FINANCIAL RESERVES POLICY - Laserfiche WebLink

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*Note: on June 18, 2020, the District allocated portions of the Woolsey Fire SCE settlement proceeds for projects in future years. As a result, these funds still appear in the unassigned fund balance shown on the June 30, 2020 financial statement, but will be appropriated in the assigned fiscal years. As a result, the Unassigned fund balance after those outyear allocations is approximately $3.6 million. These funds have been saved over the years to fulfill a particular need or to serve a particular purpose. The attached current Policy for Financial Reserves (aka "Reserve Policy") (Exhibit 2) is intended to provide clear, concise and well -articulated reasons and guidance for the accumulation and management of the District's reserve funds. The attached Reserve Policy provides for five distinct reserve funds: 1. The Operating Reserve is committed for unexpected operating expenses and contingencies. 2. The Claims and Liability Reserve is committed for workers' compensation expenses, claims and liabilities. 3. The Equipment Replacement Reserve is committed for vehicle and equipment replacement. 4. The Vested Leave Reserve is assigned for accrued leave (vacation/sick) payouts. 5. The Pension Stabilization Fund is restricted for pension and OPEB (retiree medical) obligations. Committed reserves cannot be used for anything but their intended purpose unless otherwise directed by the Board of Directors. Per the attached policy, these reserves and balances therein will be considered at least annually as part of the annual audit presented to the Board. Should circumstances require, the Board may consider potential utilization or adjustments to reserves at any time. Funds remaining "Unassigned" could be utilized for a variety of purposes, such as reducing District long-term liabilities and providing funds for capital projects. The Finance and Audit Committee of the Board of Directors met on January 8, 2021 to review the District's Pension and Post -Retirement Benefit Liabilities, the District's reserve policy, and amounts assigned to each of the reserve funds. After consultation with staff, and considering the District's mission, present financial conditions and strategic objectives, the Committee discussed the following items. Collectively, the District's Pension and Post -Retirement Benefit Liabilities (Exhibit 3) are currently 96% funded considering all assets at PERS, PARS and in the District's reserve fund. The Committee reviewed the investment performance of funds at PARS. Previously, the board decided to utilize HighMark Capital Management as the Investment Manager of these funds and opted for the "Moderate" Investment pool from 5 choices ranging from Conservative to Capital Appreciation. Based on the funding status and investment performance, no change to the PARS "Moderate" investment objective is recommended at this time. The District's Unassigned Fund Balance is approximately $3.6 million (Exhibit 4). The Committee discussed multiple options for the use of these funds with staff. One proposal, which the Committee