The Ottumwa Courier

Local News

February 6, 2013

City’s finances reported ‘clean’

Annual city audit shows decrease in debt, increase in public safety costs, snail-like population growth

OTTUMWA — The city of Ottumwa keeps plugging along financially.

In Anderson, Larkin & Co.’s annual audit of the city’s financial records, the CPA firm found nothing amiss in fiscal year 2011-12, issuing an “unqualified, clean opinion” of the city’s statements.

“The city audit has basically been unchanged for years,” said city Finance Director Bob Jay. “We’ll just keep marching along like we’re supposed to.”

Since Ottumwa Housing Authority and Ottumwa Water Works and Hydro are autonomous organizations, their financial records were not included in the report.

“Public safety costs continue to increase and consume 81 [percent] of the net General Fund expenditures (property taxes). Expenses for Public Service have been increasing as well due in part to using local option sales tax to finance an expanded street repair program,” Jay wrote in the report.

These costs have increased because police and fire are not revenue-generating entities.

“We’ve got their salaries, pension, health insurance,” Jay said. “The net amount is offset by revenues generated from grants and fees, such as local citations. Those get vetted against expenditures to get the net expenditures.”

Normally, nothing in the general fund is a revenue-generating entity, Jay said.

“They’re all paid for with property taxes, for the most part,” he said. “Though the hotel/motel tax does come in and pays for Bridge View Center.”

According to the report and the findings of the U.S. Census Bureau, the city’s population has only increased slightly since 2003, from 24,998 to today’s population of 25,023.

Countywide, per capita personal income has dropped from $24,013 in 2003 to $22,376 in 2011, and unemployment has increased from 6.4 percent in 2003 to 7.9 percent in 2012, according to Iowa Workforce Development.

Population, income and unemployment all contribute to and affect the local economy.

“It relates to no housing development, of course,” Jay said. “And a slower economy means slower population growth, unlike in West Des Moines where somebody’s bringing in how many thousands of dollars a day, they’re moving into that town, purchasing products from local people, paying local property taxes, sales tax, buying things there.”

Those cities with spurts in population growth will in turn see a boost to their economy, he said.

“This also relates to the Road Use Tax program,” Jay said. “We get revenues there from the state based on our population. So if it decreases, the dollar amounts available for streets and the maintenance portion are reduced.”

According to the report, the city saw nearly $40 million in revenue and $36.4 million in expenditures last fiscal year.

The amount of debt outstanding at fiscal year end decreased 4 percent to $28.4 million from the previous fiscal year. New debt issued during the year amounted to $11.8 million, while $13.1 million was retired.

Of the total debt outstanding, $15.9 million is “backed by the full faith and credit of the city.” The remaining $12.5 million is backed by sewer revenue.

These general obligation bonds can be taxed for if the city needs to, but Jay said the city doesn’t, “in part because some are paid for through LOST and sewer revenue.”

Moody’s Investor Services has rated the city’s general obligation bonds A1, which can mean the difference between 2 and 5 percent, Jay said.

“You’re talking hundreds of thousands of dollars in interest,” he said. “Moody’s determines how solid the city is financially and the more solid we are the lower the rates are that we have to pay.”

Investors will be more confident in purchasing bonds because they know that the city will be able to pay it back, he said.

“When you go out and issue bonds, you have to give an interest rate that’s appealing,” Jay said. “You don’t go out and buy a bond when you think the company could go belly-up in a couple of years. A lower borrowing cost relates to offering lower interest rates for bonds.”

The report also noted that three phases of the city’s ongoing sewer separation project have been completed: Phase 1 in June 2008, costing $9 million; Phase 2 in May 2011, costing $6 million; and Phase 3, which will wrap up this year and will cost $7.4 million.

 

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