Mill Creek council debates reserve rules, surplus treatment in second review of draft financial policies

At a July 29 study session, Mill Creek council members and staff conducted a second review of revised financial management policies, centering debate on definitional clarity for reserve and surplus, whether minimum reserves should be tied to revenues or expenditures, and how much of any biennial surplus should be shifted to the capital improvement program.

Finance staff opened the session by explaining the timeline for the policy work: the draft incorporated council feedback from an April review and other legal and management comments. Staff said a primary objective was to ensure the document provided consistent definitions and operational rules for the city's biennial budget process and for each fund type.

A central point of contention was the definition and measurement point for reserve balances. Council members argued definitions such as "minimum reserve level," "surplus," "unassigned and unencumbered" and the reference date for measuring fund balances should be…