WORKSHOP ITEM - Joe Huss, Finance Director
Title
Strategic Priorities Fund Policy Formulation
Background
The objective for this workshop is to establish guidelines for developing a policy on the use of the City’s Strategic Priorities Fund.
The Strategic Priorities Fund was established in May 2019 from the proceeds of the dissolution of the North Suburban Hospital District (NSHD). On May 6, Council directed that the $2,648,000 from NSDH be placed in a Strategic Priorities fund to be used pursuant to Council priorities as established at a later date. Council also directed that $100,000 of this amount be set aside as a matching grant to assist in funding the new Veterans Memorial Park. Additionally, the 2021 Tax Levy, adopted by the City Council on December 21, 2020, included a Strategic Priorities levy of $325,000. As of year-end 2020, the Strategic Priorities Fund had a balance of roughly $2,656,000.
At the time the funds were placed into the Strategic Priorities Fund, the City Council expressed its intent to develop a policy governing expenditures from the fund. Per Council discussions, it was intended that the fund be used only for items that the Council considers to be of high priority for accomplishing established strategic initiatives. With the adoption of the 2021 levy, Council also expressed a desire to establish a strategy whereby, in the event of an economic downturn, the City would have a funding source from which to draw to maintain basic service levels without putting undue pressure on the tax levy. With respect to the preceding parameters, Council was supportive of reviewing a draft policy for use of Strategic Priorities funds that is modeled after the City’s Capital Improvement Fund Policy, including (and especially) the requirement that expenditures from the fund must be supported by at least five (5) affirmative votes of the Council.
Based on the above, staff began framing a draft policy.
For Council discussion at this time, staff is requesting Council review of the following elements that would be used to develop a policy for use of the Strategic Priorities Funds:
1. Policy Statement - the purpose of the Strategic Priorities Fund is:
a. To fund items that the Council considers to be of high priority for accomplishing established strategic initiatives.
b. In the event of an economic downturn, to relieve the reliance on property tax levy increases and provide a funding source from which to draw to maintain basic service levels.
2. For Strategic Priorities
a. Expenditures or transfers from the Strategic Priorities Fund shall be made only after careful deliberation of the City Council.
b. The city council must identify that:
i. The project/strategic priority will advance or achieve one or more of the strategic initiatives identified in the City’s adopted Strategic Plan; and
ii. The project/strategic priority has sufficient community-wide benefit consistent with other city goals, programs, or policies.
3. For Economic Downturns - The City Council will consider the use of the Strategic Priorities Fund as a supplemental funding source for the General Fund in the event of an economic turndown as measured by:
a. A decline in the City’s overall taxable property value of 0.5%;
b. A decline in non-property tax revenue equal to 5% of annual revenue;
c. A mid-year decline in revenue to the extent that the General Fund’s reserves are depleted;
4. Expenditures or transfers from the Strategic Priorities Fund are to be made only upon the adoption of a resolution approved by an affirmative vote of at least five (5) Councilmembers.
There are other potential uses of the Strategic Priorities Fund that either this Council or the previous Council has brought up in the past, including:
• Supplemental resource for funding capital equipment purchases
• Facilities Fund reserve
While the above other potential uses could be specifically incorporated into the Strategic Priorities Fund Use Policy, staff feels that they are adequately and more properly addressed in Section 2 of the Policy.
Staff Recommendation
Staff requests Council review and discuss the proposed elements of a Strategic Priorities Fund use policy and provide direction for staff to develop a policy.
Attachment List