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Rushford gets clean audit, still waiting on FEMA funding

By Kirsten Zoellner

Fri, Jun 28th, 2013
Posted in Rushford All

Independent auditing firm Smith, Schafer and Associates has reviewed the city’s finances and accounting and found no issues with Minnesota legal compliance. However, there were three areas noted that the city needed to address. Tom Wente, principal, was on hand at the most recent council meeting to discuss the matter in depth.

Last year’s glaring issue of FEMA reimbursements is not yet completed, but drawing to a hopeful close. Collections from FEMA totaled $845,723 in 2012. BDM Engineers have estimated that FEMA must still reimburse the city for several items, the largest of which is the Capital Improvement Fund repayment of $551,487. “It’ll make a significant impact,” noted Wente.

The city has been diligent about keeping on top of tracking the FEMA payments and what is owed. “They’re not disputing the numbers anymore,” noted City Administrator Steve Sarvi. “This is going to be the year to push to get it done.” Even without the FEMA funds, the Capital Improvement Fund increased by $157,270 in 2012.

The biggest issue for this year is rebuilding the city’s General Fund. “Given the uncertainty of state funding, the ongoing costs of flood recovery, the need to plan for the future and to be prepared for any future contingencies, we believe it is important for the city to rebuild this fund balance.”

“With the receipt of outstanding FEMA reimbursements, the completion of large restoration projects, and the implementation of appropriate utility rate charges, the fund balances will begin to be restored to a more appropriate balance, with the goal being 30-50 percent to meet the city’s fund balance policy.”

The fund is low, but it’s an improvement,” noted Wente.

Two Interfund amounts are also an issue. The largest is the Sewer Enterprise Fund, which saw an advance of $200,000 from the General Fund Reserves in 2010.

“It’s going to take a long time to dig out of that hole,” added Wente. “It’s the only big issue at this point. With the chaos after the flood, I would have anticipated FEMA paying a lot more.”

The city intends to make a case to FEMA for further assistance with the sewer upgrades. “It wasn’t identified back then,” noted Sarvi, speaking to why the Highway 43 Project hasn’t received FEMA funding. “If the numbers are right, we’ll go to the mat. If not, I’m not sure how much we should push,” added Sarvi.

The other lingering issue is the deficit in the Liquor Fund, which remains after the closing of the Municipal Liquor Store in 2011. An advance of $166,042 was made to the Liquor Fund from the General Fund Reserves.

“When FEMA funds are finally collected in the Liquor Fund, all payables can be liquidated other than the $166,042 owed to the general fund. This deficit and any additional liquor store fund expenses in 2013 will need to be addressed when fund is closed out,” noted Wente.

The city is looking at many options for clearing the remaining liquor store deficit. One option for clearing the debt would be to sell the building to the EDA (Economic Development Authority). Since the EDA is a city entity, the city would not be penalized by FEMA restrictions requiring the facility remain in city ownership.

Having the deficit in any enterprise fund can be an ongoing issue, with long-term effect, for the city if it is not resolved. “We need to sit down and come up with a strategy for each of these funds,” suggested Sarvi.

The city is now sitting at 57 percent of funding coming from general property taxes. “Our piece of the pie is growing. At the same time, the pie is growing. It’s having a doubling impact on taxes,” said Wente. Local Government Aid to the city is expected to increase to $584,269 in 2014.

On a brighter note, Wente declared the EDA loan fund a ‘real positive’ to expand the tax base. The city’s 202 EDA Fund is substantial, especially compared to other municipalities. Cash received from Business Flood lands is being transferred to the city’s EDA Revolving Loan Fund and the fund is continuing its growth.

The city is also preparing for 2014 budget planning and levy certification to the county. Starting much earlier than in 2012, the city council has determined that Mayor Chris Hallum and Councilor Roger Colbenson will sit on a budget subcommittee and work with staff to be more proactive in laying out the plans for 2014 in an effort to preserve cost savings.

The city saw no levy increase in 2012. “We’ve done a good job at lowering expenditures and continuing services,” said Councilor Mark Honsey. “But, I realize at some point, the slide can only go so far.”

Mayor Hallum agreed. “We’ve done a good job of keeping this slow and steady without drastic changes.”

Looking to determine a reasonable target to shoot for in budget planning, the council has asked city staff to attempt to keep operating expenses at a two percent increase or less. At the same time, they will aim for keeping the levy at a zero percent increase, hoping to ride the increased LGA funding. The budget subcommittee and city staff will begin working on the budget in early July, getting the information to department heads as soon as possible. They will return their findings to the council.

The next regularly scheduled council meeting is Monday, July 8, at 6:30 pm, at city hall. The public is encouraged to attend.

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