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V. UNRESERVED, UNDESIGNATED FUND BALANCE <br />A. It is the intent of this policy to keep the General Fund's unreserved, undesignated <br />fund balance to a minimum. The fund balance of the General fund will fluctuate <br />from year to year depending upon the overall results of operations compared to the <br />budget. Budgets may vary from one year to the next as well. As a result the <br />designated amount of the fund balance may be more than adequate one year but <br />deficient in the next. Reacting to each year's variance should be thoughtful and <br />deliberate. <br />B. Deficits are to be avoided. Elimination of deficits in fund balance will be <br />addressed during the budget process. The subsequent year's budget should <br />address the method to eliminate the deficit. <br />C. Surpluses may be utilized in subsequent years' budgets. Subsequent years' <br />budgets may utilize up to 20% of the amount over the targeted balance. This will <br />allow the balance to be in compliance with the intent of this policy gradually over <br />five years, while allowing for future years' fluctuations. <br />VI. CLOSED BOND FUND <br />It is the intention of this policy that each year the projected investment earnings of the <br />Closed Bond Fund will be used to provide supplemental financing for debt service tax <br />levies. <br />VII. ENVIRONMENTAL RESTORATION FUND <br />It is the intention of this policy that each year the projected investment earnings of the <br />Environmental restoration Fund will be used to provide supplemental financing for debt <br />service tax levies. <br />VIII. REPORTING <br />The Finance Director shall report to the City Council, upon completion of the audit field <br />work, the status of the fund balance of the General Fund. This report will state the <br />General Fund's fund balance at the close of the year with reservations and designations <br />along with an explanation of changes in the reservations and designations levels. <br />Page 3 of 4 <br />