The policy describes prudent financial practices and the council's desire to maintain a healthy reserve for fiscal emergencies. The policy also ensures accountability for large expenditures of public funds and offers guidelines to the council in making budgetary decisions.

Even though Monte Sereno is in a financially sound position, City Manager Brian Loventhal said the council wants both residents of Monte Sereno and council members to understand that fiscal responsibility goes beyond just putting together a budget every year. Loventhal said the city must be prepared "to weather any kind of storm" or economic emergency.

"The interest is really to do some public outreach to our community and let them know we take the budget scenario with the state pretty seriously," Loventhal said.

Stressing Monte Sereno's stable budget, Loventhal said the policy was written in response to cities within the state reacting to Sacramento's budget crisis. Even though the city has never had a formal long-term fiscal policy in place, Loventhal said it has never been a problem.

After Proposition 13 was put into place in 1978 and in more recent times of the state's fiscal uncertainty, Loventhal said Monte Sereno has always operated with a budget in the black—rather than in the red. Loventhal, who has worked for the city for 11 years, said he doesn't anticipate budget problems this or next year in Monte Sereno.

"It was a way to put into writing what we've always practiced," Loventhal said.

The policy was drafted by Loventhal, Mayor Erin Garner and Councilman David Baxter. Loventhal said the language of the policy was written with the help of samples of fiscal policies from other cities throughout the state.

During a phone interview from Washington, Garner said Monte Sereno has started to feel pressure from the state on its local budget.

"We feel like our finances are somewhat threatened by state activity, so we want to make sure we have a prudent policy in place," he said.

Some of the revenue streams that provide Monte Sereno with operating income include state sales and vehicle license tax, interest from reserves, law enforcement tax, franchise tax, licenses, permits, property tax and property transfers, to name a few. Garner said the city's funds are mostly spent on improving traffic and public safety, road enhancement and capital outlay.

As part of the annual review of the city's budget, the policy stipulates that a portion of each year's budget appropriations will be contributed to the city's reserve.

"We have a commitment to give to our reserve every year," Loventhal said.

Loventhal said the city's healthy reserve consists of both "restricted" and "unrestricted" funds. Restricted funds are collected and can only be used for specific purposes, such as sales tax money from the Santa Clara Valley Transportation Authority that must be used for sidewalk improvements.