City finances causing concern

By Tom Joyce -

Matt Braswell, standing, of the Hickory accounting firm Martin Starnes & Associates, discusses its latest audit for the city of Mount Airy as Commissioner Dean Brown listens.

Typically an annual audit is a routine report with a bunch of numbers which winds up in a file collecting dust — but the latest financial review for Mount Airy could signal the end of an area.

When city officials gathered this past week for a work session to discuss the latest audit and municipal finances in general, strong words were heard along with a sound not unlike that of a bucket hitting the bottom of the well.

It all boils down to a funding crunch now facing the city which had officials not only contemplating a possible increase in property taxes Tuesday, but cuts in services, borrowing money, a hiring freeze, the furloughing of municipal workers for a certain number of days and other strategies to reduce expenses.

“I think we need to start looking at every nickel and dime,” Commissioner Shirley Brinkley said at the work session, which produced no action regarding such measures.

Downward trend seen

Each June when the Mount Airy Board of Commissioners approves its budget for the next fiscal year beginning on July 1, it’s accompanied by earmarking funds from city savings. That money is officially known as the general fund balance available for spending, and also has been referred to as the “surplus.”

This appropriation occurs under a prediction that property taxes and other regular revenue sources will be insufficient to meet city expenses.

Yet every fall — audit time — the municipality usually comes out rosier than thought, actually increasing its reserves, which have hovered around the $12 million mark for the past several years.

Some citizens have complained that this is playing games with taxpayers’ money, giving the false impression Mount Airy is in worse financial shape than it actually is and providing a smoke-screen to offset major tax cuts or other benefits to residents.

Only twice in recent memory has the general fund balance actually dipped, with one of those times during the 2013-2014 fiscal year.

This also was the case for the most recent fiscal year that ended on June 30, which is taking on greater significance due to major financial expenditures now facing the city which hasn’t been the case previously.

General fund reserves decreased during 2015-2016 to $11,645,462, from $12,294,500 at the end of the previous fiscal year on June 30, 2015, a drop of $649,038, according to the audit report by Martin Starnes & Associates.

It is a Hickory accounting firm contracted to audit Mount Airy’s books every year.

Expenses rolled over

Based on information at the budget work session this past week, a total of $3.1 million was appropriated in reserve funds to balance the 2015-2016 budget, about $300,000 of which was actually used.

This contributed to the overall drop in the fund balance, which would had been greater had not several situations unfolded.

One involved the fact that planned capital outlay expenditures (for major building- and equipment-related needs) were rolled over in the last fiscal year. That includes $479,300 in the water and sewer area alone.

Often this is due to delaying construction projects for various reasons, or products or services simply not being received within a specified budget year as planned, officials were advised.

Overall, general fund expenditures were about $2.6 million under budget during 2015-2016, which was reflected across the board among city government operations.

The police department, for example, spent $615,033 less than budgeted, $350,000 of which was due to salaries for positions that were vacant.

City Finance Director Pam Stone explained during the work session that property and sales tax revenues also were higher than anticipated last year.

“We can’t always not spend 2.8 million dollars,” Commissioner Jon Cawley commented after Stone offered those explanations, saying that capital needs will have to be met at some point.

“The roofs are going to have to be fixed,” Cawley said of ongoing maintenance issues.

Concerns for future

Matt Braswell, a representative of the Hickory firm who presented the audit report, said Mount Airy was in good financial shape as of June 30.

“We issued a clean opinion,” he said, which reflects no questionable findings or costs.

“The city of Mount Airy is top-notch,” Braswell told city officials in regard to its financial condition and budgetary controls. “You’re in good shape.”

However, there is concern about how this will play out over the next couple of years.

Not only have major capital needs that were to be paid for during 2015-2016 been carried over to this year, the municipality also is facing other big-ticket expenditures that were prioritized at the workshop.

This includes the redevelopment of the former Spencer’s industrial property now owned by the city, put at $4.5 million to $5 million; a facelift of Market Street nearby, $300,000; and parking lot/drainage improvements at Reeves Community Center, $500,000.

For the present 2016-2017 fiscal year, about $2.5 million was designated from the reserve funds to help balance the books.

When money restricted for a pension fund commitment is applied to the available fund balance reported for last year, $11,645,462, it’s reduced to a net of $11,243,069, according to figures presented by the finance director.

And when other restricted funds are taken into account from the public safety and street maintenance areas, the city’s fund balance will become $8,019,145 if the entire allocation of $2.5 million to balance the budget is used, figures show.

“You’re getting to the point you said you did not want to go below,” City Manager Barbara Jones told the commissioners during the work session.

The board has pledged to use only a limited amount of the savings, down to a level representing 75 percent of Mount Airy’s annual operating budget.

As of last year, this stood at the 96.8 percent mark, down from 108.7 percent the previous year, according to the audit report.

Commissioner Cawley expressed concerns that the city budget is not sustainable, given that it is expected to require more and more money from the reserve funds to balance the spending package that isn’t being funded through regular channels. This includes ongoing costs for city personnel, who received a 3 percent pay raise on July 1 and could be in store for more.

This becomes even more of a problem with the major projects on the city’s table such as the Spencer’s redevelopment.

“I don’t see us taking in enough revenue to cover these things,” Stone said.

Tom Joyce may be reached at 336-415-4693 or on Twitter @Me_Reporter.

Matt Braswell, standing, of the Hickory accounting firm Martin Starnes & Associates, discusses its latest audit for the city of Mount Airy as Commissioner Dean Brown listens. Braswell, standing, of the Hickory accounting firm Martin Starnes & Associates, discusses its latest audit for the city of Mount Airy as Commissioner Dean Brown listens.

By Tom Joyce

comments powered by Disqus