Financial Management & Other Policies

The Long-Term Financial Policies are reviewed by City Council each year along with the Budget Guidelines. These policies support a financial planning process that assesses the long-term financial implications of operating and capital budgets.

• Minimum Fund Balance Policy: Maintain a minimum General Fund balance of at least 14% of General Fund budget. This policy provides the City with sufficient working capital and a margin of financial safety to address unforeseen, one-time expenditure emergencies or significant unforeseen declines in revenues in a specific fiscal year. In the event of a drawdown, the reserve must be replenished to the 14% level within three years.

• Downturn Reserve Policy: Maintain a minimum Downturn Reserve Fund balance of no less than 3% of General Fund budget. Drawdown of this reserve can occur if revenues decline by more than 1.5% of current fiscal year estimate and will be limited to less than half of the balance of the Downturn Reserve Fund. In the event of a drawdown, the reserve must be replenished to the 3% level within three years.

• Working Capital Policy: Maintain sufficient working capital in the utility funds (Water, Wastewater, Gas, Stormwater).

• Fund Balance Policy (Non-General Funds): Stabilize all non-general funds by ensuring they have a positive fund balance.

• Debt Service Policy: Debt service as a percentage of the general fund total expenditure budget has a ceiling of 10%, with a target of 9%. In calculating compliance with this ratio, the City will exclude debt serviced by dedicated revenues, i.e., self-supporting debt.

• Meals Tax Policy: Transfer an amount equivalent to 1 percent of the meals tax rate to the Debt Service Fund to be used for debt service.

The City’s Investment Policy has been established by the Treasurer (an elected “constitutional officer”) of the City of Charlottesville and is designed to ensure effective management of the day-to-day investment activity for the City and to increase non-tax revenues by investing funds when not needed for current obligations. The objectives of the policy are as follows:

1. All investments shall be in compliance with the Code of Virginia Sections §2.2-4400 et seq. and §2.2-4500 et seq. and Trust Agreements, where applicable.
2. The cash management and investment activities of the City shall be conducted in a manner which is consistent with prevailing prudent business practices which may be applied by other public organizations of similar size and financial resources.
3. All investments and deposits will be managed to accomplish the following fundamental goals:

• Safety of Principal - The single most important objective of the investment program is the preservation of principal of those funds within the Investment Portfolio.

• Maintenance of Liquidity - The Investment Portfolio will be always managed with sufficient liquidity to meet all daily and seasonal needs, as well as to fund special projects and other operational requirements which are either known or which might reasonably be anticipated.

• Maximizing Return - The Investment Portfolio shall be managed to maximize the return on investments within the context and parameters set forth by the safety and liquidity objectives above.