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programs. Funds must be appropriated by a vote of at least a majority of the Council with Mayoral
concurrence. Funds for new programs or positions added outside of the current year budget must come
from other non-Reserve Fund sources.
Budget Stabilization Fund
The Budget Stabilization Fund provides a method to prevent overspending during prosperous years and
provide resources to help maintain service levels during years of slow revenue growth or declining
revenue.
Unappropriated Balance Line Item for Mid-Year Adjustments
Each year, the City Council and Mayor shall appropriate funds to a line item in the Unappropriated
Balance intended for use as a reserve for mid-year adjustments. The purpose of this line item is to
address shortfalls that arise during the fiscal year that the City cannot otherwise address through service
adjustments or account transfers. The City shall use this line item to address these shortfalls prior to
using the Reserve Fund.
GENERAL FUND ENCUMBRANCE POLICY
An encumbrance is a reservation of funds to cover purchase orders, contracts, or other goods and
services that are chargeable to an appropriation. It records obligations for goods or services not yet
received or rendered in amounts equal to their anticipated costs. An encumbrance system provides a
warning as the City approaches the authorized expenditure level and thus protects the City from over-
spending an appropriation.
As a rule, the City shall revert any encumbered funds that remain unspent for a period longer than one
fiscal year. An exception to this policy applies to encumbrances for commodities procurements, which
include supplies or equipment. These encumbered funds shall revert if they remain unspent for a period
longer than three years. Further exemptions apply to legal obligations, contingent liabilities such as
pending legal settlements, or an appropriation for a project that the authorized department cannot
complete within the allowable timeframe.
DEBT MANAGEMENT POLICY
The Debt Management Policy provides guidelines for the issuance of bonds and other forms of
indebtedness to finance the acquisition of real property and equipment, capital improvements, and other
matters for the City including short-term cash flow and large legal judgments. This policy incorporates the
Municipal Improvement Corporation of Los Angeles Departmental Operating Policies and the Mello-Roos
Policies and Procedures.
The following represent key objectives of the Debt Management Policy:
To mitigate risk and support sound decision-making with regard to long-term financing
commitments.
To comply with federal and state laws and regulations, including disclosure and reporting
requirements.
To incorporate best practices into the City’s issuance and management of its debt obligations.
To ensure that the City’s debt is consistent with the City’s planning goals and objectives, and
capital improvement program or budget, as applicable.
To minimize the cost of debt.
To maintain and improve the City’s ratings on its debt.
To establish selection criteria for retaining the best qualified financial consultants, attorneys,
underwriters, and other financing participants through fair procurement processes.
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