By Leslee Kulba-Asheville City Council approved its Comprehensive Annual Financial Report Tuesday night. For the thirty-third time, the city received a Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association. In four reports prepared by the independent auditing firm, Cherry Bekaert, LLP, fault was found only in three federal reports. All instances were of a minor nature, more indicative of a complex federal bureaucracy than any malicious intent from the city. Cherry Bekaert also had a few recommendations for the IT Department that the consultant said the city could take or leave.
In a penny-pinching economy, council avoided controversy by spending only a few minutes on receiving the report. Gwen Wisler asked for city management’s plan to address the recommended IT changes, and Marc Hunt asked Collin Hill, CPA, who represented the auditing firm, to explain to the public changes in the city’s fund balance. The new Director of Finance & Management Services, Barbara Whitehorn, was introduced to the crowd, and council acted as if they were hearing for the first time the nickname CAFR.
Overall, the city’s total General Fund budget for FY2014 was $95,861,764, up 6.6 percent from last year, in part due to a 3-cent property tax increase. Revenues exceeded expenditures, but one reason was that the city had to defer $1 million in capital improvements due to uncertainties in legislation affecting the water system.
Management of the water system was a specific fizzled hot topic. Accusations still rage about how the city misappropriates water revenues. Many allegations have long-since been debunked, but a large segment of the population continues to ignore the fact that, unlike any other North Carolina municipality owning a utility, Asheville has been restricted in its use of water revenues by the Sullivan acts. In 2009, the city did get a reprieve with an amendment that allowed it to use water revenues to replace roads and sidewalks torn up for waterworks. It was then faulted for restructuring its capital improvement plan to take advantage of the opportunity. Last year, the legislature responded with HB 252, which rescinded the privilege, but grandfathered-in projects already underway.
Another big question is how well the city is managing its unfunded liabilities. After all, Detroit had been warned well in advance about the undercutting nature of making promises it couldn’t keep. The city has a number of retirement plans: one for regular employees, one for police officers, and one for firefighters. The report was politically-correct, listing many numbers; but it left the reader without a sense of whether or not a number of reasonable actuaries would feel the city was prepared to pay out its pensions.
According to city staff, the city participates in the NC Local Government Employees Retirement System, managed by the state treasurer. Eligible employees contribute 6 percent of their income to the fund, and the city sets aside a set amount each year. Funds are held in trust, leading to statements such as, “Pensions are 37-percent funded.” Hill explained before the meeting that North Carolina cities fund pensions and other post-employment benefits on a pay-go basis. Some municipalities don’t set anything aside in trust. Asheville does. The amount is determined by city leadership each year. What the trust fund doesn’t cover is paid out of the general fund. Whether or not the city was on-track for the foreseeable future was an actuarial hazard nobody was willing to make.
Reading the report, one gained insight into why and how the federal debt continues to increase. Assuming the same was happening all across the country, one could see thousands upon thousands of dollars being spent by the thousands for extra-Constitutional activities, like support for the Asheville Puppet Alliance and Mad Hat Arts. Even after the housing bubble, the federal government continues to deem extending mortgages to unqualified buyers as one of its important functions, as evidenced by the millions of dollars the city racked up in Affordable Home Ownership receipts. The city continues to spend down stimulus funds it received back in the shovel-ready years.
Other subjects of interest covered in the CAFR include how the city insures itself, how funding for capital improvements is distributed for the near future, and amortizations schedules for the various forms of debt the city has taken out. The city’s outstanding debt, as of June, was $107,916,236. This is well below the 8 percent of assessed taxable property ($845 million) allowed by the state. Standard & Poor’s gives the city an AA+; and Moody’s, an Aa1 bond rating.
This particular CAFR was highly readable. Normally, the city and county financial reports list line items by six-and seven-digit categories, wide enough to hide any number of golden toilet seats. The current report, prepared by city staff as a cost-cutting measure, provides a lot of informative color commentary. For better or worse, two of the hottest bragging points were the closing of the golf fund and expenditures for the new center on Livingston Street.
Lastly, the city’s organizational chart puts the citizens of Asheville at the very top. Are you doing your job?