDIAC
has developed the Marks -Roos Yearly Fiscal Status Report for Authority Issue to standardize and
facilitate reporting on joint powers authority bonds. Such reports must be submitted to CDIAC no later
than October 301h each year.
The Disclosure Coordinator will be responsible for complying with State requirements regarding annual filings
all applicable outstanding City debt. At their sole discretion, the Disclosure Coordinator may engage a consultant
that specializes in compliance with State reporting requirements to assist the City in maintaining compliance
with all covenanted continuing disclosure requirements.
Section 6 — Public Statements Regarding Financial Information
Whenever the City makes statements or releases information relating to its finances to the public that are
reasonably expected to reach investors and the trading markets, the City is obligated to ensure that such
statements and information are complete, true, and accurate in all material respects.
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Section 7 —Training
The Disclosure Coordinator shall ensure that the members of the City staff involved in the initial or continuing
disclosure process and the City Council are properly trained to understand and perform their responsibilities.
The Disclosure Coordinator shall arrange for disclosure training conducted by the City's disclosure counsel or
other qualified instructor. Such training sessions shall include education on these Disclosure Procedures, the
City's disclosure obligations under applicable federal and state securities laws and the disclosure responsibilities
and potential liabilities of members of the City's staff and members of the City Council. Such training sessions
may be conducted using a recorded presentation.
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EXHIBIT A
LISTED EVENTS
The Disclosure Coordinator should review this list at least once each week to determine whether any
event has occurred that may require a filing with EMMA.
For securities subject to Rule 150-12, the following events require notice in a timely manner not in excess
of ten (10) business days after the occurrence of the event:
1. principal and interest payment delinquencies;
2. non-payment related defaults, if material;
3. unscheduled draws on debt service reserves reflecting financial difficulties;
4. unscheduled draws on credit enhancements reflecting financial difficulties;
5. substitution of credit or liquidity providers, or their failure to perform;
6. adverse tax opinions, the issuance by the I.R.S. of proposed or final determinations of taxability,
Notices of Proposed Issue or other material notices or determinations with respect to the tax
status of the security, or other material events affecting the tax status of the security;
7. modifications to rights of security holders, if material;
8. bond calls, if material, and tender offers;
9. defeasances;
10. release, substitution, or sale of property securing repayment of the securities, if material
11. rating changes;
12. bankruptcy, insolvency, receivership or similar event of the obligated person;
13. consummation of a merger, consolidation, or acquisition involving an obligated person or the sale
of all or substantially all of the assets of the obligated person, other than in the ordinary course
of business, the entry into a definitive agreement to undertake such an action or the termination
of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;
and
14. appointment of a successor or additional trustee or the change of name of a trustee, if material.
For continuing disclosure undertakings entered into on or after February 27, 2019, the following events
require notice in a timely manner not in excess often (10) business days after the occurrence of the event:
15. incurrence of a financial obligation of the obligated person, if material, or agreement to
covenants, events of default, remedies, priority rights, or other similar terms of a financial
obligation of the obligated person, any of which affect security holders, if material; and
16. default, event of acceleration, termination event, modification of terms, or other similar events
under the terms of a financial obligation of the obligated person, any of which reflect financial
difficulties.
City of West Covina
Information Technology Backup Policy
Updated — May 5, 2020
City of West Covina
Administrative Policies
SUBJECT: Information Technology Backup Policy EFFECTIVE DATE: May, 5, 2020
To establish a policy regarding the backup of data and essential systems to ensure
PURPOSE: recovery/business continuity in the event of a virus attack, software interruption, system failure or
Introduction:
Division of Information Technology (DoIT) uses full and incremental backups of all servers and databases;
saving data to onsite and cloud storage service. This allows for data to be stored and then replicated in a timely
manner. This policy has been designed and implemented with disaster recovery/business continuity (i.e. the
ability to recover recent live data in the event of a partial or total loss of data) as key deliverables and is not
designed as a method of archiving material for extended periods of time.
The data backups cover all systems managed by the DoIT. Data held and managed locally in departments is
excluded unless departments have entered into specific arrangements with DoIT. All staff are reminded that
they are individually responsible for data held locally on their desktop or laptop computer. All critical data must
be stored on the network drives provided.
A. Backup Schedule:
1. Upon completion of backups, data is stored to a secure remote site for disaster recovery purposes.
2. A limited number of personnel have access to the backup application.
3. Frequency: Server backup daily. Incremental backup every day and full backup on a weekly basis.
B. Backup Access:
4. Upon completion of backups, data is stored to a secure remote site for disaster recovery purposes.
5. A limited number of personnel have access to the backup application.
C. Backup Policy:
1. The DoIT backup systems have been designed to ensure that routine backup operations require no
manual intervention.
2. DoIT ensures regular monitoring of backup operations and the status for backup jobs is checked
regularly with a full recovery test yearly and a random partial recovery test quarterly.
1
D. Restore:
1. Data is available for restore upon request
2. Request for data recovery should be submitted to the DoIT service desk.
Shawn Granger David Carmany Date
IT Manager City Manager
City of West Covina
Pension Funding Policy
Adopted - May 5, 2020
11Page
I, LISA SHERRICK, ASSISTANT CITY CLERK of the City of West Covina,
California, do hereby certify that the foregoing Resolution No. 2020-35 was duly adopted by the
City Council of the City of West Covina, California, at a special meeting thereof held on the 5th
day of May, 2020, by the following vote of the City Council:
AYES:
NOES:
ABSENT:
ABSTAIN:
Lisa Sherrick
Assistant City Clerk
PURPOSE
The City's Pension Funding Policy documents the method the City will use to determine
its actuarially determined contributions to fund the long-term cost of benefits to the
plan participants and annuitants. The policy also:
• Provides guidance in making annual budget decisions;
• Demonstrates prudent financial management practices;
• Create sustainable and affordable budgets for pensions;
• Reassures bond rating agencies; and
• Shows employees and the public how pensions will be funded.
II. BACKGROUND
The City provides defined benefit retirement plan through the California Public
Employees' Retirement System (CaIPERS). CalPERS is a multiple -employer public
employee defined benefit pension plan.
All full-time and certain part-time City employees are eligible to participate in CalPERS.
CalPERS provides retirement and disability benefits, annual cost of living adjustments
and death benefits to plan members and their beneficiaries. CalPERS acts as a common
investment and administrative agent for participating public entities within the State of
California. Benefit provisions and all other requirements are established by state
statute.
The financial objective of a defined benefit pension plan is to fund the long-term cost of
benefits provided to the plan participants. In order to assure that the plan is financially
sustainable, the plan should accumulate adequate resources in a systematic and
disciplined manner over the active service life of benefitting employees. This funding
policy outlines the method the City will utilize to determine its actuarially determined
contributions to fund the long-term cost of benefits to the plan participants and
annuitants.
Pension Funding: A Guide for Elected Officials, issued by eleven national groups
including the U.S. Conference of Mayors, the International City/County Management
Association, and the Government Finance Officers Association, established the following
five general policy objectives for a pension funding policy:
• Actuarially Determined Contributions. A pension funding plan should be
based upon an actuarially determined contribution (ADC) that incorporates
both the cost of benefits in the current year and the amortization of the
plan's unfunded actuarial accrued liability.
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• Funding Discipline. A commitment to make timely, actuarially
determined contributions to the retirement system is needed to
ensure that sufficient assets are available for all current and
future retirees.
• Intergenerational equity. Annual contributions should be
reasonably related to the expected and actual cost of each year
of service so that the cost of employee benefits is paid by the
generation of taxpayers who receives services from those
employees.
• Contributions as a stable percentage of payroll. Contributions
should be managed so that employer costs remain consistent
as a percentage of payroll over time.
• Accountability and transparency. Clear reporting of pension
funding should include an assessment of whether, how, and when
the plan sponsor will ensure sufficient assets are available for all
current and future retirees.
III. POLICY
A. Actuarially Determined Contribution (ADC). CalPERS actuaries will
determine the City's ADC to CalPERS based on annual actuarial valuations. The
ADC will include the normal cost for current service and amortization of any
under -funded amount. The normal cost will be calculated using the entry age
normal cost method using economic and non -economic assumptions
approved by the CalPERS Board of Administration.
The City will review the CalPERS annual actuarial valuations to validate
the completeness and accuracy of the member census data and the
reasonableness of the actuarial assumptions.
B. Additional Discretionary Payment (ADP) Contribution. The City will
consider making ADP contributions with one-time General Fund resources,
with the objectives of increasing the plan's funded status, by reducing the
unfunded actuarially accrued liability, and reducing ongoing pension costs.
C. Pension Obligations Bonds. The City will consider pension obligation bonds if
such bonds have expected savings using borrowing costs and CaIPERS'
discount rate.
The City and its advisors will discuss and consider the risks of any potential
pension obligation bonds.
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Any pension obligation bonds, or refundings of pension obligation bonds, must
be voted upon by the City Council.
D. Contributions as a Manageable Budget Expense. The City will always make its
required annual contributions to CaIPERS. Contributions should be stable and
a manageable portion of revenue. The City may:
• Make additional discretionary contributions directly to CaIPERS.
• Consider establishing a pension stabilization trust, subject to approval
by the Council.
• Issue, call, or refund pension obligation bonds.
E. Transparency and Reporting. Funding of the City's pension plans should
be transparent to vested parties including plan participants, annuitants, the
City Council, and residents. In order to achieve this transparency, the
following information shall be available:
• Copies of the annual actuarial valuations for the City's CalPERS
plans shall be made available to the City Council.
• The City's Comprehensive Annual Financial Report shall be
published on its website. This report includes information on the
City's annual contributions to the pension systems and their funded
status.
The City's annual operating budget shall include the City's
contributions to CalPERS.
Review of Funding Policy. Funding a defined benefit pension plan requires
a long-term horizon. As such, the City will review this policy at least every two
years.
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EXHIBIT A
FINANCIAL AND BUDGET POLICIES
City of West Covina
Budget Policy
Updated — May 5, 2020
INTRODUCTION
This document defines the policies and procedures for the budget for the City of West
Covina.
The procedures serve as a guide for maintaining the City's reputation for fairness and
integrity of fiscal responsibility in preparation of the annual budget using proper checks and
balances. The budget functions will be conducted using the highest ethical standards.
The objective of the budget policy is to establish a budget process that helps decision makers
make informed choices about the provision of services and capital assets and to promote
stakeholder participation in the process. The term "stakeholder" refers to anyone affected
by or has a stake in the City of West Covina with priority to residents and West Covina
businesses. The use of "shall" is synonymous with will.
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POLICY PURPOSE
Policy and procedures have been established in order to provide the most efficient and
effective operations of preparing the budget. The budget process will cover four main Goals:
1. Establish Broad Goals to Guide City Decision Making
• The City Council does adopt broad goals on an annual basis that provide
overall direction for the City and serve as a basis for decision making.
i. Assess community needs, priorities, challenges and
opportunities.
ii. Identify opportunities and challenges for City services,
capital assets, and management.
iii. Develop and disseminate broad goals.
2. Develop Approaches to Achieve Goals
• The City will utilize specific policies, plans, programs, and management
strategies to define how it will achieve its long-term goals.
i. Adopt and review financial policies.
ii. Develop programs, services, operating, and capital policies
and plans.
iii. Develop management strategies.
3. Develop a Budget Consistent with Approaches to Achieve Goals
• A financial plan and budget that moves toward achievement of goals,
within the constraints of available financial resources, is to be prepared
and adopted.
i. Develop a process for preparing and adopting a budget.
ii. Make choices necessary to adopt a budget.
4. Evaluate Performance and Make Adiustments
• Programs and financial performance will be continually evaluated, and
adjustments made, to encourage progress toward achievinggoals.
i. Monitor, measure, and evaluate performance.
ii. Make adjustments as needed.
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Goal # 1- Establish Broad Goals to Guide City Decision Making
i. Assess Community Needs, Priorities, Challenges, and Opportunities
A. Identify Stakeholder Priorities, Needs, and Concerns
• The City Council meetings are an open forum providing opportunity
to stakeholders to bring forthconcerns, needs, and priorities.
• Among other mechanisms that might be considered are special
public hearings, surveys, meetings of leading residents and resident
interestgroups, City strategic planning processes, meetings with City
employees, and workshops involving City administrative staff and/or
the City Council.
B. Evaluate Community Condition, External Factors, Opportunities, and
Challenges,
• The City Council will regularly collect and evaluate information about
trends in community condition, the external factors affecting it,
opportunities that may be available, and problems and issues that
need to be addressed.
• Some mechanisms will involve data gathering from pre-existing
sources or through opinion surveys.
• Other mechanisms will be subjective, such as observing physical
characteristics of geographic areas within the community or talking
to residents, experts, business and community leaders, and
legislative bodies. Formal studies of particular issues or trends may
also be undertaken.
• The frequency and extensiveness of the evaluation should be
consistent with how frequently the information changes and the
relative importance of the information being gathered.
ii. Identify Opportunities and Challenges for City Services, Capital Assets,
and Management
A. Assess Services and Programs, and Identify Issues, Opportunities, and
Challenges
• The City shall inventory, identify, and assess the programs and
services that it provides, their intended purpose, and factors that
could affect their provision in the future.
1 The intent of this practice is for the City to have up-to-date information with which to evaluate
community conditions and majorissues that are integral to the development and achievement
of goals. In evaluating community condition, the City may want to consider local, regional,
national, and global factors affecting the community (i.e. economic and financial factors,
demographics, physical or environmental factors, changes in technology, etc.).
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