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City council: Expenses lower than expected

Thursday, November 14, 2013

City officials did not spend as much money in the past fiscal year as they thought they would, Martinsville City Council learned Tuesday.

A report prepared for the council showed that expenditures for fiscal 2013 totaled $64,390,585, which was 93.3 percent of the amount expected to be spent by the year’s end on June 30.

Finance Director Linda Conover said the lesser spending was due to various factors, including the city seeing no major unanticipated expenses, fuel costs being less than officials had predicted and delays in filling job vacancies.

City revenues in the past fiscal year totaled $58,965,447, which was 98.3 percent of budgeted projections, the report showed.

The city took $8,863,415 from its fund balance — the difference between liabilities and assets, and which includes reserve funds — to balance the past fiscal year’s budget, another report showed.

That left $17,909,095 in the fund balance as of June 30. Of that amount, $14,406,331 was unassigned fund balance, which Conover said essentially means the city could use it — with the council’s approval — for anything determined to be necessary, such as paying unanticipated expenses.

Asked whether $14.4 million is adequate, Conover said Wednesday it meets the city’s fund balance policy stipulating that an amount equal to at least 10 percent of budgeted general fund expenses be kept as unassigned balance.

Council members did not discuss the city’s finances in detail. However, they and other officials previously have said that the city cannot continue to use reserve funds to balance budgets well into the future.

“It’s just common logic,” Conover said.

She said she expects the council will discuss finances more as the budget-preparation period for the coming fiscal year approaches. Work on a fiscal 2015 spending plan will start in earnest early next year.

“There’s still a lot up in the air” as far as preparing the next fiscal year’s budget, Conover said, such as finding out how much state revenue will be received and whether the council will pursue Martinsville reverting to town status as a money-saving measure. Reversion will be the focus of special meetings Monday.

Conover emphasized that city finances remain sound.

Also Tuesday, the council reviewed proposed cash reserve policies that a private consultant developed for the city’s electric, water and sewer funds.

“We’ll use these as guidelines” in preparing the fiscal 2015 budget proposal, said Vice Mayor Gene Teague.

Conover said, though, it would be good for the council to formally adopt the policies eventually because bond rating agencies would look favorably on it.

Utility Financial Solutions LLC, a Michigan-based consulting firm for city-run utilities, prepared the proposed policies.

The policies are similar to the city’s fund balance policy, but they contain different language because they deal with different financial matters.

Specifically, the policies establish minimum cash reserves to help utilities ensure financial stability, make capital improvements and pay bills in timely manners, cope with large unforeseen expenses and stabilize rates paid by customers, according to a report Conover prepared for the council.

The policies suggest reserves of $3.14 million for the electric fund, $1.22 million for the water fund and $1.56 million for the sewer fund.

Those sums were deemed adequate by taking into account factors such as equipment depreciation values, wholesale electricity needs and costs, and expenses incurred in producing drinkable water, documents show.

Such factors are “pretty sound and comprehensive methodology,” said City Manager Leon Towarnicki.

The recommended reserves are “not law,” Conover said. “We don’t have to abide by them.”

Rather, “they are like road maps to keep us headed in the right direction” in budgeting, she said.

Council members indicated they also want Utility Financial Solutions LLC to prepare cash reserve policies for the city’s refuse fund and the Martinsville Information Network. Conover said that will be pursued.

The council also:

• Reappropriated $3,217,179 in funds from fiscal 2013 into the current fiscal year’s budget for projects and other expenses not completed by June 30. Such reappropriations between fiscal years occur annually.

The council appropriated $193,818 from sources such as grants, donations and reimbursements into the current fiscal year’s general fund. The money is to be put toward numerous expenses, including emergency management and senior center programs, a document shows.

In addition, $1,938,839 in federal dollars was appropriated into school-related funds. A document indicates that most of the money will be put toward educational supplies and employee-related costs.

• Formally agreed for the city to serve as a conduit between the state and the New College Institute (NCI) for $700,000 for new construction.

The Community Development Block Grant is being sought to help develop the Center for Innovation and Entrepreneurship on the second floor of NCI’s new building being constructed on the Baldwin Block uptown, officials have said.

NCI Executive Director William Wampler said Wednesday that the money has not yet been received.

City Attorney Eric Monday said only localities can officially accept block grants, hence the need for the city to be a conduit.

• Was introduced to Chris Collins, regional director for U.S. Sen. Tim Kaine, D-Va.

Collins noted that Kaine and U.S. Sen. Mark Warner, D-Va., are continuing to work with the city and Henry County to try to convince the U.S. Army Corps of Engineers to approve a permit needed to develop Commonwealth Crossing Business Centre, an industrial park planned near the North Carolina line.

• Decided to wait until Nov. 26 to approve a legislative agenda for 2014 so Monday, the city attorney, can make revisions he thinks appropriate.

• Heard from city resident Raymond Durand about a personal tax matter.


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