GLADSTONE - City of Gladstone officials are pleased overall with an audit recently submitted to the commission, despite a negative balance in one fund that requires a deficit reduction plan be submitted to the state.
The audit preformed by Anderson, Tackman & Company, PLC. was reviewed by the city commission during a special meeting Monday night and evaluated the financial documents for the fiscal year ending March 31, 2013.
In 2009 the general fund was $30,000 in the red. This year the general fund ended the fiscal year with a positive unassigned fund balance of $319,404 - more than the target goal set by the city commission of $298,00 designed to keep two months of city operating in the budget.
"We've come a very long way, basically, in very tough economic times," said City Manager Darla Falcon, noting revenues are flat and are expected to remain flat or decline in the next two years.
According to the audit, roughly $40,000 of the general fund was used during the year. However, money used from the fund was earmarked for specific projects.
"We're using fund balance but it's planned. We still have $319,000 that's unassigned," explained Falcon.
At the beginning of the fiscal year the solid waste fund was $887 in the red as a result of purchasing a new dump truck. Throughout the course of the year the city put $92,046 back into the fund, bringing the ending balance to a positive $91,159.
The electric fund saw an increase of $348,482 raising the fund balance to $8,122,768 for operations and maintenance.
"It's such a capital intensive fund. If a bucket breaks down the city needs money to fix it. If half the town loses power we need cash on hand," explained Falcon.
The water and wastewater funds also saw gains of $185,833 and $48,351 respectively. Currently the city is seeking a Stormwater, Asset Management and Wastewater Program grant from the state. This grant funding will be used to make major infrastructure changes that will bring the city's wastewater system compliant with new restrictions taking effect in the next few years.
"Again, when you look at a $4 million budget, it's a comfortable (amount in these funds)," said Falcon.
Unlike the other funds operated by the city, the city's equipment fund is operating at a deficit. According to the audit, the fund balance has a deficit of $167,623. However, state formulas use by the Department of Treasury are holding the city accountable for $154,093.
The city received a letter from the Department of Treasury dated Oct. 4, requiring the city submit a deficit elimination plan for the fund within 30 days. If the city does not comply, the state would be withholding a portion of the city's Economic Vitality Incentive Program, commonly known as EVIP, payments. The payments would be withheld until the plan was evaluated and certified by the Department of Treasury if the plan was submitted after the due date.
"We really don't have (a plan) completed yet. I can't say by 2016 we'll be out of that debt," said Falcon, noting the city was evaluating it's options which may include dissolving the fund.
Because the equipment fund receives money from other funds when equipment is used, dissolving the fund may help to eliminate the deficit by modifying the way money is distributed between funds. For example, if the snow plow is used on city streets a rental payment is made from the street funds to the equipment fund for that usage. If there is no snow and plows are not used, the equipment fund does not receive revenue for holding equipment.
Despite not having a concrete plan of action, the city commission approved sending a letter to the Department of Treasury during its meeting Monday night which would explain the city is evaluating its options. City staff and the commission believe this letter will fulfill the requirements of the state until a plan can be created.
The city's liabilities to the Municipal Employees' Retirement System, MERS, and Other Post-Employment Benefits, OPEB, were also discussed during the audit.
While the city has $5,990,892 actuarially available for retired employees through MERS, the market value of those assets are only $5,142,604 due to changes in the market. In addition, while the city has been increasing its payments into the MERS system - $62,300 more was paid into the program in 2012 than in 2011 - the ratio funded to unfunded liability has reduced. Currently the city's liability is 51 percent funded, down from 52 percent in 2011 and 53 percent in 2010.
"We're paying them more but out funding percentage is decreasing," said Falcon. "At some point we've got to get that turned around."
OPEB liability, the liability the city has to retired employees for benefits like health care, is also listed in the audit. Annually the city is required to contribute $335,957 to OPEB benefits.
"I feel we still need to offer decent wages and benefits in order to keep good people," said Falcon, adding the city had made cuts to benefits in the last few years.
Overall, Falcon was pleased with the results of the audit despite the deficit in the equipment fund.
"This is a very good audit report. Do we have our deficiencies? Yes, but all our funds are headed in the right direction," she said.