Portola’s City Council members received a review of the city’s audit of the 2008–09 fiscal year at the Dec. 9, meeting and found it good.
With $4 million in reserves, the city is weathering the storms of the current financial climate better than many California cities, but has adopted a “wait and see” attitude toward the future, as the state borrows from cities and counties to meet deficits.
There were no findings during the audit, although auditors Gallina LLP suggested the city review its utility customer policy. Currently, the city, which provides water and sewer service to more than 1,067 customers, allows renters to establish new accounts.
However, when a tenant defaults on an account, the city has no effective means of collecting, the audit pointed out. Because the landlord is not liable, the city cannot place the delinquency on the property tax rolls.
City Manager Jim Murphy said the matter would come under review by the council in the near future.
Murphy also said pensions are another area that cities are reviewing in an effort to cut costs. While it is difficult to take away benefits already in effect, Murphy thought the council might want to consider a new tier for future hiring.
Council member Bill Kennedy expressed concern for the city’s money already in banks, and suggested the funds be split between two banks, with no more than $250,000 FDIC-insured limits in accounts.
Finance Officer Susan Scarlett felt confident all of the city’s money was currently covered, but as an extra precaution, she had already begun taking steps to transfer a portion of the city’s money to Plumas Bank. Council members expressed approval for both the caution and the city’s support of a local bank.
In addition to assuring the public that the city is fiscally responsible in its accounting practices, the yearly audit report also gave city staff, led by Scarlett, an opportunity to give a report on the past year and discuss how the events and projects of that year impacted the city financially.
City management highlighted several areas in its “Discussion and Analysis” and at the top of the list: the bottom line.
‘The assets of the city exceeded its liabilities at the close of the fiscal year by $17,275,166 (net assets). Of that amount, $4,842,087 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.
Management also noted the city’s total net assets increased by $426,655 during the year and that the general fund’s unreserved balance was $3,636,623, amounting to 264 percent of total general fund expenditures.
City finances are split into two basic categories: governmental activities and business enterprises. Government activity includes planning and community development, public safety, streets and roads, public works, and parks and recreation. Business activity includes water, sewer and solid waste services.
Governmental services are paid for by taxes, including property tax portions, gas tax, sales tax, and both state and federal tax dollars. Users of the services pay for business activities.
Governmental activities for the year ending June 30, 2009, reported a $150,598 increase in net assets, and business-type activities reported an increase of $276,057.
Revenue from governmental sources, which includes taxes, licenses and permits, fines, interest, intergovernmental and charges for services, increased by 30 percent over 2008 to $1,876,200.
Management discussion pointed out there was an increase in property taxes at the same time that sales tax revenues decreased. Interest income was down due to lower rates. City leaders attributed the overall increase to Proposition 1B, the Riverwalk TE project and A-15 STIP.
Following suit, expenditures for the year also increased, this by 25 percent, and also due to the Proposition 1B project. Americans with Disabilities Act compliance expenditures at the pool were also cited as the reason for the increased expenses.
The city’s stated financial priorities are: to sustain basic municipal services currently provided; maintain infrastructure while planning for the future; provide for some investment in redevelopment and improve aesthetics; and develop a plan for municipal services with a vision toward “impending growth and tourism.”
Management projected revenues for the 2009–10 General Fund Budget as $1.06 million, compared to the $1.23 million for 2008–09, a decrease of 7 percent.
When all funds are taken into consideration, management projected a 17 percent decrease.
After listing some of the project highlights of the 2008–09 fiscal year (Lake Davis Treatment Plant, Riverwalk Extension, continuation of ADA compliance, Safe Route to School improvements on West Street), city management pinpointed street improvements as the biggest issue facing them.
“The Special Revenue Funds include the gas tax funds where the city receives a portion of highway user taxes. The taxes are intended to fund street rehabilitation, but in reality only help with some street repair and offer some revenue assistance with snow removal.
“As part of the upcoming budget debate at the state, these funds are in jeopardy of being taken from the city and could possibly worsen the condition and our ability to maintain our street infrastructure,” said the report.
City management also expressed concerns about future increased regulatory fees from the state’s various oversight agencies: Integrated Waste Management Board, Regional Water Quality Control Board, Department of Water Resources, Department of Health Services, etc.
“Costs of compliance are passed on to the local entities with no regard for their impact, particularly on small cities,” management complained.
The management report finished its “Discussion and Analysis” with uncertainty—not knowing what revenue might be diverted by the state, or even eliminated. The city council will hear a six-month status report from Scarlett on the current budget in effect at an upcoming January council meeting.
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