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Public Works/Administration Minutes 1997 09-02-97 UNITED CITY OF YORKVILLE Committee Minutes - Special Administration & Public Works Date of Meeting: September 2, 1997 Time Convened: 6:10 P.M. Location: 111 W. Fox Time Adjourned: 9:25 P.M. Attendees: Mayor Bob Johnson Kathy Jones Art Prochaska Jeff Spang Jim Nanninga Paul Stepusin J.T. Johnson Richard Sticka Larry Kot Joe Wywrot Richard Scheffrahn Tom Sowinski Jerry Lynch Discussion: 1. ) Presentation of 96-97 Audit - There were a lot of changes made on the finances. Funds were combined, so there were also a lot of funds that collapsed. The City is being honest on where the money is. There was about a 65 percent increase in equity this year over last year. Debt service is at about $304,000. There needs to be something to fund the debt service. The City was basically only borrowing to pay because there it nothing dedicated to repay. Debt is down $130,000. The City has done some cleaning up. Right now we owe the debt service about $400,000. It does look better than last year. General fund looks much healthier, but debt service does not. Capital projects have improved. The City transfers money to pay the debt service. Stepusin does not want to mislead anyone. Stepusin can not compare to last year because of the collapse of funds. The City does not have direct mechanisms in place to fund so there is a build up over time. On the loan with the County, when the City received funds the county gets paid first. If the City collect over and beyond the amount, then the City is obligated to pay the County first. Spang thought that when the City redid the loan that clause was taken out. Stepusin said that most Counties are set up that way. The loan was redone and combined with another loan to get a lower interest rate. Stepusin said that the City is in the middle of the road. We are not real good but we are not real bad either. We have improved over last year. The City did a good job budgeting on the positive sides of both the revenues and expenditures. We spent almost all the money budgeted. Most towns spend 90-95 percent of their budget. This is ok as long as we know that is where we are going to be. Are we going to have that cash? If the budget goes over it would have to be changed and voted on. Great job of budgeting. Proprietary funds are positive $130,000. Water and sewer made $130,000. This is improving. Funds are making money. There will be some major changes to the way the paper work is done in the year i Special Administration/Public Works Page 2 2000. The accountants have to follow the guidelines. Stepusin wanted to inform the City that this will probably happen. More of the debt service will have to be carried in the general fund. There will be more confusion when the new guidelines are effective. New guidelines will include fixed assets. The scrutiny of detail is much lower now than they will want. The guidelines will request fixed assets and depreciation. Historical cost on fixed assets. The City can hire a firm to do the assets. A lot of smaller and larger end clients do not have asset files. Most of the medium sized firms do. Stepusin does not know if they will be able to give the City a clean opinion of the general fund without an asset ledger. It is similar to industrial accounting. The fund that purchased the asset will show equity but then it wipes out the equity. The City needs to find out where they are with the assets because that could change things substantially one way or another. Fixed assets are things like property, streets, curb, gutters, water mains, etc. Stepusin said that most do not include streets, curbs, and gutters. Stepusin said as time goes on they will start advising us what to do. When a bank loans money they look at the strength of the general fund. The City needs more steady sources of revenue. Over all there is still some clean up that needs to be done for quality control. This is a draft. Final copy will be presented in two or three weeks. The audit went smoothly. The records are improving. Stepusin feels that when the City pay the bills for the month the cash supply is low. If you are able to carry over too much money each year then taxes are too high and they would have to be lowered. Some communities have three years worth of living expenses in the general fund. The Cities carry over amount is low enough that we do not need to worry about it. The City has a lot of anticipated growth and income with permit fees. Sewer maintenance shows a positive number, before it showed a negative number. Sewer maintenance owed $149,000 but do not have enough money to give that fund. Only has $13,000 in it now. Interfund borrowing - You can have equity without the actual money being there. Can spend it but would have to borrow it from somewhere else to write the check. We spent $45,000 more than we took in but it was planed that way. Nanninga did not plan it that way this year. The City still needs to continue to improve. All the cost associated with a fund may not be paid from that fund. Hook on fees from last year were $122,000. If we do not get that amount from hook on fees this year then we need to make sure we get enough money to cover the debt service. $23,000 in administration cost means non-sale purchase of water. Trucks were purchased from the general fund. Library is not based on cash. $94,000 in investments. Part of that might the building expansion fund. What is left over money. Stepusin says that if you look for money that was left over there was not any. The debt service owes almost $500,000. Just because you make money, it does not mean that it actual cash. Cash went up about $50,000 from last year. The $190,000 is equity. Not all of the receivables have been received. This receivable is going to come in this year, fiscal of 1998. It is on an accrual basis, not a cash basis. The accountants can do a cash statement. That would give the Special Administration/Public Works Page 3 City an actual cash amount. In Stepusins opinion the City does not have any excess. We have anticipated ending the year with $70,000. The City needs to decide how much equity it wants to keep. Stepusin recommends at looking at keeping three months worth of expenses. Equity is ok but cash is not. We need to decide if we are going to spend down the equity or not. We need to decide what account can be forgiven. You really do not want to leave the Municipal Building fund with no money in it when you plan on spending money from that fund. Prochaska is concerned with the cash flow problem. We really need to take a look at this. The default on the computer is interfund. In the past capital projects that we did, we did not have the money to do. That is how we got in trouble with interfund borrow. The City really did not have the cash to repay. Prochaska would like to decide what funds can be forgiven. He does not want to end up in a cash flow problem. Actual cash at end of year is $108,000. 2. ) State and Spring Streets Improvements - All of the MFT funds have been spent for this year. The $102,000 would have to come from the general fund. Prochaska would like to know what the actual cash amount is in the general fund. J.T. would like to know if there is a set amount of cash in the general fund can he get started ordering stuff that will be needed to do these street projects? The budget will have to be changed. There will need to be a public hearing and it will have to be voted on. The bid can not be awarded until the budget has been changed. Spang said if it does not disturb the overlay he is all for it. J.T. said it would be better. Spang also said he is not comfortable with spending the money from the general fund after hearing the audit report. Mayor Johnson said he is committed to doing these streets. Nanninga feels we should spend the money on these streets. Lynch feels we should do the streets. Kot feels we should do Colonial Parkway and Spring. J.T. wants to get started on Spring. He has permission from the property owners. J.T. is hoping to have an answer by COW on Thursday. Colonial is scheduled for extensive work in the year 2000. Spring is a major collector road. If we spend the money from the general fund then we will be reducing the equity. Scheffrahn said that reducing the equity was helpful in getting the City in the bind it is in. Prochaska wants to know where we stand with cash in the general fund. He is also concerned that if the City inherits the old courthouse that we will have to have cash to do the renovations. There is not any money in the municipal building fund. The water fund owes the municipal building fund $201,000. Scheffrahn said he is ok with spending half the money but not the whole $102,000. Go ahead with State. Get bids for Spring Street and do repairs next spring. Minutes by: Mollie Anderson