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Archive for Sunday, October 7, 2012

Auditor: City passes financial checkup

Lawrence in good shape compared with similar communities

October 7, 2012

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Peer cities

Here are the 15 peer cities Lawrence was compared with in the 2011 Financial Indicators Audit: Iowa City; Bellingham, Wash.; Norman, Okla.; Missoula, Mont.; Bloomington, Ind.; Charlottesville, Va.; Chico, Calif.; DeKalb, Ill.; St. Cloud, Minn.; Auburn, Ala.; Corvallis, Ore.; Davis, Calif.; Morgantown, W.Va.; State College, Pa.; Grand Forks, N.D.

It’s time to get out the tongue depressor and poke and prod the city of Lawrence’s checkbook.

Once a year, Lawrence City Auditor Michael Eglinski puts the city’s finances through a series of tests and examinations. It is not the city’s official certified-public-accountant type of audit, which generally produces a mass of technical jargon and figures.

Instead, Eglinski’s report compares Lawrence’s finances with a host of other similarly sized university communities across the country.

“I view this report a little bit like the checkup you get at the doctor’s office,” Eglinski said. “You get some advice to exercise a little more and watch what you eat.”

But Eglinski said that all in all, his review of the city’s 2011 finances indicates the patient is in pretty decent health.

“When I talk to my colleagues, I think they are envious of the situation we have here,” Eglinski said. “Nationwide, there are some communities that are doing terrible. They’re talking about bankruptcy and large layoffs. We’re not having those type of discussions.”

But, hey, no doctor ever lets you off that easy. So, yes, there are some signs that Lawrence could stand to eat a few more vegetables and little less candy in a few areas. Here’s a look at some of the major findings of the city’s 2011 Financial Indicators Audit:

• Lawrence is in a stronger position to maintain its government services than many other communities. Eglinski creates a ratio of Lawrence’s revenue and assets versus its expenses and found that Lawrence’s ratio is about four times higher than the median of Lawrence’s 15 peer communities.

If providing quality service is the core function of local government, then this is kind of like hearing that your ticker is still strong. Eglinski said the three new sales taxes approved by voters in 2008, plus relatively flat budget expenditure during the last several years, are the main factors in Lawrence’s stronger-than-average position.

Lawrence’s ratio, however, is lower than it was in 2007 before the recession began.

• The city has its own version of a pension problem. State law requires the city to offer health insurance to retired city employees until age 65. Like many cities, Lawrence agrees to pay for a portion of their health insurance premiums. The new report notes the city’s current and future obligations when it comes to retiree health care are growing rapidly.

The most recent analysis estimates the city’s obligation will grow from $1 million in 2010 to $3.5 million in 2012.

The news didn’t catch city leaders by surprise. City Manager David Corliss said he’s identified the issue as one that needs significant attention in the future.

“We’re on the way to having $2 out of every $10 we spend on health care being spent on retiree health care,” Corliss said. “That is probably not sustainable.”

The solution may be a change in diet, so to speak. The state requires the city make its health plan open to city retirees, but it does not mandate how much the city must contribute to the retirees health care premiums. Whether the city should contribute less or whether details of the plan should change may be a discussion on the horizon.

“It is going to be painful,” City Commissioner Hugh Carter said. “There is no easy fix, but it probably will be more painful the longer we wait.”

• The amount Lawrence spends, borrows and collects per resident has remained fairly stable or declined over the years — kind of. Once adjusted for inflation, Lawrence’s per capita amount of debt is actually down from 2003 levels. In 2003, the city had $886 in debt per capita. In 2011, the amount had shrunk to $614, in 2003 dollars. Total revenue per capita was $761 in 2003 versus $731 in 2011. Total spending per capita was $922 per capita in 2003 and $760 in 2011.

But there is a caveat to all of this. The city and the Census Bureau don’t agree on how many people live in the city. The city believes its population is about 6 percent larger than the Census Bureau reported. Eglinski said that is a significant difference, and per capita figures should be viewed with some skepticism until the issue is resolved. Eglinski used the city’s population estimates. All of the numbers also are prior to the city issuing about $18 million in debt earlier this year for the Lawrence Public Library expansion.

• Revenue growth in the city’s fee-based services has slowed. The city operates several funds that are paid by fees — the water and sewer fund is by far the largest. In the years 2003 through 2006, revenues for those funds grew by about 4 percent to 6 percent per year. Since 2007, the revenues have grown by 2 percent or less. In 2011, the growth rate of 1 percent was about half of the average of Lawrence’s peer cities. The revenues are somewhat weather-dependent, especially when it comes to water sales. But the revenues also are affected by a slowdown in population growth.

• Lawrence may charge less in fees for many services than other communities. Lawrence relies more heavily on taxes and transfers to support its general fund than Lawrence’s peer communities. About 20 percent of Lawrence’s general fund revenues, which excludes enterprise funds like the water and sewer fund, came from fees, grants or other nontax-oriented sources. The average for other communities was about 75 percent.

Examples of fees that would be included in the measurement range from parks and recreation class fees to planning department fees to cemetery fees. An earlier audit by Eglinski looked at 20 different city fees across a variety of departments and found that half of the fees had not been changed since 1993.

Comments

just_another_bozo_on_this_bus 1 year, 9 months ago

"The solution may be a change in diet, so to speak. The state requires the city make its health plan open to city retirees, but it does not mandate how much the city must contribute to the retirees health care premiums. Whether the city should contribute less or whether details of the plan should change may be a discussion on the horizon."

Local governments, just as small businesses (and even larger ones,) are saddled with paying significant amounts for the most expensive and least efficient healthcare system in the world. A single-payer, Medicare-for-all system would relieve them of that burden, and go a long ways towards allowing us to reduce the federal deficit.

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