FINANCIAL ANALYSIS DISCUSSION BETWEEN JOHN FRIEND , CPA AND RUSS Lloyd JR, CPA
In speaking about good government, transferring $2.5 million disguised as “In Lieu of Taxes” in December just after paying to the Utility the approximate $2 million the City owed the utility and exceeding the approved budget authorized by the DGLF in the eyes of the public is not good government….especially when those poor State Utility homeowners will have mega utility bills and the Utility is relieved of those funds that would have easily paid the freight…but of course, the General fund would have have been upside down…if we do not take note we may end up like Terre Haute, negative by 5 million or worse, Hammond upside down $30 million…the emphasis is simple, the General Fund is the primary fund running cities, most of their funds are specific, you and I both know this…for God’s sake when towns like Boonville, Mt. Vernon, Darmstadt, Petersburg, Jasper have 2015 expend coverage exceeding 140 days and by 10 a.m on January 2nd, we are broke in the General Fund…and this is not an issue? What is South Bend doing that we are not…Ft. Wayne’s cost per citizen stem to stern is $1,210 and we are $1,877…why, because their per capita General Fund is too low, far better than our’s…if we were operating at Ft. Wayne published levels, our operational costs would be $8 million less..oddly enough, about would our operational funds have been failing short.
I do not agree, good government may not be the political thing to do. Also, I don’t agree you should just look at the General Fund. My analysis will be broader than that and I will use the same Indiana Cities sample you did.
As you know, everything is political…however, please answer one thing…do you or do you not agree that having only $3 per capita funds in the General Fund at January 1st, 2015 is adequate to operate a fund that spends nearly 220k per day as evidenced by the negative General fund balance of $8.6 million as of January 31, 2015….?
I can provide some answers and additional analysis to your analysis at our next meeting. As you know, the Riverboat Gaming Fund has operated under a prior City Council resolution (1996) that moved to preserve those funds for capital projects. I will answer the “Mayors questions” you sent although it appears to be a political campaign document to me.
In regards to the requirements per the pending ordinance that the Police and Fire Pension Funds (referred to as Fiduciary) have their own combined checking accounts together with the Riverboat, Rainy day, Streets & Road Funds (Capital) and all bond funds, combined into their own checking accounts and the remaining funds would default into the existing checking account number 3768, as such, under this ordinary as to be amended to eliminate the transfer clauses whereby the council would NOT interfere with the administration’s day to day financial activity….the administration would just simply request to borrow the necessary amount from the Capital Funds for whatever the time period necessary….the police and fire pension funds together with the debt service funds (Bonds) would be off limits.
Without this ordinance, this council should seriously move for a permanent transfer of the Riverboat and the Local Option Income Tax funds in the amount of $17,500,000…the attached analysis will illustrate why….I have surveyed 15 cities using a per person approach in determining the amount of money in your General Fund per each person at the start of the 2015 year….all the cities are on an equal basis relating to the General Fund, (the fund that operates our Cities) As you know, all cities have their high and low point in the general fund but all start with the same constraints having only two property tax installments one in June and one in December….so after receiving our December 2014 final instalment we have only $307,000 while the little town of Darmstadt has $357,000….Boonville has $578,000 and Mt. Vernon has $$730,000 (SOURCE: Indiana State Board of Accounts and the US Census Bureau) and WOW take a look at South Bend…nearly $29 MILLION…19,000 less people with only $1,739 more income per person and of course nearly 10% of the town not receiving property taxes due to ND & St. Mary Universities exempt status
Per the analysis, the per person amount of money averages $149 (excluding the Metro-Indy Govt due to the size and complexities of the combined city/county govt) while the average per person income in those cities is $22,356….we, on the other hand have only $3 per person and our average per person income is $20,984 or 94% of the average per person income…with only 6% differential in the income levels, why is our per person money in the bank,i.e. General Fund, at the start of 2015 virtually non-existent?….wouldn’t you think that our per person money in the bank (General Fund) would be at least $140 ($149 x 94%) NOT a paltry $3….?
So, if the weight average of the 14 cities from Ft. Wayne to Darmstadt is $149 and we have $3 the difference of $146, in order to bring our General Fund balance to parity is $17,500,000…How did I arrive at this conclusion: the population of Evansville is 120,310 multiplied by the difference of $146($149 minus $3) = $17,565,260 or rounded to $17,500,000…
So, our current Riverboat fund balance is approximately $13 million and our current Local Option Income Tax fund balance is approximately $8 million….a permanent transfer of $11,000,000 from the Riverboat and $7,000,000 from the Local Option Income Tax fund is more than necessary, it is critical to assure our citizens that their tax dollars will be used for the intended purpose collected, i.e. safety and properly maintained infrastructure, etc…Simply stated, you do not have any Riverboat funds nor Local Income Tax fund….they have been spent because if those funds were NOT in the same checking account as that of the General Fund the administration would be papering the entire city with bad checks as noted in the January 31, 2015 city financial statement where you will find that the General Fund is NEGATIVE by $8.6 MILLION and you have five months to go before you receive the first property tax installment? And, one more note, since the administration does not show expenditures in the General Fund until the actual check is cut would it be fair to say that if all of the bills were paid as they should have been in the amount of $5.1 million as of the end of the 2014 year. The General Fund one year ago January of 2014 was NEGATIVE by $5.9 MILLION an increase in negativity of 2.7 MILLION from 2014 to 2015…this is evidence that bills were delayed in 2014 and paid in January of 2015…but, what really concerns me is the fact that 2.5 MILLION of water utility ratepayers’ money was transferred from the water dept to the General Fund without any NOTIFICATION to the fiscal body, i.e. the Council…as it would seem, not only did the administration apparently manipulate the payment of our bills to the tune of 2.7 million but without authority transferred 2.5 million out of the utility into the General Fund…so, if these accounting maneuvers were not done the General Fund balance at the beginning of the year would have been NEGATIVE FOR THE FIRST TIME IN THE CITY’S HISTORY by nearly $5 MILLION DOLLARS. These year end transactions are evidence of spending issues especially when you were required to pay back the Utility nearly $2 million in December just to turn around and over charge the ratepayer $2.5 million disguised as property taxes (In Lieu of Taxes) originally budgeted at $3.1 million and according to your Year End 2014 yellow book report the amount clearly indicates $5.6 million….and the Mayor says that he spent $5 million less then the Council budgeted for 2014…yes he did, BUT HE FAILED TO MENTION THAT HE NEGLECTED TO COLLECT $11 MILLION AND THIS INCLUDES THE UTILITY TRANSFER OF THE $2.5 MILLION…SO, BACKING OUT THE OVER CHARGING FROM THE UTILITY TO THE GENERAL FUND, THE UNCOLLECTED REVENUE WOULD HAVE BEEN $13.5 MILLION OR OVER-SPENDING OF $8.5 MILLION but it you include the unpaid bill issue of $2.7 million the over spending amount is $11.2 MILLION.
So, the choice should be simply, does this council (THE FISCAL BODY) desires to demand better CASH MANAGEMENT (remember those 4b quarterly this council has never seen) and the Formal Spending Plan (as advised by your CPA firm Umbaugh, namely Dan Hedden) or do we simply ignore that realities of the situation and should this Council ignore the realities not one of us should be re-elected that ignores this critical situation.
For your review as well, I have attached the changes in fund balances (evidence of spending more than you receive) each year 2012, 2013, & 2014…please note the yellow lines…per your definition, these represent the operational funds of the city…the grand total of declines in CASH in those operational funds which includes the General and Park Funds were nearly $22 MILLION over the three year period or simply put over $800 per every hour of the day! But, I have concluded that the operational funds deficit spending is understated by $5 million resulting in over spending by over $12 million which sustained my premise during the 2014 budget hearings that at least $12 million should have been cut…and note not in the Riverboat and/or the Local Option Income Tax, but in the operational funds.
In summary, if you have issues with the loan approach to the ordinary, I will move for the permeant transfer of funds to the General Fund …. but this does not address the Park/Rec situation were the combined Park/Golf/Sport funds are NEGATIVE by $355,000 where those fund balances were nearly $4 MILLION when Mayor Winnecke took office AND DOES NOT RESOLVE THE OVER SPENDING SITUATION…the transfer just keeps politians from thinking we have reserve funds available to do more public projects like the dog park.
I have attached some questions that need to be addressed.
Thank you for your time on this very important issue…
EDITORS FOOTNOTE: THIS E-MAIL EXCHANGE WAS BETWEEN JOHN FREIND AND CITY CONTROLLER RUSS LlOYD, JR AND WAS POSTED BY THE CCO WITHOUT EDITING.
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