(a) Capital reserve fund.--

(1) Council may create and maintain a separate capital reserve fund for any anticipated capital expenses, which shall be designated for a specific purpose or purposes when created. The money in the fund shall be used for no other purpose unless council declares that conditions in the city make other expenses more urgent than those for which the fund was created.

(2) Council may appropriate money from the general city fund to be paid into the capital reserve fund or place in the fund any money received from the sale, lease or other disposition of any property of the city or from any other source.

(b) Operating reserve fund.--With regard to an operating reserve fund, the following shall apply:

(1) Council shall have the power to create and maintain a separate operating reserve fund in order to:

(i) minimize future revenue shortfalls and deficits;

(ii) provide greater continuity and predictability in the funding of vital government services;

(iii) minimize the need to increase taxes to balance the budget in times of fiscal distress; and

(iv) provide the capacity to undertake long-range financial planning and to develop fiscal resources to meet long-term needs.

(2) Council may annually make appropriations from the general city fund to the operating reserve fund, but no appropriation shall be made to the operating reserve fund if the effect of the appropriation would cause the fund to exceed 25% of the estimated revenues of the city's general fund in the current fiscal year.

(3) Council may, at any time by resolution, make appropriations from the operating reserve fund for the following purposes only:

(i) to address emergencies involving the health, safety or welfare of the residents of the city;

(ii) to counterbalance potential budget deficits resulting from shortfalls in anticipated revenues or program receipts from any source;

(iii) to counterbalance potential budget deficits resulting from increases in anticipated costs for goods or services; or

(iv) to provide for anticipated operating expenditures related either to the planned growth of existing projects or programs or to the establishment of new projects or programs if, for each project or program, appropriations have been made and allocated to a separate restricted account established within the operating reserve fund.

(c) Investment and administration.--The operating reserve fund shall be invested, reinvested and administered in a manner consistent with the provisions of this part relating to the investment of city funds generally.