The City’s independent accounting firm recently presented an unqualified or “clean” audit opinion on Salida’s 2010 financial statements.
The City’s financial position improved during 2010 despite overall weak economic conditions and a 1.3% decrease in taxable sales reported within the City. The sales tax trend improved in the later part of the year, and a modest improvement in development related revenue was realized in comparison to 2009.
Total assets of $38.3 million exceeded liabilities by $31.1 million at the end of 2010. A $1.9 million increase in net assets in 2010 was primarily driven by grant and other revenues that the City invested in capital assets. The council approved deferrals of some capital spending and reduced the budget for operating expenses because of economic uncertainties, which also helped improve general fund equity.
It is important to understand, however, that the City’s finances are divided into separate funds. The resources and spending within each fund are kept separate from that of other funds. 2010 was mixed in terms of the finances of each of the funds.
The main government fund is the general fund. It includes the city government activities that are not separated as a business-type activity or special fund. Included are activities like police, fire, streets, recreation, planning and general administration. Sales tax revenue pays for most of these activities.
Nearly $270,000 was added to General Fund reserves in 2010. This was achieved by not replacing some employees who left during the year, eliminating raises that had been budgeted and cutting or deferring some capital spending.
The water and wastewater enterprise fund is managed essentially as two separate businesses. Revenue generated from providing water is used to pay for operations of the water plant and associated infrastructure and overhead. Revenue generated from treating waste is used to pay for the wastewater plant and other costs of that service.
The water fund depleted its reserves in 2010. Staff and elected officials have discussed this extensively in connection with the increase in rates effective for second quarter bills. The amount of revenue coming into this fund was not sufficient to meet the debt service, capital and operating obligations in 2010. To meet cash flow obligations in 2010, the water fund borrowed $250,000 from the sewer reserves. The recent increase in rates will slowly fix the financial short falls for the City’s water operations.
Sewer operations are generating a surplus. This has happened for the past several years in anticipation of the treatment plant upgrade needed to continue meeting regulatory requirements for the effluent discharged into the Arkansas River. Cash reserves of $2.1 million are relatively substantial, but will be put to use once construction starts on the upgrade.
The SteamPlant was also set up as an Enterprise Fund for accounting purposes, although it is currently disqualified under TABOR because of the general fund subsidy it receives. The SteamPlant currently operates at a loss.
Finally, the Conservation Trust Fund shows a little more spending than the amount of revenue received in 2010. This fund receives its revenue from lottery proceeds and interest on reserves.
The audit report includes a narrative called management’s discussion and analysis of the financial statements that provides some financial highlights and explains the different sections of the financial reports. I encourage citizens to review the full financial report and this section in particular.
I am also pleased to report that sales tax collections have increased 7.4% from January through April 2011. If this trend continues, we can anticipate a further improvement in general fund reserves this year.