ALACHUA COUNTY LIBRARY DISTRICT POLICY STATEMENT
Approved by: Governing Board 09/10/08
The following policies establish the framework for the Library District's overall financial planning and management. These policies show the citizens, credit rating industry and prospective investors (bond buyers) the Library District's commitment to sound financial management and fiscal integrity. These policies also improve the District's fiscal stability by helping Library District officials plan fiscal strategy in a consistent manner. Adherence to adopted financial policies promotes sound financial management.
General Financial Goals
General financial goals are:
- To maintain the financial viability of the Library District in order to ensure adequate levels of Library services.
- To maintain financial flexibility in order to continually adapt to local and regional economic and demographic changes.
Operating Budget Policy
The Library District will establish and maintain practices for the administration and amendment of the annual budget.
The Library District shall establish an annual budget process to:
- Develop a proposed and planned budget to include personal services, operating, capital outlay, and non-operating categories.
- All Library Divisions shall submit an annual budget request in the manner and form prescribed by the Library Director or his designee.
Budgetary levels of authority are as follows:
- Budget Transfer:
- Transfers requested within a major expenditure category, between major expenditure categories, and/or between divisions within the same department, or between activity codes within the same department require approval by the Library Director or his designee.
- The Library Director will provide the Library Governing Board with aapproved within this policy.
- Budget Amendment:
- Amendments between Library departments or from the Reserve for Contingency require Library Governing Board approval, except for all capital project funds with multiple departments/divisions which require approval from the Library Director or designee.
- Establishing a budget for revenues that were not anticipated during the annual budget process requires that the Library Governing Board adopt a resolution to recognize the revenue, appropriate the revenue, and establish a new fund if appropriate.
- Upon completion of the prior fiscal year's Comprehensive Annual Financial Report, the operating budget may be adjusted to reflect actual beginning fund balances if deemed necessary by the Library Director. Audited fund balances that are less than the budgeted amount will be adjusted during the year to prevent spending of resources not available.quarterly report of all budget transfers in excess of $50,000 that are
Budget appropriations will be made as follows:
- Appropriations will be made at the major expenditure category: personal services, operating expense, capital outlay, debt service, grants and aids, nonoperating expenses, and miscellaneous revenues and expenditures.
- The Administrative Services Division will estimate revenues as early as possible in the budget process in order to provide expenditure guidelines. The Library Governing Board will establish the District's budget priorities based upon the revenue estimates and expenditure guidelines.
- The budget shall be balanced; the total estimated receipts (including balances brought forward) shall equal the total appropriations and reserves in accordance with Chapters 129 and 200 F.S.
- In general, current operating revenue should be sufficient to support current operating expenditures, with adjustments made to budgeted fund balance or appropriations if necessary.
- "Earmarking" of available revenues that would unnecessarily restrict the full range of potential uses of such revenues will be avoided. The use of various funds, however, will be consistent with generally accepted accounting principles and Chapter 129.02 F.S.
- One-time revenues will be utilized to fund one-time expenditures wherever possible. If one-time revenues are assigned to pay for recurring expenditures then a three to five year plan for transferring the expenditure to a recurring revenue source will be adopted by the District as a part of the budget process in the initial year.
- A fee schedule shall be adopted and amended by resolution each fiscal year. When new fees and/or charges are imposed, the rate proposal will be analyzed using the following criteria:
- Sufficiency - fees and/or charges should recover the full cost of the program/ service, administration, and enforcement while recognizing that adjustments may be necessary for the benefit of the public.
- Efficiency - fees and/or charges should be designed for easy, economical administration by the District and easy, economical compliance by the payee.
- Simplicity - fees/charges should be easily understood by both the payee and District officials and leave as small a margin as possible for subjective interpretation.
- Current operating expenditures should not exceed current operating revenues. When current operating expenditures exceed current operating revenues adjustments will be made in the subsequent years' budget.
- The financial impact associated with new programs or program modifications will be analyzed and determined prior to adoption by the Library Governing Board.
- Grant applications to fund services/programs with local, state or federal funds will be reviewed by the Administrative Services Division and the Library Director, withsignificant consideration given to:
- the cost of administering the grant relative to the amount of the grant,
- the availability of matching funds and,
- the extent to which locally generated funds will be required to support the program when the grant funding is no longer available.
A recommendation will be presented to the Library Governing Board.
Capital Management Policies
The Capital Improvement Program (CIP) shall consist of projects/equipment with a cost estimate of at least $5,000 and an asset life of at least three (3) years. A CIP project, under this definition, is intended to include those projects that involve a new purchase of capital outlay, infrastructure and any new construction or renovation of Library District infrastructure.
- Annually, a five-year Capital Improvement Program (CIP) will be developed. Projects needed to maintain adopted Level of Service Standards shall be financially feasible, with identified funding sources based on current revenue projections for the five year period.
- The first year of the five year Capital Improvement Program will be used as the basis for formal fiscal year appropriations during the annual budget process. Appropriations made in prior years for which expenditures have not been incurred nor projects completed, will be reevaluated and incorporated into appropriations for the new fiscal year.
- Each Capital Improvement Program budget will include a reserve for contingencythe estimated project cost. for each project, if appropriate. The reserve should be between 5% and 10% of the estimated project cost.
- Capital improvement life cycle costs will be coordinated with the development of the Operating Budget. Future operating, maintenance, and replacement costs associated with the new capital improvements will be forecast, matched to available revenue sources, and included in future operating budgets. If the Library District is unable to provide for future operating costs the project will be delayed until the operating costs can be funded.
- The Library District may utilize a combination of Debt and pay as you go financing for capital projects. The particular funding mechanism for each project will be determined and included in the CIP.
Debt Management Policies
Debt management policies are intended to provide a comprehensive and viable debt management policy which recognizes the capital improvement needs of the Library District as well as the taxpayers' ability to pay while taking into account existing legal, economic, financial, and debt market considerations. The Library District has a capital planning and financing system for use in preparing a multi-year capital improvement plan, which is adopted by the Library Governing Board as a part of the Library District's budget process. No Library District debt issued for the purpose of funding capital projects will be authorized by the Library Governing Board unless it has been included in the capital improvement plan or until the Library Governing Board have modified the plan.
Purposes of Debt Issuance
- The Library District will issue long-term debt only for the purposes of constructing or acquiring capital improvements (specifically, the approved schedule of capital improvements), for making major renovations to existing capital improvements, and for refunding outstanding debt when sufficient cost savings can be realized or it is advantageous to do so.
- The Library District may also enter into long-term leases for the acquisition of major equipment when it is cost justifiable to do so.
- Financing Requirements
- Cash surpluses, to the extent available and appropriable, will be used to finance scheduled capital improvements if it is deemed to be the best financing method for that particular improvement.
- Revenue sources will be pledged for debt only when legally available and, in those situations where they have previously been used for operation and maintenance expenses/ general operating expenditures, they will be pledged for debt only when other sufficient revenue sources are available to replace same to meet operation and maintenance expenses/ general operating expenditures as deemed appropriate by the Library Governing Board.
- Where possible, capital expenditures will be funded through pay-as-you-go programs, debt restructuring and alternative financing mechanisms, such as state loan programs or federal pilot projects.
- Maturity Limitations
- All capital improvements financed through the issuance of debt will be financed for a period not to exceed the useful life of the improvements, but in no event to exceed 30 years.
- All capital improvements financed through lease-purchase obligations will be financed for a period not to exceed the useful life of the improvements.
- General Debt Limitations
- Rapid debt repayment is a goal of the Library District's debt management polices. Each borrowing will be structured to repay principal as rapidly as the amount of the pledged revenue source will allow. Adjustment in repayment time frames may be modified to reflect changes in the interest rate environment, which may argue for shorter or longer retirement plans.
- The Library District will, at all times, manage its debt and sustain its financial position in order to seek and maintain the highest credit rating possible.
- The Library District will strive to maintain debt ratios within the median range of benchmarks (based on Moody's Indicators for counties of similar size).
- The Library District shall not construct or acquire a public facility if it is unable to adequately provide for the identifiable annual operation and maintenance costs of the facility, or it must be disclosed.
- The Library District will consider coordinating with other local government entities, to the fullest extent possible, so as to minimize the overlapping debt burden to citizens.
- The Library District will ensure that an adequate system of internal control exists so as to provide reasonable assurance as to compliance with applicable laws, rules, regulations, and covenants associated with outstanding debt.
- Debt Issuance Restrictions
- The Library District will market its debt through the use of competitive bid whenever deemed feasible, cost effective, and advantageous to do so. However, it is recognized that, in some situations, certain complexities and intricacies of a particular debt issue are such that it may be advantageous to market the debt via negotiated sale.
- The Library District shall use the services of outside finance professionals selected using competitive bid.
- Credit enhancements (insurance, letters of credit, etc.) will be used only in those instances where the anticipated present value savings in terms of reduced interest expense exceeds the cost of the credit enhancement.
- In order to maintain a stable debt service burden, the Library District will attempt to issue debt that carries a fixed interest rate. However, it is recognized that certain circumstances may warrant the issuances of variable rate debt. In those instances, the Library District should attempt to stabilize debt service payments through the use of an appropriate stabilization arrangement.
- The Library District will continually monitor its outstanding debt in relation to existing conditions in the debt market and will refund any outstanding debt when sufficient cost savings can be realized.
- Outstanding debt will be refunded as long as the net present value savings between the refunded bonds and the refunding bonds is equal to or greater than three percent without extending the maturity of the debt being refunded, unless extenuating circumstances would justify a smaller percentage savings (e.g., historically low interest rates).
- The Library District may also refund existing debt for the purpose of revising existing bond covenants to meet particular organizational and/or strategic needs of the Library District when it is advantageous to do so.
- Disclosure Requirements
It is the policy of the Library District to endeavor to provide full and fair disclosure in connection with the initial sale and distribution of its publicly marketed debt instruments and to provide appropriate ongoing secondary market information, in compliance with the requirements of applicable federal and state securities laws, rules, and regulations, including Securities and Exchange Commission Rule 15c2-12.
- Arbitrage Reporting
Finance and Accounting shall establish a system of record keeping and reporting (or procure the services of a company specializing in arbitrage) to meet the arbitrage rebate compliance requirements of the federal tax code. This includes tracking investment earnings on bond proceeds, calculating rebate payments in compliance with tax law, and remitting any rebatable earnings to the federal government in a timely manner in order to preserve the tax-exempt status of the Library District's outstanding and future debt issues.
- Investment of Bond Proceeds
The investment of bond proceeds shall be governed by the Library District's Investment Policy and any applicable bond covenants. In the event of conflicting policies, the more restrictive policy shall be enforced.
- Short-Term and Interim Financing
- Tax (Revenue) Anticipation Notes - Where their use is judged by the Library/Clerk staff, bond counsel and financial advisor to be prudent and advantageous to the Library District, the District may choose to issue Tax or Revenue Anticipation Notes as a source of interim operating financing.
- Other - Where their use is judged by the Library/Clerk staff, bond counsel and financial advisor to be prudent and advantageous to the Library District, the District may choose to use other short-term financing tools such as a line of credit or pooled commercial paper programs.
- Debt Affordability Assessment
- The Florida Constitution requires that long-term debt pledged by the full faith and credit of the Library District can only be approved by voter referendum. For debt issues to be placed on the ballot, the Library Governing Board must approve both the capital and financing proposals. There is no statutory limit on the amount of debt and corresponding tax levy the voters can approve. It is the Library District's own policy to manage debt within the guidelines identified in these policies.
- The Library Director has implemented debt management policies throughout all funds.
- The Library Director and Finance Director will be responsible for coordinating all debt issuance for the Library District including the use of short-term and long-term financing.
- The Library Director and Finance Director will be responsible for determining reasonable debt levels for the Library District as part of the annual budget process and capital improvement plan. Each year, the Library Director and Finance Director will review the Library District's ability to absorb and pay for long-term obligations (including new bond issues). The review process will include recommendations on how much new debt can be afforded by the Library District. Recommendations will be based on an analysis of the following measures:
- Total debt service on "Direct Debt" (debt payable from general revenues; including GO Bonds, capital leases, and notes payable) measured as a percent of current General Fund revenue. Debt service costs on "Direct Debt" will not exceed 5% of total General Fund revenue.
- Total debt service on "Direct Debt" measured as a percent of General Fund operating expenditures. Debt service costs on "Direct Debt" will not exceed 10% of total General Fund operating expenditures.
- Total debt (includes "Direct Debt" and "Revenue Debt" as a percent of assessed value. Total net direct indebtedness will not exceed 3% of the full valuation of taxable property in the County.
- Total debt (includes "Direct Debt" and "Revenue Debt") per capita. Total net direct indebtedness will not exceed $500 per capita.
- Per capita debt as a percentage of per capita income. Per capita debt will not exceed 5% of per capita income.
The terms "Direct Debt" and "Revenue Debt" used above are defined in GFOA's Recommended Practice for Debt Management Policies as follows:
- Direct Debt – Debt payable from general revenues, including capital leases
- Revenue Debt – Debt payable from a specific pledged revenue source
Inter-fund Loan Policy
Inter-fund Loan Policies are intended to provide parameters and guidance for the management of loans between funds. Inter-fund loans may be necessary to provide adequate cash flow for reimbursable grants and contractual obligations with deferred revenues.
- Repayment of any loan shall not exceed one year without approval of the Library Governing Board. Loans outstanding at fiscal year end will be reported to the Library Governing Board.
- Any fund may receive a total loan of up to $50,000 with approval from the Library Director, Finance Director, and Clerk of the Courts.
- Any fund may receive a total loan in excess of $50,000 with the approval from the Library Governing Board.
Contingency Reserves/Cash Carry Forward Balances
Contingency reserves are established to provide for the following:
- Funding for unexpected increases in the cost of providing existing levels of service;
- Temporary and nonrecurring funding for unanticipated projects;
- Funding of a local match for public or private grants;
- Funding to off-set losses in revenue caused by actions of other governmental bodies and/or unanticipated economic downturns;
- Funding to accommodate unanticipated program mandates from other governmental bodies;
- Funding for emergencies, whether economic, natural disaster or act of war;
Budgeted Reserve for Contingency
- Reserve for contingency requests must be approved by the Library Governing Board. The Board will use the procedures and evaluation criteria set forth in this policy. Such requests will be evaluated to insure consistency with other Board policy; the urgency of the request; the scope of services to be provided; the short and long-term fiscal impact of the request; a review of alternative methods of funding or providing the services; a review for duplication of services with other agencies; a review of efforts to secure non-Library District funding; a discussion of why funding was not sought during the normal budget cycle; and a review of the impact of not funding or delaying funding to the next fiscal year.
- A reserve for contingency will be calculated and established by the Library Director or designee for each operating fund in an amount not greater than 10% of the total budget and in accordance with Chapter 129.01(2) (c) F.S.
- The reserve for contingency will be maintained at a level not less than 5% of the General Fund operating revenues. If the reserve for contingency falls below 50% of the minimum level, the reserves will be reestablished over a three fiscal year period.
- The reserve for contingency shall be separate from any cash carry forward fund balances.
- The Library District's budget will be amended at such time as the Library Governing Board authorizes the use of contingency reserves. All requests for the use of any reserve for contingency shall be accompanied by information prepared by the Administrative Services Division showing the year-to-date activity of the reserve account as well as the current account balance and the net effect on the account balance.
Cash Reserve Carry Forwards – All Operating Funds
- The Library District will maintain an annual unappropriated or cash carry forward fund balance that is equal to at least 60 days of operating expenditures. The unappropriated cash carry forward will be at a level sufficient to maintain adequate cash flow during the beginning of each fiscal year in order to eliminate the need for short-term borrowing. The unappropriated fund balance shall be separate from the reserve for contingency.
- The amount of cash carry forward to be budgeted shall be analyzed and determined during the annual budget process; the Library Director and the Director of Finance will jointly agree upon the carry forward balances.
Financial and Budgetary Reporting, Audits and Analysis
- Balanced revenue and expenditure forecasts will be prepared to examine the Library District's ability to absorb operating costs due to changes in the economy, service demands, and capital improvements. The forecast will encompass five years and will be updated annually.
- The Library District's accounting and financial reporting systems will be maintained in conformance with all state, federal and local laws, generally accepted accounting principles as required in Chapters 129 and 200 F.S.
- An annual audit will be performed by an independent public accounting firm, as required by Florida Statute. The results of the audit will be reported to the Library Governing Board and the audit opinion included in the Library District's Comprehensive Annual Financial Report (CAFR).
- The Clerk's Office will be asked to submit the CAFR to the Government Finance Officers (GFOA)'s Certificate of Achievement for Excellence in Financial Reporting Program.
- Financial information including the CAFR and the Budget will be published on the Library District's and Clerk's websites.
- Secondary market disclosures will be included in the CAFR.