City finances 'in decent shape'
By GALE PIFER, Contributing Reporter
Despite increases in water, sewer and electric bills this year, the city of Madison's 2013 operating budget is actually lower than a year ago. The current city budget is $19.1 million, down $284,225.|
The difference is due to lower interest rates currently in effect across the nation. Examples include the refinancing of bonds used to build a standby electric generation plant in 2004, and a recent decision to forgo paying for water system improvements with a low-interest state loan and instead seek an even lower interest rate with a $3.5 million revenue bond.
According to Finance Commissioner Scott Delzer, Madison is in "pretty decent shape, compared to some other towns in the state, although it seems like we never have enough money to do all the things that need to be done."
Delzer said it is unrealistic to think the city can find all of the money needed simply by taking it out of the general fund.
"We've got to consider all of the projects the city faces, place them in order of importance, and then determine the best way to do the work and pay for it," said Delzer.
Contrary to public perception, he said, Madison has not exceeded its bonding authority.
"At the present time, we are approximately $1.5 million away from our governmental bonding limit," Delzer said. "But if we are suddenly faced with an emergency, that isn't very much to go on. Our job as city commissioners is to determine just what is an acceptable amount to commit to any particular project and then find the best way to fund it.
``Obviously, we have more debt percentage-wise today than we did 20 years ago, but we also have many more areas to fund than we did years ago," he said.
The biggest item in the budget is the city electric fund at 48 percent. The general fund is next at 21 percent. Appropriations for the current year call for 29 percent to go toward the purchase of wholesale electric power. The next biggest is personnel, which includes salaries and benefits, at 25 percent.
Picking up the tab to meet those expenses will be the big three: property tax, sales tax and cash balance. Property tax is expected to pay 31 percent of the budget, sales tax another 27 percent, and 30 percent coming in the form of cash balance funds.
Finance Officer Jennifer Eimers said the city receives federal funds each year -- some years much higher or lower, depending on projects under way. More federal funds came into city coffers in the last couple of years because of the extensive work done at the Madison Municipal Airport.
"Of course, those federal funds almost always come with some strings attached," said Delzer. "Often the rates we charge for utilities, for example, are in direct response to what our funding source insists on. It wouldn't be fair, for example, for us to charge lower utility rates than some other community, provided we both are receiving the same loan guarantees."
As a point of interest, Madison's city budget in 2003 was only $11,365,446. City expenses have gone up approximately $7.7 million in 11 years.
Last year, the city managed to stay in the black. This year, revenues are projected to be $18,842,493, but expenses are estimated to be $19,132,602, a year-end loss of $290,000.
"We had a fairly good year in 2012," said Eimers. "With governmental or tax-supported revenues of $5.7 million, property taxes of $1.8 million and sales and use tax income of $2.8 million, we spent only $5.5 million for general governmental operations."
That included major projects such as updating old water mains in the northeast section of town, rebuilding of E. Center Street, airport improvements and an ongoing sidewalk program. The city also retired nearly $1.2 million in long-term debt. Madison's total debt was placed at $15.4 million.
The city doesn't start the year at zero. There is a little thing called capital outlay accumulation, or designated reserves. That's money in the cookie jar. In 2013, the total capital outlay accumulation was $431,000, up from $134,980 set aside last year.
"You can't expect any business to operate without some reserves," said City Commissioner Richard Ericsson. "In fact, Madison is in pretty good shape financially. I suspect if we experienced a huge calamity, we might be able to operate the city for a year even if income from all sources dropped dramatically."
The biggest chunk of the 2013 $19.1 million budget is for the Electric Department at $9.2 million. Just buying wholesale power will cost approximately $5.37 million and another $468,000 is for transmission expenses. A total of $1.39 million was appropriated this year for the water fund and another $1.05 million for the city's sewer fund.
Another topic, which has caught the ire of some citizens, is the amount of money paid to hired consultants. In the past year, the city spent $175,000 for engineering consultants.
The latest request comes from the Lake County Emergency Planning Subcommittee, which is urging the city to earmark $40,000 during the next two years to help pay for a flood mitigation study. The subcommittee has suggested that the city and county each set aside $20,000 in their 2014 and 2015 budgets to pay for a Banner Engineering study. A year ago, Banner engineers estimated the cost of such a study would be between $70,000 and $75,000.
"I know some people believe we spent way too much on consultants," said Delzer. "They argue that we have a city engineer and question why he can't do the engineering on any project. The truth of the matter is that oftentimes it requires specific knowledge about a certain area that an engineering firm can provide that we don't have. Plus, if we expected our Engineering Department to do all of that work, we would most likely have to add personnel to the department.
``It is a matter of time and efficiency. Many times it is more economical to hire consultants than it is to have our people do all of the work," Delzer said. "And it isn't unusual for the lenders or the federal government to require outside engineering and other experts. The airport remodeling was a case in point. The feds absolutely insisted we have consulting engineers on board."
Delzer summed up Madison's financial situation: "While we have lots of challenges, we also have a citizenship and community willing to meet those challenges. So many residents of Madison are willing to step up in countless ways to help our city. Madison's people are generous with their time, talents and dollars. A recent area-wide fund-raising group told me they get more donations from Madison than much larger cities.
``And I can't say enough about all those people who have stepped forward to serve on committees and make suggestions and help us plan ways to make Madison an even better place to live," he said.
©Madison Daily Leader 2013