Staff Report.General Fund Reserve Policy (2)
PREPARED BY: Stephen Conway
Finance Director
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 406-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 9/21/2021 ITEM NO: 6
DATE: September 15, 2021
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Approve Revisions to the Town’s General Fund Reserve Policy to Document
the Market Fluctuation Reserve as Recommended by the Finance
Commission.
RECOMMENDATION:
Approve Revisions to the Town’s General Fund Reserve Policy to document the Market
Fluctuation Reserve as Recommended by the Finance Commission.
DISCUSSION:
The Governmental Accounting Standards Board (GASB) 31 requires that at year end the Town
must compare or “mark” its historical cost of investments against the market value of those
investments as determined at its fiscal year end date. If the market value is below cost, a
negative interest earned adjustment is made to the Town’s interest earned for the fiscal year.
Conversely, if the market valuations exceed historical cost, a positive increase is added to the
calculation of interest earned for the fiscal year.
Staff has utilized a Reserve for Market Fluctuations to assign or reserve Town General Fund
balance when substantial unrealized gains (market value of investment above its historical cost
to the Town) on its operating portfolio are determined upon the last day of the fiscal year.
At its August 9th meeting, the Finance Commission requested that staff develop a threshold for
unrealized gains so reserve balances resulting from market fluctuation gains are consistently
applied from year to year.
On September 13, 2021, the Finance Commission reviewed and recommended for Council
approval the staff recommendation reserving the market fluctuation gains that are equal or
higher than $10,000. The recommended changes have been incorporated into existing GASB 31
language and can be seen in the redlined General Fund Reserve Policy in Attachment 1.
PAGE 2 OF 2 SUBJECT: Recommended Changes to General Fund Reserve Policy DATE: September 15, 2021
FISCAL IMPACT:
This action has no fiscal impact.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachment:
1. Town General Fund Reserve Policy (redlined)