Where'd the money go?
In response to where the money went, I have spent the last week or so analyzing the city’s budgets and audits that are available. I will address most of my comments/stats towards the governmental side of the city, not the proprietary funds. The proprietary funds are made up of the water, sewer and landfill operations.
*As of the most recent city audit, 9/30/17:
-General Fund Balance: $1.36M unassigned; a total balance of $2.16M; “I.E. the city’s checking account”
-Total Unrestricted Funds: $4.7M; “Unrestricted funds are what the city has available to spend, versus restricted funds that various government agencies have mandated the city set aside for future needs. Those cannot be spent on budget shortfalls”
-Net Worth of the city: $27.4M*; “$56.1M for the city as a whole.”
Since 9/30/13 the city has spent $4.9M in major capital improvements over the amount gifted or bonded out. Some of the shortages in cash needed were refinanced with new bonds.
Another major expense for the city has been salaries, as in most organizations, and related benefit categories. The city council has historically budgeted about $1M more than the total salaries of all employees combined. The most recent budget shows salaries at $5.7M.**
That is an average increase of $450K per year in budgeted raises/benefits/new hires and 13.04 new employees. Last year the city spent $5.1M in salaries and benefits, and the budget for this year is $6.3M, while decreasing 1 FTE Employee.*
In summary, the gross revenue for the city has been increasing over the past few years, while the operating net income has stayed about $1M, showing expenses have increased along with revenue, which is to be expected in government. Most years that net income amount has been enough to cover the principal payment on the bonds, except in 2014, when $821K of the debt payment went to paying outstanding registered warrants (Checks) from 2013. One of the major expense increases each year is salaries & benefits for the staff. This has been due to adding employees, promotions, rising cost of healthcare, Step Program pay raises, longevity pay raises, and cost of living pay raises.
One of the biggest uses of the city’s cash over the past five years has been in capital improvements (roads, buildings, equipment, etc.). It’s like using your savings to buy a car, it’s great if you have the money, but you don’t want to use all your cash buying big dollar items. There is the opportunity to borrow the money and make payments, which is called bonding. Some of this money should come back to the city in the future. Typically, when a new road is paved, the city pays for it up front, out of cash, and then receives the money back when lots are sold.
Another use of cash has been TIF projects. TIF is a great tool to use, but we must understand that it uses available cash. TIF is a program where the city either lends or gives money to a developer to improve a property, only if the project cannot be done without it. The increased value of that property would then generate a higher property tax that goes back into the TIF fund of the city over time, which can be used to improve the surrounding area.
Unless I am missing some information, it looks like the city is doing OK financially. Yes, the expenses have increased, which maybe those should be cut. The city has emptied the “checking account” general fund through past capital improvements, paying down principal on debt, and other projects in the city. The job of the city is not to have a large balance of cash just sitting around, that is tax payer’s money. If there are needs that can be fulfilled with cash, rather than borrowing the money, I say go for it. The problem came when the city completed more projects than there was cash available for. There may not be enough cash available to complete the amount of capital projects the city has grown accustomed to over the past few years, and that’s OK. If the council still wants to complete any projects, there is always bonding, or they can decide to wait until the cash is available again in savings to spend it.
I want to reiterate, these audit numbers are as of 9/30/17, so almost a year ago. What has happened to the money in the last year, still begs a question. I hope the council has gone through their internal accounting reports for the last 11 months and traced the dollar. How close are the actual dollars spent, compared to the most recent budget? If those questions can be answered, then it may give everyone a clue as to why the city is in its current situation.
If you have any questions related to the numbers I’ve written about, I would be more than happy to discuss where I found these numbers in the audits/budgets.
*Government side of the city only; **City as a whole.
*** To understand income/expenses for the city, I removed any capital related categories, depreciation and internal fund transfers, since those are just moving money around. These numbers are as of the 9/30/17 audit.
I want to clarify that I have no formal training in municipal accounting, and not being on the inside of the city, there may be information I am missing by analyzing only what is publicly available. While the net income may be positive, there are certain government restrictions on how some of it can be spent, specifically LB 357 funds. Those come in as sales tax revenue, but can only be spent on the $9.5M bonds for the softball complex, and other capital improvements. Based on those limitations, these comments are my best guess as to the issues with the city, and should not be taken as facts.