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D. Provide financial stability and a positive trend of fund balance levels which will <br />be a positive factor in our bond rating analysis. <br />III. RESERVED FUND BALANCE <br />A. The function of reserved fund balance is to isolate the portion of fund balance that <br />is not available for the ensuing year's budget. The City will follow all Generally <br />Accepted Accounting Principles (GAAP) and Governmental Accounting <br />Standards Board (GASB) pronouncements regarding requirements for reserving <br />fund balances. <br />B. The fund balance may be reserved for amounts determined by the City Council to <br />be encumbered for a specific use in the subsequent year's budget. <br />C. The fund balance may be reserved for unutilized budget appropriations from one <br />year to be carried over to the subsequent year's budget. <br />IV. DESIGNATED UNRESERVED FUND BALANCE <br />A. Designations of fund balance are established to identify tentative plans for the use <br />of financial resources. <br />B. The fund balance of the Closed Bond Fund shall be designated for supplemental <br />financing for the retirement of outstanding debt. <br />C. The fund balance of the Environmental Restoration Fund shall be designated for <br />capital projects and for supplemental financing for the retirement of outstanding <br />debt. <br />D. The fund balance of the General Fund shall have a designated amount for cash <br />flows for the subsequent year's operating budget. The targeted designated amount <br />shall be equal to 50% of the subsequent year's General Fund property tax levy, <br />less any debt service portion included, and 50% of State Aid revenues anticipated <br />in the ensuing year's operating budget. <br />E. The General Fund shall have a portion of its fund balance designated for <br />contingencies, such as emergencies and/or unanticipated expenditures. The <br />targeted amount designated for contingencies shall be equal to 10% of the sum of <br />the ensuing year's operating budget less debt service. <br />F. The City Council may decide to designate portions of the fund balance for other <br />items such as City projects and/or improvements, emergency or unanticipated <br />expenditures, etc. <br />Page 2 of 4 <br />