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EXHIBIT 3 City of Santa Ana Council Policy Mayor's Authorization Subject Council Approval Date: BUDGET AND FINANCIAL POLICIES Background The severity of the recent economic recession highlighted the need toestablish and maintain adequate reserve policies tooffset significant economic downturns and unforeseen rising costs more effectively. In 2002,The Government Finance Officers' Association /GF{3A\ recommended reserve levels equal to a minimum of596to 1596 of operating revenues or one to two months ofoperating expenditures as a basis to establish sound reserve levels. Adoption of formal City Budget and Reserve Policy will provide a basis to manage significant financial events more effectively in the future. PURPOSE The Citws reserve policy will define the recommended level for reserves for the Genera; fund as well as internal and enterprise operationo. The policy will outline a tinnefname and plan that will assist the City in meeting the minimum General Fund requirements over the course of the next few years. it will also establish criteria for the use ofreserves and establish a process bywhich to replenish, reserves if used. It is the intent to focus on the General Fund initially and incorporate additional reserve policies for internal and enterprise funds over the next fiscal year. The General Fund is the general operating fund for the City. It accounts for all general revenues including sales tax, property tax, business tax, hotel visitor's tax, as well as other fees and charges. It is the basis to fund general ongoing City operations such as police, fire (contract service), recreation, planning and building auwell as other general support servYces. Furthermore, the following budget pnhcy directives are recommended to be continued/implemented in order to maintain positive operating reserve levels: General Fund Budget Pm|icVDirectk/es - It shall be established that a balanced budget will be presented annually to the City Council for adoption. A balanced budget will be defined asongoing recurring operating revenues matching ongoing recurring operating expenditures including debt service. - One time or1e,rm specific funding can only be used to match one-time non'recurhn,g expenditures with the exception of during a budget deficit, benn specific projects and programs, as well as capital expenditures. - In order to ensure a balanced budget objective, the City w�U continue to pursue internal operational City Council 32-14 3/16/2021 Budget & Financial Polices (Rev. 6/2017) Page I