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portion included, and 50% of the revenues from the State and County anticipated in the ensuing year's general operating fund budget. 2. The fund balance of the General Fund shall also have an amount included in its unassigned fund balance for contingencies, such as emergencies and/or unanticipated expenditures. The targeted amount designated for contingencies shall be equal to 10% of the sum of the ensuing year's general operating fund budget less any debt service included in the General Fund budget. 3. The City Council may choose to include an amount for contingencies in the annual General Fund budget. Each year the unused amount of the annual contingency appropriation will be carried over to the next year's budget. When this approach is used, the targeted amount of fund balance for contingencies should be reduced by the same amount included as the contingency appropriation in the annual budget. 4. The total targeted unassigned fund balance should not be less than the minimum. In the event that the calculations of the targeted balance become less than the minimum, then the minimum will become the targeted balance. C. Minimum balance For working capital purposes ensuring positive cash flows, the City will maintain an unassigned fund balance in the General Fund of an amount of not less than 35% of the subsequent year's budgeted operating expenditures. The dollar amount of the minimum may fluctuate with each year's budget objectives. D. Replenishing and reducing the targeted stabilization fund balance 1. Deficits are to be avoided. Elimination of deficits in targeted levels of fund balance shall be addressed during the next annual budget process. It is the intent of the City Council and this policy to resolve deficits and balances below the targeted amount within the next three budget years. The subsequent year's budget should address the method to eliminate the deficit, Methods may include but are not limited to using annuatbudge� surpluses, transfers m from otherl`un�s an adJushnent of other resources and budgets. Care will be exercised to maintain the integrity of the City's long-term financial plans when determining the method to be used to bring the fund balance back into conformance with the targeted balance. 2. Amounts in excess of the targeted balance may be utilized in subsequent years' budgets and/or transferred to other funds. Subsequent years' budgets and/or transfers out of the General Fund may utilize up to 20% annually of the amount over the targeted balance. This will allow the balance to gradually come into compliance with the intent of this policy over five years, while allowing for future years' fluctuations. Page 4 of 6