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LOS ALTOS BILIS Town of Los Altos Hills CALIFORNIA Reserve Policy Purpose To set forth the Town's policy for establishing and maintaining find reserve targets for each of the Town's governmental funds. Fiscal reserves provide working capital for operations and maintenance activities, funding for IT, vehicle, and equipment needs, fulfillment of legal, regulatory, and contractual obligations and mitigation of risk and liability exposures. Policy This policy is intended to ensure that the Town has sufficient cash flow to meet current and future needs and provide transparency to its residents by establishing fund reserve targets for each of the Town's governmental funds. Reserve funds are needed to provide funding for planned and unplanned events. Planned events include, but are not limited to, (1) accumulating balances to fund operating needs; (2) debt service obligations; and (3) funding for employee related pension and other post -employment benefits. Unplanned events include, but are not limited to, (1) accounting for revenue shortfalls; (2) unanticipated expenses; and (3) paying for unforeseen emergency events. The established reserve targets defined herein provide guidance for long-term financial planning and maintaining the Town's long-term financial health. Adequate find reserves are of value to: (1) provide working capital to fund operating needs; (2) provide a financial cushion for dealing with unanticipated financial needs and emergencies; and (3) are a component of achieving favorable credit ratings which can help reduce the costs of issuing debt. This policy designates specific reserve accounts. For each reserve, this policy specifies the reserve purpose, the threshold amount, allowable uses of reserves, and replenishment of the reserve. This policy establishes committed and assigned reserves. Committed or Assigned reserves may be established, changed, applied, and deleted by Council resolution. Committed reserves may be used for one or more limited activities noted in the purpose or usage of the reserve. Assigned reserves are not limited to one single activity and may be used for any Town specific activity described in the purpose or usage of the reserve. This policy will be reviewed annually during the CAFR process to ensure conformance with the Town's goals and objectives and compliance with any changes in regulations or standards. In conjunction with the annual policy review, the Administrative Services Director will include updated calculated thresholds, review of use and replenishment of the reserves, and any anticipated changes to be included in the annual CAFR preparations. Committed Reserves Pension Contribution Reserve Purpose of the Reserve: The Pension Contribution Reserve is to provide for contingent liabilities identified by Ca1PERS actuaries in the most recent Actuarial Report that are not included in the most recent actuarial calculation of the Town's Past Unfunded Pas Service Liability reported in the Town's most recent Activities (or accrual) annual Statement of Position (balance sheet) found in its most recent CAFR. . Committed Reserves — continued Contingent Liabilities identified by CalPE.RS actuaries: Updated 2/18/21 -1- Resolution 06-21 Page 2