Monday, January 24, 2011

A Positive Financial Note

The city council, earlier this month, was pleased to receive positive financial news in the form of the annual audit.

The audit was performed by the certified public accounting firm of Gilbert and Stewart. Having reviewed the City's funds, financial statements, bank accounts, reporting procedures, etc., etc., etc., the auditors awarded their "unqualified opinion," the best kind possible, stating that the City is in good financial condition and its finances are accurately stated.

I leaned over to fellow council member Dale Gunther and asked his take on this opinion. I've been reading audits for six years now, but Dale's judgment, honed in the financial industry, is without peer.

He was all smiles. "The City is strong," he beamed, "and Cathy is keeping us in good shape." Cathy Jensen is the City's chief financial officer.

The report came with three footnotes of interest.

Note 1. The deficit in the broadband fund is shrinking down to size. Revenues from marketing the City's dark fiber assets are being held in a reserve account. This reserve, together with the funds from the sale of the in-city fiber network, is projected to retire the broadband bond on schedule. The subsidy from the general fund is coming to an end.

Note 2. The City has been frugal in its use of debt. Even after issuing $49 million in PI bonds, the City's debt level remains below fifty percent of its ceiling.

Note 3. Owing to a change in accounting procedures -- namely, that revenues received within 60 days of the close of the fiscal year are now posted to the previous fiscal year -- the City suddenly finds itself with a fund balance in excess of 18 percent. The fund balance is the City's reserve account. By law, it must be kept between 5 and 18 percent. The excess will be funneled into the capital improvement fund and budgeted appropriately next year.

This news leaves me grinning from ear to ear. An 18 percent fund balance is a generous cushion. It protects the City against the unforeseen and also gives the City greater flexibility to apply for grants with matching funds.

In other news, sales tax receipts, for the first year in three, are holding steady. Last year, revenues came in twelve percent below the previous year. The previous year, revenues were eight percent below the year preceding. But this year, though they have not rebounded to pre-recession levels, revenues have held steady with what they were last year.

Thus it seems possible -- just possible -- that careful management may have brought the City through the worst of the recession. There may yet be light at the end of the tunnel.

Friday, January 7, 2011

Conversation with an Engineer

I wanted to talk transportation, so I cornered Andy Spencer, City Engineer. "Andy," I said, "I made a Top-Five list of AF's road funding needs, and I want to see how it compares with your list."

"I can't talk to you," Andy said, looking down at the front of his shirt. It was a spiffy new polo shirt embroidered with the words, "American Fork Public Works." I immediately saw the problem.

"No pocket," I said.

Andy nodded, listlessly.

"No pocket protector," I said.

He nodded again.

"Aha," I said. Engineers do not talk without pointers. Fortunately, the daughter of an engineer, I knew exactly what to do. "Take this," I said, thrusting my ball-point pen into his hand. "You can point with the ink delivery end."

Gratefully, he took the pen and pointed to the map on the wall. As he did so, the words began to flow.

The Top Five hot spots, in Andy's opinion and mine, are these:

1. 900 West, from State Street to 1120 North. Fortunately, we are not alone in our view. Utah County, acknowledging this route into Costco and the Meadows as a road of regional significance, has come through with funding. Look for construction in 2013.

2. 1120 North, including both the extension of the road to 900 West and mitigation measures in front of the junior high. My 1120 North friends will be pleased to note that I have sequenced this priority, as always, behind the improvement of 900 West. The one must be completed before the other.

3. The 300 West underpass at I-15. Already a trouble spot, this will become of great strategic significance when the Front Runner arrives.

4. 300 North from 900 East to 1100 East. While traffic does not stall here, the road is nevertheless a perilous proposition for pedestrians, a threat comparable to that on 50 South before its widening. When the County completes construction on 1100 East and installs the signal at this intersection, the situation will become even worse.

5. 400 West at Pacific Drive, possibly in connection with the opening of 560 West onto Pacific Drive. (Andy and I had a lengthy debate about this, during which I almost took my pen back.)

Andy also added a Number 6, of which I had not been aware: 500 East at Main Street. Apparently, the accident count is high at this intersection.

"So," I said, "tell me how much it would take to fund all of this within a reasonable period of time."

Still gesturing with my Bic, Andy moved over to the white board. Hastily, I replaced the pen with a white-board marker. He drew three pots for me. "Ideally," he said, "we would feed three pots on an on-going basis. One would be for new construction; one would be for on-going maintenance; and the third would be for reconstruction."

"Reconstruction?" I said, scratching my head.

"Reconstruction," he said, pointing to the residential roads between 700 North and the golf course.

"Aha," I said, thinking also of the roller coaster on 220 North between 900 and 1100 East. "How much would it cost to get the City on track within, say, ten years?"

At this, dutiful public employee that he is, Andy intoned several disclaimers, respectfully suggesting that funding is the council's place, not his, but finally delivered a ball-park estimate of $750,000 to one million per year in each pot.

I did some quick mental math of my own. At present, B and C road funds (money allocated to cities from the gas tax) accrue at the rate of about $600 to $700 thousand per year. The city council, two years ago, began an additional, annual accrual of $500,000 per year for road projects. At best, this means we're allocating $1.2 million each year to various, unspecified road needs.

Ideally, we should be funding at least $1 million more, and we should be directing those funds, as Andy says, into three disciplined pots, or line items.

This is food for thought. I will be chewing on it as we head into the budget season. The City made a good start this year, spending about $700,000 out of the roads accrual fund to resurface several major collectors. That's maintenance. Ideally, I would like to see the City create two additional line items, one for new projects and one for reconstruction, gradually increasing funding to all three as economic development picks up.

I do not mean to say that the City does not now recognize these needs. But with the creation of dedicated line items, the funding can be assigned more strategically.

I also see need for pots number four and five. Number four would be for safe sidewalks (now funded at the rate of $110,000 per year) and number five would be for traffic mitigation, or in other words, school crossings. Regular contributions to each pot -- however modest at first -- would eventually put the City in good shape.

My questions answered, I took my pen back.

Andy had nothing more to say.

Note to Andy's loved ones: Make sure you give him shirts with pockets next Christmas.