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City taking steps to reduce negative cash flow

By: Stephanie Dumm News Messenger Reporter
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Heeding a warning given by an auditor last April, the city has taken steps to reduce its negative cash flow, according to Lincoln Assistant City Manager Anna Jatczak. Ingrid Sheipline, a certified public accountant with the city’s consulting auditor, Richardson and Company, presented a review of the city’s finances during a City Council meeting last April 5, according to previous News Messenger reports. Sheipline told the city that it could continue to operate for the following year, “but to go past that would need to increase funds with a positive balance so they exceeded funds with a negative balance,” according to previous News Messenger reports. “She said if the situation changed where positive cash would not cover negative cash, then we would have a problem meeting our cash-flow needs,” Jatczak said. “What she said was should that occur and if we did not take steps to address the structural deficit and decrease in fund balances, she would consider issuing a statement of going concern, which said the city may or may not have enough money to cover 12 to 18 months of operation.” In response to Sheipline’s comments, Jatczak said the city took steps to reduce expenditures for this fiscal year’s budget “because we have very little control over revenues.” The city’s total operating budget for this fiscal year is $46.2 million and the General Fund’s budget is $10.7 million, according to previous News Messenger reports. “One of the other things that we did do with respect to bettering our financial position was in addition to the number of layoffs we implemented last year, we also significantly reduced the Capital Improvement Program in order to maintain our healthy, positive fund balance,” Jatczak said. Jatczak said those layoffs were for seven police officers, one community service officer, two firefighters and one fire captain, and the city was directed until Jan. 2012 to implement those layoffs. Those layoffs have since been postponed to the end of this month. “In addition, we saved money by not filling certain positions, like the library services director, and reducing some full-time staff to part time,” Jatczak said. Budgeted General Fund expenditures went from $12.6 million in 2010-2011 to $10.7 million in 2011-2012, according to Jatczak. The Capital Improvement Program are “projects to improve current infrastructure,” according to Jatczak. “For 2011-2012, our Capital Improvement budget was $5.6 million, and in the previous year, it was $11.5 million,” Jatczak said. “We are really looking at focusing capital improvement monies on our highest-priority projects.” The funds that currently have negative balances are the airport fund and public facilities element fund, Jatczak said. Funds with positive balances include garbage, water, landscape and lighting and the General Fund. When asked by The News Messenger for the amount of negative fund balance the city currently has, Jatczak said, “We won’t know that until we close the books and have the audit done.” “Until all of the adjustments are made, we will not know our true financial position,” Jatczak said. “When the audit is completed, we will have a better understanding of our negative versus positive cash fund balances.” Jatczak said the audit is scheduled to begin in March. Sheipline also recommended that the city “establish a plan to eliminate the need for each of these funds to continue using financing in the form of inter-fund borrowings,” according to previous News Messenger reports. If one fund has a negative fund balance “at the end of the year,” City Manager Jim Estep said, “we pull money from another fund.” “We borrow on a temporary basis,” Estep said. “If we don’t have enough money in funds to cover that, you are sunk. That’s where we would be heading if we didn’t take care of that.” Estep said the fiscal sustainability committee (FSC) is currently analyzing all of the city’s funds, in response to Sheipline’s recommendation to eliminate inter-fund borrowing. “They are analyzing everything from the outside to verify our position and develop a strategy. That was part of what Ingrid has asked,” Estep said. “We are balancing the General Fund budget, we have revenue matching expenditures and have the FSC looking at all funds and pulling them together so we’ll have a plan for the future.” City staff is currently researching how to eliminate lifetime health benefits for council members, according to Jatczak. “What we are trying to do is validate with CalPERS what it is that we can do and what we can’t do in respect to those health benefits,” Jatczak said. A date to bring that information forward to the council has not been scheduled, according to Jatczak.