Advertisement

Archive for Thursday, October 10, 2013

City fares well in audit but health care costs, equipment replacement will get more attention

October 10, 2013

Advertisement

Financial challenges associated with both aging equipment and aging employees are going to eat up more of the city's resources in future years, a new audit prepared for Lawrence city commissioners suggests.

A recently released financial indicators report gives the city of Lawrence's finances generally strong marks. But it does highlight a pair of line items that are going to need more attention: the growing cost of health insurance for retired city employees and a long list of city equipment that is quickly reaching the end of its useful life.

"Most of the measures I'm looking at either have a favorable trend or a neutral trend for the city, so that is a good thing," said City Auditor Michael Eglinski.

But employee health insurance costs are an exception. The latest estimates are that the city has an unfunded obligation of about $3.2 million in employee health care. That's up from an unfunded obligation of about $190,000 in 2008.

"The point of all this is that it is growing quickly," Eglinski said.

The number is an eye-catcher, but it is more manageable than those facing many other cities, Eglinski said. He said some similar cities in other regions of the country have $10 million or more in unfunded health care obligations.

A bulk of the unfunded obligations come from estimates about how much health care current city employees will need once they retire. State law requires the city to continue offering health insurance to retirees generally until they qualify for Medicare. The estimates assume the city needs to start incrementally setting aside money now to fund the future health care costs, or else be prepared to set aside big chunks of money in the future.

"Some communities have gotten into real trouble in this area, and we're not there, but it is an issue we're going to have to address," said Eglinski, who said that the amount of unfunded liability has been growing at about 22 percent a year.

City Manager David Corliss said the issue will generate City Commission discussion in the near future. The city has contracted for a new actuarial study to provide updated estimates on the city's unfunded health care liabilities. When that study is complete next year, Corliss said he will ask commissioners to consider a variety of options to "respond to these future cost increases and liabilities."

Aging equipment also is on Corliss' mind. He said the city has cut back on some of its equipment replacement programs as it has tried to control budgets during tight financial times.

Eglinski said that the city may have to boost equipment purchases in the future. Eglinski looked at the amount of depreciation on city equipment, which includes everything from trash trucks to police cars. He found the value of the city's equipment and machinery fleet had depreciated 64 percent through the end of 2012. That means the city's fleet has about 36 percent of its value left, which Englinski said is a fairly low number.

The audit report touched on several other subjects. They included:

• Continued evidence of a strong financial turnaround in the city's solid waste division, which collects the city's trash. Eglinski measures several divisions based on how much money they generate in revenues, how much they spend and how much assets — such as equipment and buildings — either appreciate or depreciate. In 2012, the solid waste division posted a positive number of $986,000. In 2008, the department was in negative territory by $746,000.

• The city's parking division and the Eagle Bend Golf Course continue to produce negative numbers in Eglinski's analysis. The parking division was in negative territory by about $115,000 in 2012, while the golf course was about $123,000 in the hole. Eglinski said the divisions may be breaking even from a cash-flow standpoint, but are being hurt by the rate of their depreciating assets.

• The amount of debt the city has per capita has been on a steady decline since 2008. At the end of 2012, the city had debt of about $650 per person. In 2008, that number was closer to $850 per person. Eglinski, however, said those numbers will rise significantly because of new debt for the Lawrence Public Library expansion, the Rock Chalk Park recreation center, and infrastructure for the new business park at the former Farmland Industries property.

Comments

Richard Heckler 6 months, 1 week ago

Rock Chalk Park is not necessary. Let's cut the funding today. Too much speculation not enough substance.

Hope the city does not do another cart before the horse doing infrastructure for the new business park at the former Farmland Industries property. Until the city knows what the tenants want there is not much use in constructing buildings. After 30 years East Hills Business Park is still not full.

Hopefully Lawrence has learned from that escapade. People may begin moving away as taxes and user fees continue to escalate. Yes I know some are under the impression that residents are okay with increased spending no matter what, increased crime rates and increased costs for law enforcement and fire department budgets. I speculate this is an illusion.

As we all know reckless fools in Washington D.C. continue to wreck havoc on the nations economy. This nonsense is not going away anytime soon. It's a recurring theme.

0

Commenting has been disabled for this item.