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Chapter 6Legislative Policy Manual -- Chapter 6 1 LEGISLATIVE POLICY MANUAL CHAPTER VI Policy 6-A Purchasing Policy Policy 6-B Standards for investments Policy 6-C Use of Contingency funds Policy 6-D Contract Change Orders Policy 6-E Finance Billing Collection Policy Policy 6-F Public Purpose Expenditures Policy 6-G Fund Balance Policy 6-H Debit Management Policy Policy 6-I City Post-Issuance Debt Compliance Policy Policy 6-J Private Activity Revenue Bond Financing Policy 6-K Capital Assets Capitalization Policy Revised: 2010 Revised: November, 2012 Revised: October 2013 Revised: December 2014 Legislative Policy Manual -- Chapter 6 2 Legislative Policy Manual -- Chapter 6-J 1 POLICY 6-A PURCHASING POLICY 1. POLICY 1.01 The purchasing policies of the City are established by the City Charter, the City Council, and state statute. Under state statute annual adoption of the operating budget shall constitute Council appropriations for purchases made throughout the year. No purchase is final until approved by the City Council. 1.02 The responsibility to adhere to a department budget shall be with the department head. Accordingly, the department head has full responsibility for the purchases which occur within their department. A department head may designate a subordinate to act for the department head. The role of the City Manager is to monitor the purchasing actions of the department head. The role of the Finance Director is to ensure that proper purchasing and payment procedures are adhered to. 1.03 Large purchases for all departments of the City are to be made centrally, as nearly as possible. 1.04 All purchases shall be of a quality to suit the intended purpose at the lowest cost. 1.05 Wherever practical and appropriate, materials with recycled content will be used in the construction or remodeling of municipal facilities. 1) Specifications will promote, and not prohibit, the use of recycled products or materials. 2) Specifications shall require that employees of the City and of the contractors bidding, cooperate and promote the use of recycled products and materials. 2. RELATIONS WITH SUPPLIERS' REPRESENTATIVES 2.01 Purchasing Relationships. The relationship between the purchaser and the seller should be one of mutual understanding. The departments should not be burdened with, nor encourage visits from, suppliers except in those cases where special equipment, chemicals, etc. are to be purchased or where it will be helpful to the City; neither should they become involved in the routine of purchasing. 2.02 All employees of the City shall keep themselves free of obligation to any of the City's suppliers. 3. REQUIREMENTS FOR PURCHASING 3.01 The standards in this policy are minimum standards to ensure fiscal responsibility. Departments may set more restrictive procedures to meet their own budgetary accountability. Legislative Policy Manual -- Chapter 6-J 2 3.02 Generally the following thresholds apply: Value of Purchase Type of Purchase Approval Needed $24,999 or less • Open Market • Written Quotes • Direct Negotiation • State Contract • Authorized Purchaser $25,000 to $99,999 • Written Quotes • Direct Negotiation • Sealed Bids • State Contract • Department Head; or • Designated Division Manager $100,000 to $174,999 • Written Quotes • Direct Negotiation • Sealed Bids • State Contract • Department Head; and • City Manager $175,000 and above • Advertise/Sealed Bids per M.S.S. 471.345 or State Contract • City Manager; and • City Council *Authorized Purchases – any employee of Hopkins as designated by a Department Head **Designated Division Manager – any Division Manager as designated by the City Manager 3.03 All non-budgeted purchase requests must be accompanied by a staff report justifying the expenditure. Requisition must be signed by the City Manager. 3.05 Multiple item purchases from a single vendor are to be placed on one purchase order. 3.06 A purchase order is prepared for each requisition when the vendor requires such a document and will be mailed or faxed to vendors upon request. 4. EMERGENCY PURCHASES 4.01 Emergency purchases are those made by departments only when normal operation of the department would be hampered by the delay resulting from adherence to the Purchasing guidelines and Minn. Stat. 471.345. 4.02 In cases of emergency, an employee, with the approval of the Department Head, may directly purchase any materials, supplies, or services necessary to the immediate continuation of the work of the department. Such purchases and the emergency causing them shall be reported in writing to the Finance Department no later than the workday following such purchase. 4.03 When the purchase is made, an invoice or sales ticket shall be obtained by the purchaser. 4.04 In cases where the purchase is for a non-budgeted item, written justification of the purchase shall be submitted to the City Manager. Legislative Policy Manual -- Chapter 6-J 3 5. CASH MANAGEMENT FOR FEDERAL FUNDS 5.01 The City will follow cash management procedures as required by Uniform Guidance for Cash Management of Federal Funds - §200.302(b)(6) 5.02 The City will minimize the time between the receipt of federal funds or other pass-through entity, and the disbursement of those federal funds. Federal funds will only be requested to meet immediate cash needs for reimbursement no covered by prior receipts and anticipated disbursements that are generally fixed, such as salaries and benefits. Disbursements will be made withing 30 calendar days after receipt of funds. 5.03 The City will maintain financial records that account for the receipt, obligation, and expenditure of each federal program fund. Cash balances for each federal program funds and for the aggregate of all federal program funds will be monitored. Established 8/18/87 Revised 6/26/92 Revised 3/19/2002 Revised 1/2/2024 Revised 8/5/2024 City of Hopkins Legislative Policy Manual -- Chapter 6-J 1 POLICY 6-B STANDARDS FOR INVESTMENTS I. PURPOSE 1.01 It is the policy of the City to invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow requirements of the City and conforming to all state and local statutes governing the investment of public funds. The purpose of this Policy statement is to establish standards governing the investment of City funds. In accordance with Minnesota Statutes 385.05 and 118A.02 the Finance Director is authorized to invest the City’s funds in accordance with Minnesota Statutes 118A.04 and 118A.05 which defines the types of securities and financial instruments the City is allowed to purchase. 2. SCOPE 2.01 This Policy applies to the investment and deposit of all funds of the City. A. Pooling of Funds Except for cash in certain restricted and special funds, the City will consolidate cash and reserve balances from all funds to maximize investment earnings and to increase efficiencies with regard to investment pricing, safekeeping and administration. Investment income will be allocated monthly to the various funds based on average cash balance for the month and in accordance with generally accepted accounting principles. 3. OBJECTIVE 3.01 At all times, investments of the City shall be in accordance with Minnesota Statutes Chapter 118A and amendments thereto. The primary objectives of the City's investment activities shall be the following, in order of priority: A. Safety Safety of principal is the foremost objective of the investment portfolio. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk, interest rate risk, and custodial risk. 1. Credit Risk: Credit Risk is the risk of loss due to failure of the security issuer or backer. Thus, designated depositories shall have insurance through the FDIC (Federal Insurance) or the SIPC (Securities Investor Protection Corporation). To ensure safety, it is the policy of the City that when considering an investment, all depositories under consideration be cross-checked against existing investments to make certain that funds in excess of insurance limits are not made in the same institution unless collateralized as outlined below. Furthermore, the City Council will approve all financial institutions, brokers, and advisers with which the City will do business. 2. Interest Rate Risk: Interest Rate Risk is the risk that the market value of securities in the portfolio will fall due to changes in general interest rates. The City will Legislative Policy Manual -- Chapter 6-J 2 minimize Interest Rate Risk by structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. 3. Custodial Risk: The City will minimize deposit Custodial Risk, which is the risk of loss due to failure of the depository bank (or credit union), by obtaining collateral or bond for all uninsured amounts on deposit, and by obtaining necessary documentation to show compliance with state law and a perfected security interest under federal law. B. Liquidity The investment portfolio shall remain sufficiently liquid to meet projected disbursement requirements. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Generally, investments shall have “laddered” maturities so that money becomes available on a regular schedule. Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity). However, the City of Hopkins practices the philosophy of “buy and hold”, meaning that when a security is purchased it is the intention of the City to hold the security until maturity. C. Yield The investment portfolio shall be designed with the objective of attaining a market rate of return given cash flow characteristics of the portfolio. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall not be sold prior to maturity except when the liquidity needs of the portfolio require that the security be sold. 4. STANDARDS OF CARE 4.01 Prudence The standard of prudence to be used by investment officials shall be the “prudent investor”, and shall be applied in the context of managing the investments. All investment transactions shall be made in good faith with the degree of judgment and care, under the circumstances, that a person of prudence, discretion and intelligence would exercise in the management of their own affairs. This standard of prudence shall mean not for speculation, and with consideration of the probable safety of the capital as well as the probable investment return derived from assets. 4.02 Ethics and Conflicts of Interest Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the Legislative Policy Manual -- Chapter 6-J 3 City of Hopkins. 4.03 Delegation of Authority In accordance with Minnesota Statute 118A.02, the City Council authorizes the Finance Director to designate depositories, subject to ratification, and further authorizes the Finance Director to make investments for the City. The authorized individuals, when acting in accordance with this Policy and exercising due diligence, shall not be held responsible for losses, provided that the losses are reported immediately and that appropriate action is taken to control further losses. 5. AUTHORIZED FINANCIAL INSTITUTIONS 5.01 A list will be maintained of financial institutions and depositories authorized to provide investment services. The City will conduct its investment transactions with several legal, competing, reputable investment securities dealers or banks located in the Minneapolis/St. Paul metropolitan area. The City will obtain a completed “Notification to Broker and Certification by Broker” statement of investment restrictions from each dealer in accordance with Minnesota Statute 118A.04. 6. SAFEKEEPING AND CUSTODY 6.01 Delivery vs. Payment All trades where applicable will be executed by delivery vs. payment (DVP). This ensures that securities are deposited in the eligible financial institution prior to the release of funds. Securities will be held by a third party custodian as evidenced by safekeeping receipts. 6.02 Safekeeping Securities will be held by an independent third-party custodian selected by the entity as evidenced by safekeeping receipts in the City’s name. 6.03 Internal Controls The investment officer is responsible for establishing and maintaining an internal control structure designed to prevent loss of public funds due to fraud, error, misrepresentation, unanticipated market changes, or imprudent actions. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognized that (1) the cost of the control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by management. 7. AUTHORIZED INVESTMENTS 7.01 All City investments and deposits shall be those allowable by Minnesota Statutes Chapter 118A.04-.05 and amendments thereto which are categorized as follows: A. United States securities-governmental bonds, notes, bills, mortgages (excluding high- risk mortgage-backed securities), and other securities, which are direct obligations or are guaranteed or insured issues of the United States, its agencies, its instrumentalities, or organizations created by the Acts of Congress. B. State and Local securities-general obligations securities of any state or local government rated “A” or better, revenue obligation securities of any state or local Legislative Policy Manual -- Chapter 6-J 4 government rated “AA” or better; and a general obligation of the Minnesota housing finance agency which is a moral obligation of the State and is rated “A” or better. C. Commercial paper-unsecured promissory notes by corporations that are rated in the highest quality category by at least two nationally recognized rating agencies and matures in 270 days or less. D. Time deposits-certificates of deposit fully insured by the Federal Deposit Insurance Corporation or bankers acceptances of United State banks; or have full collateral by the financial institution. E. Repurchase agreements (Repos)-contracts whereby a holder of securities sells the securities to an investor and agrees to repurchase them at a fixed price on a fixed date. The City in effect lends money to another party and holds the security as collateral until it is repurchased by the other party. F. Money market mutual funds-shares of a Minnesota joint powers investment trust whose investments are restricted to securities described in (1) through (5) above, or shares of an investment company that meets the requirements of Minnesota Statutes 118A.05, subd. 4 (4). 8. AUTHORIZED COLLATERALIZATION 8.01 In accordance with MN Statutes 118A, collateralization will be required on all demand deposit accounts, including checking, savings, and money market accounts, and non- negotiable certificates of deposit in excess of federal deposit insurance. State law defines the types of securities that a financial institution may pledge as collateral for public deposits. These securities include: • United States Treasury Issues • Issues of US Government Agencies and Instrumentalities • Obligations of State and Local Governments • Time Deposits (Certificates of Deposits fully insured by the federal deposit insurance company or federal agency). Since the amount a public entity has on deposit will vary from time to time, the financial institution needs sufficient amounts of pledged collateral to cover 110% of the uninsured amount on deposit during peak deposit times. 9. DIVERSIFICATION 9.01 The City will attempt to diversify its investments according to type and maturity. The portfolio, as much as possible, will contain both short-term and long-term investments. The City will attempt to match its investments with anticipated cash flow requirements. Extended maturities may be utilized to take advantage of higher yields. 10. BROKER REPRESENTATIONS 10.01 Municipalities must obtain from their brokers certain representations regarding future investments. Pursuant to Minnesota Statutes 118A, the City shall provide each broker with the City’s investment policy, and the securities broker shall submit a certification annually to the City stating that the officer has reviewed the investment policies and objectives, as well as applicable state law, and agrees to disclose potential conflicts of interest or risk to Legislative Policy Manual -- Chapter 6-J 5 public funds that might arise out of business transactions between the firm and the City. All financial institutions shall agree to undertake reasonable efforts to preclude imprudent transactions involving the City’s funds. 11. REPORTING 11.01 The Finance Director will report at least quarterly to the City Council on the total of all funds invested, the types of securities held, the amount held in each class of security and the total interest received on all securities year to date. 12. POLICY CONSIDERATIONS 12.01 This policy shall be reviewed on an annual basis by the Finance Director. Any changes must be approved by the Finance Director and the City Council. 13. APPROVAL OF INVESTMENT POLICY 13.01 The investment policy shall be formally approved and adopted by the City Council of the City of Hopkins. Established 8/18/87 Revised 9/21/2010 (Res. 2010-063) Revised 1/2/2024 City of Hopkins Legislative Policy Manual -- Chapter 6-J 1 POLICY 6-C USE OF CONTINGENCY FUNDS 1. PURPOSE 1.01 The purpose of this policy is to establish guidelines for the use of contingency funds in the City of Hopkins. 2. USE 2.01 The annual city budget provides a dollar amount to cover unforeseen expenditure needs. Use of these funds must be approved by the City Manager prior to commitments being made. 2.02 The City Manager will inform the Council as to the use of these funds, at their discretion, up to the budgeted amount. City Council approval will be required for any use exceeding the budget except in the case of an emergency. 2.03 Use of contingency funds shall not preclude adherence to bidding and purchasing policies. Established 8/18/87 Reviewed 11/2010 Revised 1/2/2024 City of Hopkins Legislative Policy Manual -- Chapter 6-J 1 POLICY 6-D CONTRACT CHANGE ORDERS 1. PURPOSE 1.01 In order to establish a consistent policy for administering contracts, it is desirable to establish procedures for administering contract change orders, cost overruns and final contract acceptance and initiation of contract warranty periods. 2. POLICY 2.01 When the City Council awards a construction contract, a 5-10% contingency item will also be added to the project financing to cover change orders. A percentage range is used as each project differs in its susceptibility to potential change orders, i.e., some projects are much more straight-forward and more easily and accurately specified. A 5% limit on change orders will be established. No council action will be required if the total value of contract change orders processed does not exceed 5% of the original contract award amount. If construction contract change orders exceed 5%, council review and approval of each change order is required. 2.02 When the budget is established for an approved professional services agreement, a 5% contingency will be used. Similar to construction contracts, no council action would be necessary as long as additional engineering services fees are within 5% of the original agreement amount. Established 2/4/97 Reviewed 11/2010 Revised 1/2/2024 POLICY 6-E FINANCE BILLING COLLECTION POLICY 1. PURPOSE 1.01 The purpose of this policy is to establish procedures to ensure the collection of utility bills and accounts receivable invoices. 2. POLICY 2.01 Utility Bills. Utility bills will be sent out on the first working day of the month and are due in 20 days, with a three-day grace period. A penalty of 10% of the water, sanitary, sewer, storm sewer and refuse charges will be charged if the bill becomes delinquent. 2.02 Accounts Receivable Invoices. Invoices for tree removal, rental of city space, repairs to City property, and other miscellaneous charges are billed and due 20 days from the bill date. 2.03 Certification of Delinquent Amounts. Delinquent amounts dated prior to June 1st of the year will be processed for assessment certification on a yearly basis to Hennepin County. Written notice shall be mailed to each such debtor during the month of June, advising them of this policy. There shall be a $100.00 service charge added on each such utility account or accounts receivable invoice. 3. SERVICE DISCONTINUATION POLICY 3.01 Refuse service may be discontinued for a period of between thirty (30) and ninety (90) days. The resident must contact the City and make a request for a discontinuation of service. Established: 1982 (Res. 82-3039) Incorporated into Legislative Policy: June, 1998 Revised: Sept 2006 (Res. 2006-052) Revised: Aug 2010 (Res. 2010-042) Revised 01/02/2024 Legislative Policy Manual -- Chapter 6-F 1 LEGISLATIVE POLICY 6-F PUBLIC PURPOSE EXPENDITURES 1. PURPOSE 1.01 Every City of Hopkins expenditure must be valid based upon the public purpose for which it is purchased and the specific or implied authority for the expenditure found in the City Charter and state statutes. 1.02 The following items are deemed to meet the Council definition of public purpose expenditures, i.e. an expenditure authorized by law which is reasonably necessary and convenient in accomplishing the functions of the City. 2. MEALS AND REFRESHMENTS. 2.01 The City Council recognizes that situations in which City business needs to be discussed can and do occur during meal hours (e.g. luncheon meetings). In addition, there are public and employee meetings and events in which reasonable refreshments may add to the success of the meeting and/or event and create a more productive work force. The following items are deemed to meet the Council definition of public purpose expenditures in regard to food and meals. a. City business meetings in which the character of the meeting would involve predominately non-city employees. b. When they are part of a breakfast/lunch/dinner meeting for official city business when it is the only practical time to meet and when it involves non-city employee participants (i.e. business developers or business representatives). Only the expenses incurred by city employee(s) may be reimbursed. The City Manager may allow exceptions when deemed in the interest of the City. c. During non-routine, official meetings of the City Council, Commissions or Committees when the meeting does not allow interruptions for meal breaks or must be held over typical meal periods. d. When they are part of the structured agenda for a conference, workshop, seminar, or meeting in which the City Manager or a department director has authorized the employee to attend (this does not include routine staff meetings). e. For department-sponsored meetings, conferences or workshops where the majority of invited participants are not city employees. f. At department-sponsored events where registration fees are charged and the majority of invited participants are not city employees. g. At meetings consisting primarily of city employees when the refreshment and/or meals are an integral part of the event and are necessary to sustain the flow of the meeting and to retain the captive audience, and if the meeting is one of the following: i. A department division or city-wide annual/quarterly staff meeting for all employees; ii. A non-routine staff or organizational meeting; iii. To welcome new employee(s). iv. Planned employee engagement and structured training sessions approved by Department Directors. Legislative Policy Manual -- Chapter 6-F 2 v. When a meeting is scheduled to last 4 hours or more or must be held over a meal period and does not allow interruptions for a break. vi. Except for structured training sessions, for the purpose of this policy, the meetings described shall be held no more frequently than once per quarter. All meetings shall be scheduled to minimize inclusion of meals. h. During official meetings of the City Council, council committees, advisory boards/commissions, and task forces, when they are of a non-routine basis or when special events are held (i.e. as retirements or recognition). i. Snacks and a dinner meal to be allowed for staff during performance of election related duties on Election Day. j. Lunch for all members of interview panels for candidate interviews held over a meal period. k. Department or City Leadership Staff Meetings and yearly staff retreat- food costs for meals and occasionally lodging if held out of area. l. Emergency Response Team-food and beverage during training once a month. Emergency personnel related trainings or emergencies where is is required to perform for extended periods of times where refreshments are important to duty performance, firefighters, police officers and other emergency response personnel may be provided refreshments or food when it is deemed appropriate by the City Manager or Department Director to assure the delivery of quality emergency response service. 3. COMMUNITY RECOGNITION EVENTS/PURCHASES. 3.01 Community Image Awards (Plaque and gift certificate) - As part of its ongoing efforts and redevelopment, the City has undertaken a program to recognize residents and businesses that make significant improvements to their properties. These property owners are awarded a plaque and a gift certificate. 3.02 The purchase of small nominal gift cards or prizes for the purpose of encouraging public engagement and/or incentivize participation, or as a gratitude or hospitality. The City Manager or their designee shall determine these gifts and amount. 4. EMPLOYEE RECOGNITION EVENTS/PURCHASES. 4.01 The City of Hopkins City Council recognizes the hard work and service performed by the employees of the City through a formal Employee Recognition Program. The City Council believes the benefits of attracting, retaining and motivating employees through an Employee Recognition Program support employee job satisfaction, which in turn impacts cooperation and productivity. The result is to provide excellent public and customer service to better serve the interests of the residents of the community. 4.02 The Employee Recognition Program is considered “additional compensation” for work performed by employees but is entirely dependent on receiving funding from year-to-year. No provisions of this policy, or its administration, shall be subject to review under the grievance or arbitration provisions of any collective bargaining agreement. These items are approved annually by the City Council as a part of the overall budget approval process which includes a public hearing on the proposed budget. Legislative Policy Manual -- Chapter 6-F 3 a. As refreshments for recognition or special one-time or once-per-year events when provided at modest level with prior City Manager approval, such as: 1) Annual Employee Picnic 2) Annual Holiday Party 3) Annual Employee Recognition Celebration 4) Police Department Recognition dinner. Includes meals for all HPD employees and a guest, City Manager or designee, Mayor and City Council. b. Annual Employee Recognition Awards 1) Years of service awards for regular full and part-time employees are recognized at 5-year intervals and are awarded at the Annual Recognition Event. Recognition gift purchases must be at a nominal cost not to exceed $250.00 depending on the number of years an employee has been with the City. 5. VOLUNTEER RECOGNITION EVENTS a. City Board and Commission Recognition - Expenditures include food and simple gifts. b. Police Reserve Dinner includes meals for reserve and a guest, coordinators, City Manager or designee, Mayor and Council. Associated costs for awards that are presented. 6. SPECIAL EVENTS a. Such as Raspberry Festival, National Night Out, and other events that involve or invite participation by the general public. b. Expenditures for meals and participation fees are allowed, and representative staff members may participate in events that directly benefit the marketing of the City. Such expenditures will be approved by the Hopkins Redevelopment Authority as Public Relations Expenditures pursuant to Minnesota Statute 469.101, Subd. 16. 7. TRAINING AND SEMINARS 7.01 Expenditures are allowed for reasonable registration, tuition and travel expenses for conferences, seminars, workshops, tuition and approved City employment-related course work in accordance with City of Hopkins Personnel Policy. 7.02 Expenditures are allowed for reasonable registration and travel expenses for City Council conferences, seminars, and workshops, in accordance with City Legislative and Personnel Policies. 8. EMPLOYEE WELLNESS PROGRAM 8.01 The City Council recognizes the importance of employee fitness and health as it relates to the overall work and life satisfaction of the employee and the overall impact on the City’s health insurance program. As such, the City Council supports the Employee Engagement and Wellness Program, which has been designed to educate employees on fitness/health, engagement and wellness. 8.02 The cost of the Employee Engagement &Wellness will be included as a separate line item in the City Budget approved annually by the City Council as a part of the overall budget Legislative Policy Manual -- Chapter 6-F 4 approval process which includes a public hearing on the proposed budget. 9. MEMBERSHIPS AND DUES 9.01 The City Council has determined that the City will fund memberships and dues in professional organizations and City social and community organizations when the purpose is to promote, advertise, improve or develop the City’s relationships, resources and advantages and not for personal interest or gain. 9.02 The cost of memberships/dues is included in the departments’ memberships/dues line-item in the Hopkins Budget. These line items are approved annually by the City Council as a part of the overall budget approval process which includes a public hearing on the proposed budget. 10. CLOTHING AND OTHER ITEMS 10.01 Employees may receive T-shirts, and other sundry items of nominal value ($5.00) when these items are made available to the general public or if these items are determined by the City Manager to be important to the successful involvement of employees in special city- sponsored or city-supported events (i.e. National Night Out, Raspberry Festival, etc.). Employees may be supplied with uniforms, clothing, boots and other gear necessary for the performance of their job. 10.02 Employees may be supplied with uniform, clothing, boot and other gear necessary for their job. 11. ALCOHOLIC BEVERAGES 11.01 The purchase of alcoholic beverages is not allowed. Established 12/3/2002 Revised 1/2/2024 City of Hopkins Legislative Policy Manual -- Chapter 6-J 1 Legislative Policy Manual -- Chapter 6-G 1 POLICY 6-G FUND BALANCE POLICY 1. BACKGROUND 1.01 In February 2009, the Governmental Accounting Standards Board (GASB) issued GASB #54 Fund Balance Reporting and Governmental Fund Type Definitions. The statement substantially changes how fund balances are categorized. It clarifies/modifies how some of the governmental funds are presented and classified. 1.02 This policy will provide a cross reference between the Pre-GASB #54 Fund Balance Classifications and the Post-GASB #54 Fund Balance Classifications. 2. FUND BALANCE CLASSIFICATIONS: CURRENT AND GASB #54 2.01 Pre-GASB #54 Classifications of Fund Balance 2.02 Post-GASB #54 Classifications of Fund Balance Reserved Non-spendable Designated Restricted Designated Not available for appropriation. Committed Undesignated Available for appropriation. Assigned Resources intended for spending for a purpose set by the governing body itself or by some person or body delegated to exercise such authority in accordance with policy established by the board. Residual (general fund only) Not available for spending, either now or in the future, because of the form of the asset (e.g., inventories) or a permanent legal restriction UnrestrictedNot available for appropriation Constraints on spending that the government imposes upon itself by highest-level formal action prior to the close of the period. Unassigned Available for appropriation but intended for a specific use. Constraints on spending that are legally enforceable by outside parties. (e.g., debt retirement) 3. PURPOSE To provide a stable financial environment for the City of Hopkins’s operations that allows the City to provide quality services to its residents in a fiscally responsible manner designed to keep services and taxes as consistent as possible over time. This fund balance policy is meant to serve as the framework upon which consistent operations may be built and sustained. Legislative Policy Manual -- Chapter 6-G 2 4. DEFINITIONS AND POLICIES 4.01 Fund Balance Fund Balance is the difference between assets and liabilities in governmental funds (i.e. general fund, special revenue funds, capital project funds, debt service funds and permanent funds). 4.02 Non-spendable Fund Balance Describes the amount of a fund balance that cannot be spent because it is either not in spendable form or there is a legal or contractual requirement for the funds to remain intact. Policy - At the end of each fiscal year, the City will report the portion of the fund balance that is not in spendable form as Non-spendable Fund Balance on the financial statements (prepaid items, inventory, long-term receivables, etc). 4.03 Spendable Fund Balance (Overview) - Describes the amount of fund balance that is available for appropriation based on the constraints that control how specific amounts can be spent. Typically, a significant portion of a government’s spendable resources can be spent only for specified purposes. The following categories define the revenue source and the level of force of the constraint on spending. Categories should be supported by actual plans approved by either the governing body, an appropriate officer, grant providers or enabling legislation. A. Restricted Fund Balance The restricted fund balance category includes the portion of the spendable fund balance that reflects constraints on spending because of legal restrictions stipulated by outside parties (e.g., encumbrances for goods or services with outside parties-creditors, grantors outstanding at the end of the year), Also, any legal restrictions based on state statutes or grant requirements placed on the use for specific purposes. Policy - At the end of each fiscal year, the City will report “restricted” fund balance for amounts that have applicable legal restrictions per GASB #54. In addition, encumbrances or funds restricted by enabling legislation will be reported as “restricted”. B. Committed Fund Balance The committed fund balance classification includes the portion of the spendable fund balance that reflects constraints that the city has imposed upon itself by a formal action of the city council (for example, an ordinance or resolution passed by a city council). This constraint must be imposed prior to year end but the amount can be determined at a later date. Policy - Prior to the end of each fiscal year, the City Council will take action to commit resources for specific purposes, as necessary (these are nonspendable based on revised guidance). C. Assigned Fund Balance Legislative Policy Manual -- Chapter 6-G 3 The assigned fund balance is the portion of the spendable fund balance that reflects funds intended to be used by the government for specific purposes assigned by more informal operational plans. In governmental funds other than the general fund (special revenue funds, capital project funds, debt service funds and permanent funds); assigned fund balance represents the amount that is not restricted or limited. The authority to “assign” fund balance is delegated to the City Finance Director. Policy - The assigned fund balance category will cover the portion of a fund balance that reflects the City’s intended use of the resources of governmental funds other than the General Fund. The action to assign a fund balance may be taken after the end of the fiscal year and cannot be negative. D. Unassigned This is the residual classification for the government’s General Fund and includes all spendable amounts not contained in the other classifications and, therefore, not subject to any constraints. Unassigned amounts are available for any purpose. These are the current resources available for which there are no government self-imposed limitations or set spending plan. Although there is generally no set spending plan for the unassigned portion, there is a need to maintain a certain funding level. Unassigned fund balance is commonly used for emergency expenditures not previously considered. In addition, the resources classified as unassigned can be used to cover expenditures for revenues not yet received. Policy - At the end of each fiscal year, the City will strive to maintain Spendable – Unassigned portions of the fund balance for Cash Flow equivalent to a minimum of five (5) months or 42% of the prior fiscal year General Fund operating expenditures. In addition to cash flow needs this accommodates emergency contingency concerns. 5. MONITORING AND REPORTING 5.01 The City Manager and Finance Director shall annually prepare the status of fund balances in relation to this policy and present to the City Council in conjunction with the development of the annual budget. When both restricted and unrestricted resources are available for use, it is the City’s policy to first use restricted resources, and then use unrestricted resources as they are needed. When committed, assigned or unassigned resources are available for use, it is the City’s policy to use resources in the following order; 1.) committed 2.) assigned and 3.) unassigned. A negative residual amount may not be reported for restricted, committed, or assigned fund balances in the General fund. Established 10/20/2009 Revised 12/20/2011 City of Hopkins Legislative Policy Manual -- Chapter 6-J 1 POLICY 6-H DEBT MANAGEMENT POLICY The following debt management policy should be used to provide the general framework for planning and reviewing debt proposals. City Council recognizes there are no absolute rules or easy formulas that can substitute for a thorough review of all information affecting the City’s debt position. Debt decisions should be the result of deliberative consideration of all factors involved. 1. GENERAL DEBT POLICY 1.01 The City shall seek to maintain and improve its current bond rating so borrowing costs are minimized and access to credit is preserved. It is imperative that the City demonstrate to rating agencies, investment bankers, creditors and taxpayers that City officials are following a prescribed financial plan. The City will follow a policy of full disclosure by communicating with bond rating agencies to inform them of the City’s financial condition. 1.02 Every bond issue proposal will be accompanied by an analysis of the sources and uses of funds for the project to be financed with the bond proceeds and sources of funding for the repayment of the bonds. The analysis will reflect how the new bond will fit with the City’s existing debt structure. 1.03 The City will confine long-term borrowing to capital improvements or projects that cannot be funded from operating revenues and/or a reasonable amount of other resources. 1.04 Bonds will be sold on a competitive basis unless it is in the best interest of the City to conduct a negotiated sale. Competitive sales will be the preferred method. Negotiated sales may occur when selling bonds for a defeasance of existing debt, for current or advanced refunding of debt or for other appropriate reasons. 2. TAXPAYER EQUITY 2.01 Hopkins’ property taxpayers and residents who benefit from projects financed by bonds should be the source of the related debt service funding. This principle of taxpayer equity should be a primary consideration in determining the type of projects selected for financing through bonds. Furthermore, the principle of taxpayer equity shall be applied for setting rates in determining net revenues for bond coverage ratios. 3. USES 3.01 Acceptable uses of bond proceeds can be viewed as items which may be capitalized, according to financial reporting standards and practices. Non-capital furnishings and supplies will not be financed from bond proceeds. 3.02 Bond proceeds should be limited to financing the costs of project planning and design, land acquisition, buildings and other permanent structures, attached fixtures, equipment and/or other costs as permitted by law. Utility revenue bond proceeds may be used to establish a debt service reserve as allowed by State law. Refunding bond issues designed to restructure currently outstanding debt are an acceptable use of bond proceeds 3.03 The City will not use short-term borrowing to finance operating needs except in the case of an extreme financial emergency which is beyond its control or reasonable ability to forecast. Legislative Policy Manual -- Chapter 6-J 2 4. DECISION ANALYSIS 4.01 Whenever the City is contemplating a possible bond issue, information will be developed concerning the following categories commonly used by rating agencies assessing the City’s creditworthiness. 4.02 The City may use the services of qualified internal staff and outside advisors to assist in the analysis, evaluation and decision process, including bond counsel and financial advisors. This policy is intended to ensure that potential debt complies with all laws and regulations, as well as sound financial principles. 5. DEBT PLANNING 5.01 General obligation bond borrowing should be planned, and the details of the plan will be incorporated in the City’s Five Year Capital Improvement Plan. 6. COMMUNICATION AND DISCLOSURE 6.01 Financial reporting and disclosure requirements will be fulfilled annually according to the disclosure guidelines of the Government Finance Officers Association of the U.S. and Canada. 7. GENERAL OBLIGATION BONDS 7.01 Capital projects proposed for financing through general obligation debt should be accompanied by a full analysis of the future operating and maintenance costs associated with the project. 7.02 Bonds cannot be issued for a longer maturity schedule than a conservative estimate of the useful life of the asset to be financed. The City will attempt to keep the average maturity of general obligation bonds at or below 20 years. 7.03 The city will comply with MN Statues 475.53 limits debt of municipalities at 3% of the market value of taxable property in the municipality. 8. REVENUE BONDED DEBT 8.01 It will be a long term goal that each utility or enterprise will ensure future capital financing needs are met by using a combination of current operating revenues and revenue bond financing. 8.02 Each utility or enterprise should provide adequate debt service coverage. A specific factor established by the City Council that the net of enterprise revenues and expenditures (exclusive of depreciation/amortization) shall be a minimum of 1.20 times the annual debt service costs. Established 10/16/2012 Revised 01/02/2024 City of Hopkins Legislative Policy Manual --Chapter 6-I 1 POLICY 6-I POST-ISSUANCE DEBT COMPLIANCE POLICY The City Council (the “Council”) of the City of Hopkins, Minnesota (the “City”) has chosen, by policy, to take steps to help ensure that all obligations will be in compliance with all applicable federal regulations. This policy may be amended, as necessary, in the future. 1. BACKGROUND 1.01 The Internal Revenue Service (IRS) is responsible for enforcing compliance with the Internal Revenue Code (the “Code”) and regulations promulgated thereunder (“Treasury Regulations”) governing certain obligations (for example: tax-exempt obligations, Build America Bonds, Recovery Zone Development Bonds and various “Tax Credit” Bonds). The IRS encourages issuers and beneficiaries of these obligations to adopt and implement a post-issuance debt compliance policy and procedures to safeguard against post-issuance violations. 2. POST-ISSUANCE DEBT COMPLIANCE POLICY OBJECTIVE 2.01 The City desires to monitor these obligations to ensure compliance with the Code and Treasury Regulations. To help ensure compliance, the City has developed the following policy (the “Post-Issuance Debt Compliance Policy”). The Post-Issuance Debt Compliance Policy shall apply to the obligations mentioned above, including bonds, notes, loans, lease purchase contracts, lines of credit, commercial paper or any other form of debt that is subject to compliance. 3. POST-ISSUANCE DEBT COMPLIANCE POLICY 3.01 The Finance Director of the City is designated as the City’s agent who is responsible for post-issuance compliance of these obligations. 3.02 The Finance Director shall assemble all relevant documentation, records and activities required to ensure post-issuance debt compliance as further detailed in corresponding procedures (the “Post-Issuance Debt Compliance Procedures”). At a minimum, the Post- Issuance Debt Compliance Procedures for each qualifying obligation will address the following: 1. General post-issuance compliance; 2. Proper and timely use of obligation proceeds and obligation-financed property; 3. Arbitrage yield restriction and rebate; 4. Timely filings and other general requirements; 5. Additional undertakings or activities that support points 1 through 4 above; 6. Maintenance of proper records related to the obligations and the investment of proceeds of obligations; 7. Other requirements that become necessary in the future. Legislative Policy Manual -- Chapter 6-J 1 3.03 The Finance Director shall apply the Post-Issuance Debt Compliance Procedures to each qualifying obligation and maintain a record of the results. Further, the Finance Director will ensure that the Post-Issuance Debt Compliance Policy and Procedures are updated on a regular and as needed basis. 3.04 The Finance Director or any other individuals responsible for assisting the Finance Director in maintaining records needed to ensure post-issuance debt compliance, are authorized to expend funds as needed to attend training or secure use of other educational resources for ensuring compliance such as consulting, publications, and compliance assistance. 3.05 Most of the provisions of this Post-Issuance Debt Compliance Policy are not applicable to taxable governmental obligations unless there is a reasonable possibility that the City may refund their taxable governmental obligation, in whole or in part, with the proceeds of a tax-exempt governmental obligation. If this refunding possibility exists, then the Finance Director shall treat the taxable governmental obligation as if such issue were an issue of tax-exempt governmental obligations and comply with the requirements of this Post- Issuance Debt Compliance Policy. 4. PRIVATE ACTIVITY BONDS 4.01 The City may issue tax-exempt obligations that are “private activity” bonds because either (1) the bonds finance a facility that is owned by the City but used by one or more qualified 501(c)(3) organizations, or (2) the bonds are so-called “conduit bonds”, where the proceeds are loaned to a qualified 501(c)(3) organization or another private entity that finances activities eligible for tax-exempt financing under federal law (such as certain manufacturing projects and certain affordable housing projects). Prior to the issuance of either of these types of bonds, the Finance Director shall take steps necessary to ensure that such obligations will remain in compliance with the requirements of this Post-Issuance Debt Compliance Policy. 4.02 In a case where compliance activities are reasonably within the control of a private party (i.e., a 501(c)(3) organization or conduit borrower), the Finance Director may determine that all or some portion of compliance responsibilities described in this Post-Issuance Debt Compliance Policy shall be assigned to the relevant party. In the case of conduit bonds, the conduit borrower will be assigned all compliance responsibilities other than those required to be undertaken by the City under federal law. In a case where the Finance Director is concerned about the compliance ability of a private party, the Finance Director may require that a trustee or other independent third party be retained to assist with record keeping for the obligation and/or that the trustee or such third party be responsible for all or some portion of the compliance responsibilities. 4.03 The Finance Director is additionally authorized to seek the advice, as necessary, of bond counsel and/or its financial advisor to ensure the City is in compliance with this Post- Issuance Debt Compliance Policy. Established 10/16/2012 City of Hopkins Legislative Policy Manual -- Chapter 6-J 0 POLICY 6-J PRIVATE ACTIVITY REVENUE BOND FINANCING 1. GENERAL 1.01 Under the Minnesota Municipal Industrial Development Act, Minnesota Statutes, Sections 469.152 to 469.1655 (the “Industrial Development Act”), the City of Hopkins has authority to issue revenue bonds or notes to attract or promote economically sound industry and commerce to the City. 1.02 Under Minnesota Statutes, Chapter 462C (the “Housing Act”) the City is authorized to issue housing revenue bonds to finance multi-family residential housing projects for low and moderate income persons and elderly persons. Projects must be embodied in a Housing Program as that term is defined in the Housing Act. 1.03 The Hopkins City Council (the “Council”) is aware that such financing for certain private activities may be of benefit to the City and will consider requests for tax-exempt financing subject to these Guidelines. The Council considers tax-exempt financing to be a privilege, not a right. 1.04 It is the judgment of the Council that the City should use tax-exempt financing on a selective basis to encourage certain development that offers a benefit to the City as a whole, including significant employment and housing opportunities. It is the applicant's responsibility to demonstrate the benefit to the City, both in writing and at the required public hearing. The applicant should understand that although the City may have approved the issuance of financing for a similar project or a similar debt structure, that approval is not a basis that the Council will use for granting future financing approvals. The City will judge each application on the merits of the project as it relates to the public purposes of the Housing Act or the Industrial Development Act and the benefit to the City at the time the request for financing is being considered. 1.05 In no event will the City issue private activity bonds for the purpose of financing the operating expenses of any borrower. However, bond proceeds may fund reasonable operating and replacement reserves where the primary use of proceeds is to finance capital expenditures. 2. GUIDELINES 2.01 The Council will consider tax-exempt financing for commercial, industrial health care, and any other projects authorized to be financed under the Industrial Development Act (referred to as “non-housing projects”), and housing projects under the Housing Act. An applicant for tax-exempt financing for non-housing projects pursuant to the Industrial Development Act must complete and submit an Application for Tax-Exempt Financing, which may be obtained from the City’s Finance Department. An applicant for tax-exempt financing for housing projects pursuant to the Housing Act must complete and submit an Application for Tax-Exempt Financing, which may be obtained from the City’s Finance Department. Legislative Policy Manual -- Chapter 6-J 1 2.02 The application must include the items identified in the addendum to the application and an indemnification letter of agreement, both of which can be found in the application packet. In addition, the applicant must furnish a description of the project, a site plan, elevation of proposed buildings, landscape, lighting, and site preparation, together with a brief description of applicant and the proposed financing in such form as required at the time of application. 2.03 Projects must be compatible with the overall development plans and objectives of the City and shall meet all applicable zoning and land use regulations of the City. 2.04 The Council will not consider an application until the City makes a tentative finding that all City requirements have been met with respect to zoning, building plans, platting, streets, and utility services. 2.05 The project must be a positive benefit to the City. The project must be of a nature that the City wishes to attract, or an existing business that the City wishes to have expanded within the City, considering employment opportunities, incentive for further development, impact on City services, and support for the industrial, commercial or health care or educational facilities currently located in the City. A housing project must provide significant housing opportunities for low and moderate income persons or the elderly. 2.06 The Council will, if requested, grant an applicant a pre-application review. The purpose of the pre-application review is to inform applicants of the possibility of rejection or the possible bases for such rejection. The fact that the project is not rejected at the pre- application stage is not to be construed as approval of the project or as an indication that the project will be approved upon formal request to the Council. The City may reject requests for tax-exempt financing by the City whether or not the project was submitted to a pre- application review and regardless of the outcome or recommendation of that pre- application review. A request for pre-application review must be in writing, addressed to the City Finance Director, and set forth the following information: the name of the project; the type of project intended; and the name, address and telephone number of the person(s) who will be representing the applicant at the pre-application review, together with such additional information as the applicant desires to submit. 2.07 During the application process, the applicant must identify an underwriter, lender or financial advisor it is working with to obtain financing. For projects financing under the Industrial Development Act, the underwriter, lender or financial adviser will be required to submit a letter that establishes the financial feasibility of the project. The applicant must receive approval from the appropriate state agencies, secure financing and commence construction within one year of the date of the resolution giving preliminary approval to the project or the housing program. Upon application, the Council may approve an extension of the preliminary approval. The City will appoint bond counsel for the bond issue, which will normally be the City's regularly retained bond counsel. Legislative Policy Manual -- Chapter 6-J 2 2.08 Pursuant to the Industrial Development Act and the Housing Act, consideration of an application for tax-exempt financing must be done at a public hearing held by the Council. Changes or modifications to the project after the public hearing and preliminary Council approval must be consistent with the scope of the project as proposed at the time of preliminary approval. 2.09 The City is to be reimbursed and held harmless for and from any out-of-pocket expenses related to the tax-exempt financing including, but not limited to, legal fees, financial advisor fees, bond counsel fees, the City staff's expenses in connection with the application, and any deposits or application fees required under state law in order to secure allocation of bonding authority. The applicant must execute a letter to the City undertaking to pay all such expenses, whether or not the bonds are issued. A non- refundable City application fee in the amount of $1,000 must be included with the submission of the application. 2.10 Prior to closing and delivery of the bonds for the project, the applicant must pay, or commit to pay at closing an administrative fee in the amount of 1% of par of the bonds, or as negotiated based upon size of issuance. The administrative fees required by this paragraph will be adjusted at or paid prior to delivery of the bonds if necessary to ensure compliance with the Internal Revenue Code and regulations. 2.11 If the City determines that issuance of the bonds requested by the applicant is reasonably expected to cause governmental bonds issued by the City in that calendar year to be ineligible for designation as “qualified tax-exempt obligations” under Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (also known as “bank qualified”), the applicant will be required to reimburse the City, at the time of issuance of the City’s bonds, for any interest rate differential between bank qualified and non-bank qualified bonds. 2.12 The Council may, in its sole discretion, impose conditions exceeding those required under the City Code in respect to exterior building materials, landscaping, signage lighting, and such other aspects as the Council may consider appropriate on a case-by-case basis. 2.13 The Council may, in its discretion, withdraw its preliminary approval of a project any time if in its judgment the purposes of the Industrial Development Act and/or Housing Act will not be served by going forward with the project and its financing. 3. MISCELLANEOUS MATTERS 3.01 Refundings. The Council will normally approve the refunding of a tax-exempt issue but only upon a showing by the applicant of (i) substantial debt service savings, (ii) the removal of bond covenants significantly impairing the financial feasibility of the project, or (iii) both. In the case of refundings of bonds for which the administrative fee listed in Section 2.10 have been paid in full, no new administrative fees are required; but the non-refundable application fee must be paid together with all City expenses related to the refunded bonds in excess of that fee. If new project costs are being financed with the refunding, then the administrative fee will be required for the new money portion of the bonds, as well as an application fee. Legislative Policy Manual -- Chapter 6-J 3 In the case of refundings of bonds where no administrative fee has been paid, the administrative fees listed in Section 2.10 must be paid and an application fee submitted. 3.02 Subsequent Proceedings. Where changes to the underlying documents or credit facilities of outstanding bond issues are to be made and require Council action (including changes that are a “deemed reissuance” under Internal Revenue Service regulations), the City will not charge an administrative fee but the actual costs incurred by the City must be reimbursed. No formal application form is required. 3.03 IRS Audits or other Investigations. If the bond issue or project is audited by the IRS or is the subject of any type of investigation, the City will require the applicant to pay for all fees and expenses incurred with respect to such audit or investigation, including the legal fees and financial advisor fees. 3.04 Issue by Another Political Subdivision. The City will consider requests for tax-exempt financing of projects in the City by other political subdivisions. In these cases the non- refundable application fee must be paid and all procedures through the approval of the preliminary resolution followed. The City will not charge an administrative fee but the actual costs incurred by the City must be reimbursed. The City reserves the right to reject such requests for any reason, including without limitation, a determination by the City that such issuance by another political subdivision would impair the City’s ability to issue governmental bonds as “bank qualified bonds” (as defined in Section 2.11) in that calendar year. 3.05 City Contact. Initial contacts about tax-exempt financing are made by contacting: City of Hopkins Finance Department 1010 First St S Hopkins, MN 55343 952-548-6330 3.06 Deadlines. The Council conducts all tax-exempt financing matters at regularly scheduled Council meetings held on the first, second and third Tuesdays of each month. Documents for Council consideration must be at the City office by noon on the Thursday preceding the Council meeting at which the matter is to be considered. In the case of a publicly offered bond issue the documents, when submitted, may specify a maximum principal amount. 3.07 Post-Issuance Compliance. The City will require that each borrower demonstrate to the City that the borrower has post-issuance bond compliance procedures in place and will satisfy all the requirements of both the tax code and state statute with respect to the bonds issued for its project. The City may require that borrowers retain a trustee and/or an independent arbitrage consultant for the term of the bonds. Established 10/1/2013 Revised 1/2/2024 City of Hopkins