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The City of Portland, Oregon

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City of Portland

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FIN-2.03 - Financial Planning

FINANCIAL PLANNING

Binding City Policy

BCP-FIN-2.03


Policy 

The City shall plan for the types and levels of investment necessary to ensure the sustained and equitable delivery of public services to the residents, businesses, visitors and customers of the City. To ensure capacity to deliver services through all types of economic cycles, the City shall prepare short- and long-term financial plans to guide City Council in adopting the City budget. See FIN-2.04 - Budget.

Planning Principles

Financial planning and budgeting shall be based on the following principles:

  Revenue estimates shall be prepared conservatively to minimize the possibility that economic fluctuations could jeopardize ongoing service delivery during the planning period.

  Expenditure estimates shall anticipate needs that are reasonably predictable during the planning period, including asset management needs for capital assets and equipment.

  Bureau financial plans shall rely on a common set of basic economic assumptions that shall be established, updated, and distributed by the City Budget Office (CBO). The Bureau of Revenue and Financial Services (BRFS) in the Office of Management and Finance (OMF) shall produce interest rate forecasts and debt service forecasts that are included in the common set of basic economic assumptions. BRFS shall advise bureaus on how standards for credit rating and debt service coverage are established and maintained.

  Bureau financial plans shall identify other assumptions used in their preparation and potential risks if actual outcomes differ from assumed outcomes. Examples of risks include, asset management funding gaps; legislation and legal rulings that affect City liability, pension systems or health benefit plans; and regional economic trends that affect City revenues.

  Bureau financial plans shall address asset management needs to support responsible stewardship of the City-owned assets.

  Bureau financial plans shall encourage the use of asset management best practices that consider, to the greatest extent feasible, intergenerational equity in distributing the costs of providing public services, so future generations of Portlanders are not forced to pay more than their share of the asset management lifecycle cost burden.

Five-Year Financial Plans

Annually, each bureau and fund identified in FIN 2.03.01 shall prepare a five-year financial plan. Bureaus shall forecast and monitor their own revenues and expenditures over the five-year planning period and shall coordinate with the CBO on the presentation of regular status reports on revenues and expenditures. The CBO, with input from BRFS and the asset-owning bureaus, shall constantly evaluate and seek to improve its financial planning methodology and tools to provide timely and accurate information to Bureaus.

Five-year financial plans shall:

  Follow guidance provided by the CBO related to their content, presentation, standard assumptions and submittal process.

  Be based on current service levels and funding sources noting anticipated changes over the planning period.

  Include reasonable cost assumptions for asset management needs over the planning period.

  Clearly call out anticipated changes to service levels and funding not yet approved by City Council.

  Quantify any funding gaps between projected revenues and expenses to meet current or future anticipated service levels.

  Include strategies to address significant funding gaps, including gaps between the need to maintain or modernize capital assets and equipment and the funds available for such improvements. Strategies may include requests for additional resources, proposed fee increases, service level reductions, divestment, or other strategies.

  Be delivered to Council each year as part of the bureau’s Requested Budget. The Requested Budget shall align with the financial plan, and it is the expectation of Council that requests for additional resources should seek to address identified funding gaps.

The CBO shall retain fiscal oversight responsibility for the General Fund and shall publish regular status reports on General Fund revenues and expenditures.

Long-Term Financial Plans

Annually, each bureau and fund identified in FIN 2.03.01 shall prepare a long-term financial plan to identify potential financial liabilities, obligations and revenues that are not included in their five-year financial plan.

Long-term financial plans shall:

  Follow guidance provided by the Chief Financial Officer (CFO) related to their content, presentation, assumptions and submittal process.

  Include a description, anticipated timing, cost, potential funding source and confidence level for each liability or obligation.

  Include a description, anticipated timing, amount, source and confidence level for each revenue item.

  Be delivered to the CFO as part of the City’s annual budget process.

Capital Asset Management

The City’s financial plans shall include investments necessary to manage existing and future capital assets and equipment at levels that:

   Protect the quality, reliability, equity and adequacy of service.

   Minimize future maintenance and replacement costs.

  Minimize risk to human health and safety.

 Minimize environmental, social and economic risks.

  Comply with applicable laws and regulations.

To do this, bureaus with capital assets and equipment shall use best practices in asset management to:

  Maintain an inventory of capital asset and equipment in their purview with best information available on asset condition and expected lifespan.

  Forecast asset management needs and associated costs across the expected lifecycle of its capital assets and equipment.

  Use these data to inform the development of the bureau’s financial plan and five-year Capital Improvement Plan, with the required level of capital asset and equipment maintenance and replacement reserves, and articulating funding gaps and their impacts.

  Provide infrastructure at the lowest lifecycle cost which meets service requirements.

Capital Improvement Plans

Each bureau that owns or manages capital assets or equipment shall develop and maintain a Capital Improvement Plan (CIP) that identifies the individual capital acquisitions, projects or procurements necessary to meet planned levels of service. The CIP shall span a minimum of five years and provide a description, location, timing, cost and funding source for each project, which will constitute a key component of their bureau’s financial plan.

At the time a new capital asset or equipment is planned in the CIP or requested through the Requested Budget, bureaus shall estimate the full operations and maintenance (O&M), major maintenance, and lifecycle replacements costs for that asset, see FIN 2.03.02 Operations and Maintenance Costs. A funding plan for the O&M, major maintenance, and lifecycle replacement costs shall be included as part of the Adopted Budget.

During the fiscal year, each bureau with a CIP shall provide narrative explanations for capital program variances.

Annually, the CBO shall prepare a five-year Citywide Capital Improvement Plan (Citywide CIP) that aggregates each bureau’s capital replacement, additions, and major maintenance needs. The Citywide CIP shall include estimated project costs and net changes in operating costs and shall identify funding sources.

Annually, the City shall adopt a Capital Budget that shall include estimated resources and capital expenditures based on the first year of the current Citywide CIP. All borrowing plans shall be developed in consultation with BRFS and in conformance with the City’s debt management policies, see FIN-2.12 - Debt Management Policy.

Funding

Bureaus that manage capital assets or equipment shall develop a funding plan and appropriate funding mechanisms to sufficiently fund asset management activities on an ongoing and/or periodic basis.

If anticipated revenues are insufficient to meet asset management needs, bureaus shall:

  Prioritize preventive asset management activities that reduce current costs or will offset greater costs in the future to restore or replace deteriorated assets, or that are required to meet desired levels of service, or to comply with laws and regulations.

  Prioritize asset management of existing capital assets and equipment over the acquisition of new assets, unless the anticipated revenues are restricted and cannot be used for operations or maintenance activities, or the acquisition would address equitable provision of services.

  Identify any anticipated funding gaps and prepare a strategy to address them, which may include changes to levels of service, use of alternative service approaches, or the pursuit of additional resources.

The City shall dedicate the following portions of General Fund discretionary revenue towards the management of capital assets to address currently unfunded needs:

  At least fifty-percent (50%) of one-time General Fund discretionary revenue identified in the five-year financial forecast shall be allocated to infrastructure maintenance or replacement in the Adopted Budget process. This funding shall be allocated for projects relating to emergency preparedness, parks and recreation, and transportation.

  At least fifty-percent (50%) of General Fund discretionary revenue that exceeds budgeted beginning balance (adjusted for the difference in encumbrance carryovers and Council-authorized carryovers from the prior fiscal year) will be set aside during the Fall budget monitoring process for allocation to infrastructure maintenance or replacement in the subsequent budget process. This funding shall be allocated for projects relating to emergency preparedness, parks and recreation, and transportation.

Annual Reporting

The City shall prepare the following annual reports on its overall financial condition and the status of its capital assets and equipment:

  Citywide Financial Condition Report. BRFS, in consultation with the CBO, shall prepare an annual Citywide financial assessment report that shall include a comprehensive overview of the City’s financial condition and the City’s long-term financial plan.

  Citywide Asset Management Report. The CBO, with the assistance of bureaus that own capital assets and equipment (see FIN 2.03.03 Citywide Asset Managers Group), shall prepare an annual report on the status of the City’s capital assets and equipment, based on asset management best practices (see Capital Asset Management, above). The report shall provide a Citywide perspective and shall include all City-owned assets and equipment. The report shall include, at a minimum:

º  an accounting of the number, condition, and replacement value of existing assets and equipment.

º  an accounting of those assets and equipment which are currently in poor condition.

º  an estimate of the annual funding needed to keep an asset or equipment from further deterioration.

º  an assessment of current service levels.

º  an estimate of the annual funding gap over current service levels needed to bring assets and equipment up to a sustainable level of service.

The report shall be delivered to Council during the annual budget discussions to inform investment and service level discussions during budget adoption.

Definitions

“Capital Asset” as defined in FIN 6.11 Capital Assets.

“Equipment” as defined in FIN 6.11 Capital Assets.

“Asset Management” means the continuous cycle of asset inventory, condition, and performance assessment that aims to ensure cost-effective provision of a desired level of service and oversight of the long-term health, i.e. physical and financial viability, of capital assets and equipment. Asset management includes acquisition, planning, design, construction, maintenance, monitoring, operation, rehabilitation, remediation, replacement, and disposition of assets, while considering the triple constraint of risk, service level and cost.

“Level of Service” means a defined standard against which the quality and quantity of service can be measured.

“Operations” means the ongoing activities that allow the use of an asset for its intended function.

“Maintenance” means activities that keep an asset operating as designed or prevent it from deteriorating prematurely, excluding rehabilitation or renewal which may extend asset life. Maintenance can be planned or unplanned.

“Rehabilitation” or “Renewal” means maintenance performed on an asset to restore it to its original level of service or capacity and achieve its useful life, which may result in an extension of the asset’s service life.

Responsibility

The City Budget Office and the Chief Financial Officer shall coordinate the presentation of the City’s financial plans. The CBO shall develop and issue the list of bureaus and funds that are required to submit capital improvement plans, define the required elements for the plans, and determine the membership of the Citywide Asset Managers Group. The CFO shall define the required elements for the long-term financial plans. Bureau directors shall be responsible for the development and submission of bureaus’ five-year and long-term financial plans. The Bureau of Revenue and Financial Services shall be responsible for providing interest rate and debt service forecasts and for working in consultation with City bureaus on debt service issues.


HISTORY

Resolution No. 35005, adopted by City Council June 17, 1992.

Replaced by Ordinance No. 181829, passed by City Council May 14, 2008 and effective July 1, 2008.

Amended by Resolution No. 37086, adopted by City Council August 6, 2014.

Amended by Resolution No. 37107, adopted by City Council January 28, 2015.

Amended by Resolution No. 37419, adopted by City Council April 3, 2019.