City audit spotlights areas of concern

High debt burden, low asset totals seen as troublesome

Financially, the city of Lawrence is in the same boat as many Americans: It needs to watch its rising debt levels and be more diligent in how it tracks some of its spending.

Those were the main conclusions in a new report put together by the city’s recently hired performance auditor, who found the city’s financial condition was still generally good but had worsened in the past five years.

“If you read newspapers from across the country, that is the story everywhere,” said Michael Eglinski, the city’s new performance auditor who was hired in February to help find efficiencies in City Hall. “You don’t see any cities rolling in cash. It’s all about how they’re going to close budget gaps.”

In Lawrence, however, some specific issues merit attention, the report found.

Lawrence’s debt burden is higher than the median for 10 other university communities with demographics similar to Lawrence. But despite the higher-than-average debt levels, the city’s asset totals are not growing rapidly.

Normally, higher debt levels would lead to higher asset totals because the money a city borrows generally is used to build roads, buildings, water mains and other structures that would increase the city’s asset totals. Why Lawrence’s ratio is somewhat off-kilter is a question city leaders should examine more closely, Eglinski said.

“Debt is not bad if you are issuing it to get what you need,” Eglinski said. “But you want to avoid the classic trap of putting groceries on your credit card.”

The report stopped short of saying that is what’s happening – that the city is issuing debt for items that don’t last as long as the debt payments do. But city leaders have acknowledged that has happened some. The city previously has issued some debt to do street maintenance – such as repaving – that likely will need to be redone before the city has paid off the debt.

“I think we’re going to have to dig a little deeper on that issue,” City Commissioner Rob Chestnut said of the debt issues.

City Manager David Corliss said the city in the past two years had cut down on the practice of debt-financing street maintenance operations but wasn’t yet in a position to entirely eliminate the practice.

“We have difficult choices,” Corliss said. “If we don’t have the will to raise property taxes to maintain a street, how else are we going to maintain it?”

The report also found that more detailed documentation should be provided on how the city spends money generated by water, sewer and other user fees. In 2006, the city transferred $2.1 million from user fee funds to the city’s general operating fund. In 2007, that amount grew to $4.2 million. Eglinski said the explanation for the large increase wasn’t well documented.

Corliss said some of the increase did go to street maintenance activities. For example, the repaving of Massachusetts Street was paid for largely by water fees. Corliss said that was justified because the street pavement previously had been torn up by a waterline replacement project.

Corliss, though, said he agreed with the basic recommendations of the audit.

“I don’t think the report had any surprises, but we appreciate the independent analysis,” Corliss said. “It confirms a number of things that we need to more vigorously monitor.”

Unlike other city employees, Eglinski does not work for Corliss. The city auditor position reports directly to the City Commission.

Commissioners will review details of the report at their 6:35 p.m. meeting on Tuesday at City Hall, Sixth and Massachusetts streets.