Financial advisor Michael Bubany of David Drown Associates, Inc., attended the Wednesday, February 10, Canton City Council meeting to discuss refinancing bonds for the city’s two outstanding USDA loans of 2005.
Bubany explained that the funds were borrowed for the city’s wastewater treatment plant. The loans were issued at an interest rate of 4.25% and currently have $346,500 in outstanding principal.
Bubany said he had been reviewing many loans for the cities he serves, but the outstanding principal, in the larger picture, isn’t that high, so significant savings would only be realized if the city could find a bank willing to refinance the loan.
“If the city were going to do this, we would want to do a bank placement,” he reiterated. “Interest rates are important, but for smaller principal amounts, the issuance expenses come into play and cut into any potential savings.”
Bubany said he was then contacted by a local bank, looking for investment opportunities and he thought of Canton and the potential for savings. In discussion with City Clerk Brock Bergey, the two decided Bergey should first approach First Southeast Bank to see if it would be interested.
The local bank came back with a proposal for a 2.2% fixed interest rate on a 25-year loan.
“With that low interest rate, the savings are pretty significant,” Bubany told the council. “The city should see a savings of $92,000, over the course of 25 years, after the issuance rates are deducted. What First Southeast Bank is offering you is very fair.”
Because of the investment, and the lower interest rate, Bubany said the bank did ask that the city not prepay the loan until at least the year 2030.
After the council approved the resolution to refinance the loans, Bubany explained that the closing would be conducted on March 1 and funds would be transferred to the USDA to pay off those loans.
Bergey highlighted new reports he is creating for the board to explain and track the city’s budget and all of the city funds. He said he is working to improve transparency with both the council and the Canton residents.
As he reviewed the 2020 budget and expenditures, he noted the city had gone slightly over budget, by 1%.
“We are accountable to the tax payer,” he said. “I’m proud to say we kept close to our budget.”
Councilman Carl Ernst interjected, “We had a lot of expenses last year – including legal fees, a street project – I think, even by going over, it’s still a win.”
Bergey then reviewed all the individual funds, including sewer, water and garbage.
“When looking at the sewer and water funds, the good news is that our budget forecast held true and you can see, by these numbers, that our rate increase was justified by our year-end numbers,” Bergey said. “We were clearly not charging enough last year, based on those shortfalls.”
The garbage service, contracted to an outside provider, breaks even, he pointed out. The city pays the contract, but bills those costs to the city residents.
In water and sewer, the base rate is the guaranteed money for the city as the usage rate can be more unpredictable. Had the city not changed the base rate, in 2020, the usage rate would have needed to be much higher as many citizens in Canton use less than 1,000 gallons a month, Bergey explained.
“We want people to understand why this had to happen,” he said and noted that once the new accounting software and his financial reports are updated, they will be available for viewing on the city’s website.
New accounting software
Over the past several months, the city has been working to transition to the new Banyon accounting system. Bergey demonstrated the city utility billing process with the former accounting software and the new Banyon system.
“Billing and reporting is much more efficient and comprehensive with the new software,” he said. “What used to take four days, now takes minutes.”
The Banyon software is a three component system that can be used for utility billing, payroll and fund accounting. The three areas also communicate with each other and reduces redundant data entry. This also reduces the possibility of human error, Bergey pointed out.
With the new system, the city will also be adding the option for online and automatic utility payments in the near future.
In another effort to be upfront with the council and citizens, Bergey also pointed out that he has exceeded his allotted hours for the past three pay periods.
“I want to be transparent and accountable,” he said. “I have gone over considerably, but I have outlined the extra responsibilities that have caused this to happen.”
Bergey outlined that the end of year and beginning of year financial reports typically create a busier time in a normal year. This was exacerbated by several other projects happening all at once, including training of the new deputy clerk, year-end financial reporting, pay equity reporting, audit preparations, the transition to a new payroll system and the transition to a new utility billing system.
Because of those extra hours, Bergey noted that he has already used 18% of his budgeted payroll.
“I don’t want there to be a question, especially with the deputy clerk now on staff, how it happened,” he added.
Bergey noted he would be willing to work less hours a week, going forward, to keep his payroll within budget, but the council did not think that would be a necessary step.
No action was taken on the matter, but Bergey again stressed that he did not want the council to be surprised at the end of the year when his payroll figures were higher than budgeted.
Pay equity report
Bergey presented the pay equity report for council approval, based on 2020. He explained this report is filed by cities once every three years to make sure male and female employees are being paid fairly based on job responsibilities, years of employment and experience.
Last year, the city had three male employees and no female employees, therefore, Bergey said, he does not anticipate any concerns regarding the pay equity. In the future, the report will include at least one female, Barb Kerns, who was hired as deputy clerk.
It was also noted, these reports were not done properly and were not filed appropriately by the former city clerk.
“The good news is, there doesn’t seem to be any severe consequence for that and we don’t want to dwell on that. We will just work to remedy that going forward,” Bergey said.
After the council approved the report, Councilman Charlie Warner added his gratitude for Bergey as he continually works to “straighten things out” and for the other city staff who work so hard for the citizens of Canton.
Bergey noted those citizens with pets should get a pet license at city hall. The licenses are $6 and are necessary to promote public safety.
Both Jon Nordsving and Jim Davis were commended on their response to recent snow events, removing snow to keep city streets open and safe.
Kerns, as the new deputy clerk, was complimented on how well she learned new tasks and helped with the transition to the new accounting software.
The city approved a 10-year contract with Maguire Iron for cleaning and inspecting the city water tower. The company comes every other year for a cost of $1,850.
The next meeting of the Canton City Council will be held on Wednesday, March 10, at 6 p.m. at the Canton Town Hall.