City auditor has good news

Lincoln can continue financially for next year
By: Stephanie Dumm News Messenger Reporter
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Cost cutting by the city has led to the city?s ability to continue financially for the next year, according to the city of Lincoln ?s auditor. Ingrid Sheipline, a certified public accountant for city auditor Richardson and Company, presented Lincoln?s 2011 audit to City Council on Tuesday night. The audit was for the 2010-11 fiscal year. Observations given by Sheipline were that the ?city?s financial condition is strained,? that there has been ?significant inter-fund borrowing and inter-fund loans,? and that ?accounting staff are being hired to address some of the findings we had? from the previous year. There was a reported $17.4 million deficit for the city?s unassigned and unrestricted funds, with the city?s solid waste, water and general funds the only ones showing a positive balance, according to Sheipline. ?Overall, there is a net decrease or net loss for all city funds of $300,000,? Sheipline said. Total inter-fund borrowing and loans by the city equal $45.6 million as of June 30, 2011, according to Sheipline. Sheipline said inter-fund borrowings ?increased in 2006 and 2007,? with a slight decrease in inter-fund borrowing from 2010 to 2011. ?Negative cash balances resulted in certain funds expending more than they had in available cash,? Sheipline said. ?Part of the issue the city needs to address is replenishing the cash and repaying these loans.? ?One new footnote in the financial statements is it contains a new disclosure about the financial condition of the city,? Sheipline said. Sheipline said the footnote includes that it is projected that there will be a General Fund deficit by fiscal year 2013-2014, but did not say how much that deficit would be. She also said the footnote ?discusses that management has done a lot of cost-cutting measures over a number of years.? ?Based on our evaluation of various factors, we?ve concluded the city can continue operation from one year of the balance sheet date,? Sheipline said. That?s a contrast from last year?s audit report in which Sheipline told City Council that the city could continue to operate for the following year but the city?s finances would need to be revisited the next year, according to previous News Messenger reports. She also said last year that the city would need to develop a plan to repay inter-fund loans eliminate ?using financing in the form of inter-fund borrowings.? Mayor Spencer Short called Tuesday?s report ?accurate.? ?A plan needs to address eliminating the deficit fund balance, most of which are Public Facility Elements,? Short said. ?We do have development projects at least somewhat on the horizon.? Councilman Stan Nader asked Short if the council could receive ?a quarterly report from staff as to the progress of correcting findings.? Short said ?staffing is not enough? to provide a quarterly report. ?This list of findings, some are fairly simple and others are more complex,? Short said. ?As long as they are continuing to check them off, annual reporting is where it should stay.? Lincoln City Manager Jim Estep suggested that city staff could bring completed findings back to the council as they come. In other city news, the city?s labor negotiator Larry Menthe presented a tentative labor agreement agreed to between the city and the eight-member Lincoln Police and Fire Mid-Management/Supervisory Bargaining unit. The members of that unit will now pay the entire 9 percent employee share of their CalPERS contribution, totaling $77,934 annually; 20 percent of their healthcare costs, totaling $24,578 annually; and no longer receive merit increases, state disability insurance contribution repayment, no cost-of-living adjustment and no pay increases, totaling $173,950 annually. ?I think it?s important we acknowledge the willingness in the long-run for this particular group to join with us during tough economic times,? Menthe said. ?This is a positive step forward.? Lincoln resident, and fiscal sustainability committee compensation subcommittee chair Richard MacKirdy, addressed the council on the contract changes. ?I?d like to congratulate management for the progress they?ve made on negotiating for more reasonable compensation packages,? MacKirdy said. ?Well all understand that the benefits they?ve been promised in the past can no longer be afforded.? MacKirdy also said that there was ?good news? in that ?future employees will have more reasonable compensation packages.? ?The bad news is you still have a lot of budget issues that were not addressed in this report,? MacKirdy said. Short spoke before the contract changes were approved, saying that ?compensation packages are based on market comparisons.? ?I?ve stated over and over, this is a significant step toward where we want to be and where all public agencies are going because of financial realities,? Short said. ?Again, I want to thank members of this group for stepping forward and working with us and renegotiating contracts, making them financially prudent so we can continue to provide services.? City Council also received an update on work done by city staff to analyze ?the best method in which to evaluate franchising the city?s solid waste collection,? according to public services director Mark Miller. Miller said staff was directed by the council on April 24 to evaluate three areas: ?rate comparison between outsourcing versus in-house operation; validation of franchise fees and legal analysis of what can be done with the collected fees; and the city of Hemet?s experience as a city having recently franchised its solid waste services.? Franchising solid waste was a recommendation made by the fiscal sustainability committee. Miler said the rate comparison study is still being done. ?The city attorney has begun review of the legal issues regarding franchise fees and, in his preliminary review, there appears to be direct applicability to General Fund revenue,? Miller said. ?Regarding the city of Hemet, we continue to monitor that process.? Miller said staff has also ?looked at other cities that have franchised to bring back a more complete picture of what?s out there.? ?As the next step, a logical move for the city would be to send an RFP (request for proposal) for consultant services to help us fully evaluate that,? Miller said. Councilman Tom Cosgrove said he ?fully supports moving ahead.? ?The only way we are going to work through this is to go through the process,? Cosgrove said. Councilman Paul Joiner said the information presented by Miller ?is in line with my expectations.? ?I?m fully supportive of moving forward and exploring it fully,? Joiner said. Short said he would like to see ?asking the public to vote that franchise funds be used as a General Fund support.? ?I am very skeptical of this as a windfall. A big part of what we are charged to do is provide services with low rates,? Short said. ?I want our citizens to have a voice at the ballot box to make a choice here.? Short also discussed wanting to move the Placer County Fairgrounds from Roseville to Lincoln. ?Over the last couple of months, I?ve had the opportunity to speak with Roseville city employees,? Short said. ?There is a desire to remove the fairgrounds from Roseville.? Short said he would ?like to ask the county for support of the idea of placing the fairgrounds in Lincoln.? In addition to relocating the fairgrounds and racetrack, Short said he would like to have the rodeo grounds relocated near the airport. Short said he would like to have a letter of support issued by the council to the county. He asked that it be on a future City Council consent agenda.