STRATEGIC PRIORITY: Fiscally Sound
AGENDA DATE: March 26, 2025
COUNCIL DISTRICT(S): N/A
DEPARTMENT: Budget and Management Services
EXECUTIVE: Jack Ireland
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SUBJECT
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Authorize the following revisions to the Financial Management Performance Criteria to: (1) add language that establishes an Employee Benefit Reserve in Unassigned Fund Balance; (2) clarify the pension benefit adjustment approval process for Employees Retirement Fund and Dallas Police and Fire Pension System; (3) change the comparison of the disabled and over 65 property tax exemption to the consumer price index to use the median residential market value instead of the average residential market value; and (4) exclude certificate of obligation debt repaid by Enterprise Funds or other funds with an existing dedicated rate structure from the limit on total certificate of obligation debt; and (5) add language that all retirement systems will be financed in a manner to systematically fund liabilities - Financing: No cost consideration to the City
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BACKGROUND
On March 15, 1978, the City Council originally adopted the Financial Management Performance Criteria (FMPC) to provide standards and guidelines for the City’s financial and managerial decision making and to provide for a periodic review of the criteria to maintain standards and guidelines consistent with current economic conditions by Resolution No. 78-2737. The City Council adopted specific FMPC for the Dallas Water Utilities Department on July 8, 1981. The status of each criterion is updated annually and presented with the annual budget, at year-end, and with each bond sale.
The FMPC contain 54 criteria in seven categories: (1) operating program; (2) pension program; (3) budget and planning; (4) capital and debt management; (5) economic development; (6) accounting, auditing, and financial planning; and (7) grants and trusts. The proposed revisions are based on feedback received from the City Council and City departments/staff.
FMPC #13 currently states, “The Employee Benefits Fund will maintain a cash reserve of at least the anticipated end-of-year claims incurred but not paid, and other current liabilities. This does not include incurred but not reported (IBNR) claims. The Employee Benefits Fund will maintain a positive cash balance”. The proposed revision states the city will establish a reserve in the Unassigned Fund balance similar to the Emergency Reserve and Contingency Reserve.
FMPC #15 currently states, “All retirement systems will be financed in a manner to systematically fund liabilities. The City will assure sufficient funds are provided to pay current service plus interest on unfunded liabilities plus amortization of the unfunded liabilities over a programmed period. No less than annual reviews will be provided to City Council by the pension funds”. The proposed revision states the city will fund retirement systems to systematically fund liabilities.
FMPC #16 currently states, “Actuarial analysis will be performed annually on all retirement systems. Adjustments in benefits and contributions will be authorized only after meeting the test of actuarial soundness. All health plans should have actuarial reviews performed at least biennially to determine the required levels of funding necessary. These health plans shall be financed in a manner to ensure sufficient funds are available to fund current liabilities and provide some reserve levels for extraordinary claims.” The proposed revision specifies that adjustments in benefits of the Employees Retirement Fund must be approved by the City Council and by a majority of the City of Dallas voters and of the Dallas Police and Fire Pension System (DPFPS) must be approved either by: (1) the State legislature; (2) a majority of the City of Dallas voters; or (3) by written agreement between DPFPS and the City, approved by a 2/3 vote of both the DPFPS Board and the City Council.
FMPC #23 currently states, “The City will compare the current disabled and over-65 exemption to the most recent annual Consumer Price Index for the Elderly, and the year-over-year change in the average residential market value (whichever is greater) annually and provide the analysis of each scenario to City Council for consideration prior to June 30 for possible modification of this property tax exemption. Changes to property tax exemptions must be provided to the appraisal districts no later than June 30.” The proposed revision will use the median residential market value in the comparison instead of the average residential market value.
FMPC #35 currently states, “CO debt, including that for risk management funding supported by an ad valorem tax pledge, should not exceed 15% of total authorized and issued general obligation (GO) debt. All COs issued in lieu of revenue bonds should not exceed 10% of outstanding GO debt.” The proposed revision clarifies the threshold of 15% and adds that certificates of obligation (COs) repaid by Enterprise Funds will not count toward the limit on CO debt.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
On October 8, 2014, the City Council authorized changes to FMPC #9, by Resolution No. 14-1679.
On December 13, 2017, the City Council authorized changes to (former) FMPC #6, #7, #9, #11, #15, #22, #27, #33, #41, #42, #44, #48, and #49 and added five new criteria by Resolution No. 17-1909.
On June 9, 2021, the City Council authorized changes to (former) FMPC #1, #2, #3, #4, #20, #23, #24, deleted #28, and added two new criteria by Resolution No. 21-0975.
On August 10, 2022, the City Council authorized changes to (former) FMPC #12 and #16 by Resolution No. 22-1074.
The Government Performance and Financial Management Committee was briefed regarding this matter on October 22, 2024.
The Government Performance and Financial Management Committee was briefed by memorandum regarding this matter on February 24, 2025. <https://dallascityhall.com/government/citymanager/Documents/Council%20Materials/K.%20FMPC.pdf>
FISCAL INFORMATION
No cost consideration to the City.