Chapter 4.15
RESERVE FUND POLICY
Sections:
4.15.020 Types of reserve funds.
4.15.030 Specific reserve funds.
4.15.040 Management of reserve funds.
4.15.010 Purpose.
Prudent financial planning and fiscal responsibility includes anticipating and preparing for future funding requirements as well as unforeseen and unexpected emergencies, disasters, and other events. The Hi-Desert Water District has established reserve funds for its long-term organizational and operational stability and the reserve funds enable the district to minimize significant rate fluctuations due to unforeseen and expected cash flow requirements. This reserve fund policy is to ensure that the district accumulates, manages, maintains, and uses certain financial resources only for specific purposes. [Res. 09-20].
4.15.020 Types of reserve funds.
The district maintains two types of funds:
A. Restricted Reserves. Restricted reserves are reserves that are restricted by an outside source, such as by statute, court, or contract.
B. Designated Reserves. Designated reserves are reserves that are established and set aside to be used only for a specific, designated purpose. [Res. 09-20].
4.15.030 Specific reserve funds.
The district maintains the following reserve funds:
A. Debt Service Reserve. The debt service reserve is a restricted reserve that is governed by legal bond covenants and is to be used if the district is unable to meet the required debt service obligation. The bond covenants require that the debt service reserve be maintained at a level sufficient to fund the maximum annual debt service payments.
B. Emergency Reserve. The emergency reserve is to be used only to cover cash flow shortages caused by an unexpected event, such as a natural disaster, water shortage situation, or other unforeseen expense. It is the goal of the district to maintain the emergency reserve in excess of five percent of the annual operating budget.
C. Capital Reserve. The capital reserve is a designated reserve to be used to fund the capital improvement program and for unforeseen capital projects that are necessary to meet regulatory requirements, system reliability, and future needs. It is the goal of the district to maintain the unforeseen capital reserve in excess of five percent of the annual operating budget.
D. Operating Reserve. The operating reserve is a designated reserve to be used only to cover cash flow shortages caused by a short-term, unexpected disruption of anticipated revenue or when expenses become due before the anticipated revenue to pay those expenses is received. It is the goal of the district to maintain the operating reserve in excess of 50 percent of the annual operating budget.
E. Pipeline Reserve. The pipeline reserve is a restricted reserve that is governed by Proposition 218 and is to be used to pay the annual lease obligation. The reserves are maintained by the amount collected from the monthly bills to the customers.
F. The Supplemental Water Reserve. The supplemental water reserve is a designated reserve to be used to fund the potential purchase of supplemental water that is necessary to meet the demands of the district for today and in the future. It is the goal of the district to maintain the supplemental water reserve in excess of 10 percent of the annual operating budget. [Res. 09-20].
4.15.040 Management of reserve funds.
The board of directors, in consultation with the general manager, will be responsible for managing the reserve funds. The board of directors must authorize the expenditure of money from all of the district’s reserve funds. The board annually will review the balance of the reserve funds, work collaboratively with the general manager to ensure the accuracy of the annual report, and evaluate the goals and purpose of each reserve fund and recommend adjustments as may be necessary or desirable. [Res. 09-20].