[SOLVED] The City of Scottsdale, Arizona, provides the

The City of Scottsdale, Arizona, provides the following report on the following page about its reserve policies on page 12 of its October 2007 financial trends booklet. Required a. Refer to Illustration 10â€“1. To which categories of factors affecting financial condition do you believe this statement belongs? Illustration 10â€“1

b. Assess the adequacy of this note. Do you need more information to understand how the reserve financial policy affects the cityâ€™s financial condition? Explain. Reserve Policies (excerpt from 2007 Financial Trends for the City of Scottsdale, Arizona) 37. All fund designations and reserves will be evaluated annually for long-term adequacy and use requirements in conjunction with development of the Cityâ€™s balanced five year financial plan. 38. General Fund Stabilization Reserve of 10 percent of annual general governmental (General and Transportation funds) operating expenditures will be maintained for unforeseen emergencies or catastrophic impacts to the City. Funds in excess of 10 percent, but not to exceed $5 million, may be used for economic investment in the community when justified by the financial return to the City. 39. Debt Service Reserve will be funded with secondary property taxes, levied by City Council, sufficient to pay the bonded indebtedness for General Obligation bond principal and interest. A debt service sinking fund will be maintained to account for these restricted revenues and debt payments, as well as any additional debt amounts deemed to be advisable and necessary for any public or municipal purposes. An excise tax debt reserve will be funded at no less than the annual debt service for all currently outstanding (1%) excise taxâ€“supported debt. 40. Water and Sewer Fund Reserves will be maintained to meet three objectives: 1) to ensure adequate funding for operations; 2) to ensure infrastructure repair and replacement; and 3) to provide working capital to provide level rate change for customers. a. An Operating Reserve will be funded not to exceed 90 days of budgeted system operating expenditures to provide sufficient expenditure flexibility during times of unusual weather resulting in variations in average consumption and associated operating expenses. b. A Replacement and Extension Reserve will be maintained, per bond indenture requirements, to meet the minimum requirement of 2% of all tangible assets of the system to ensure replacement of water and sewer infrastructure. c. In addition, working capital will be funded based upon a multiyear financial plan to provide adequate cash for water and sewer capital improvements and to level the impact of rate increases upon our customers. 41. Solid Waste Management Fund Reserve will be funded not to exceed 90 days of budgeted system operating expenditures to provide contingency funding for costs associated with solid waste disposal. Costs may include site purchase, technology applications, or intergovernmental investment to maximize the value of waste disposal activities. 42. Aviation Fund Reserve will be funded not to exceed 90 days of budgeted system operating expenditures to provide contingency funding for costs associated with airport operations. Costs may include site purchase, technology applications, or intergovernmental investment to maximize the value of airport activities. 43. Self-Insurance Reserves will be maintained at a level, which, together with purchased insurance policies, will adequately indemnify the Cityâ€™s property, liability, and health benefit risk. A qualified actuarial firm shall be retained on an annual basis in order to recommend appropriate funding levels, which will be approved by Council. 44. Fleet Management Reserve will be maintained based upon lifecycle replacement plans to ensure adequate fund balance required for systematic replacement of fleet vehicles and operational contingencies. Operating departments will be charged for fleet operating costs per vehicle class and replacement costs spread over the useful life of the vehicles. 45. Contingency Reserves to be determined annually will be maintained to offset unanticipated revenue shortfalls and/or unexpected expenditure increases. Contingency reserves may also be used for unanticipated and/or inadequately budgeted events threatening the public health or safety. Use of contingency funds should be utilized only after all budget sources have been examined for available funds, and subject to City Council approval.

Transcribed Image Text:

ENVIRONMENTAL FACTORS ORGANIZATIONAL FACTORS FINANCIAL FACTORS Population density Age Home ownership Vacancy rates Crime rate Employment Business activity Growth Flexibility Elasticity Dependability Diversity Administration Community needs and Revenues Income resources Property value and distribution Intergovem- mental constraints Intergovemmental mandates Restrictions on Growth Priorities Mandated costs H Expenditures Productivity Effectiveness revenues Potential for patural disasters Management practices and legislative policies Operating results Fund balances Reserves Disaster risk Operating position Local preparedness Liquidity Attitudes toward taxes, services, and political processes Short-term debt Political culture Long-term debt Debt schedules Debt structure Ovrlapping debt Extemal economic сonditions National and regional • Inflation • Employment • Markets Pension obligations Pension assets Unfunded liabilities Postemployment benefits Maintenance effort Condition of Capital outlay capital plant

Question: The City of Scottsdale, Arizona, provides the

Transcribed Image Text: