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December 4, 2012

Cash on hand, but for how long?

Umbaugh presents financial status of Jeffersonville

JEFFERSONVILLE — A comprehensive financial analysis of the city of Jeffersonville was presented by Indianapolis-based Umbaugh and Associates at a recent Redevelopment Commission meeting.

Jeffersonville Controller Monica Harmon said the reports were put together at the request of the administration “to better plan for our city.” Along with the comprehensive financial plan an analysis of the funding dedicated and available in the city’s Tax Increment Finance — TIF — districts was presented.

“There are three main purposes for this plan: one is to develop a financial plan model that can be updated periodically; two is to protect the receipts, disbursements and account balances; and lastly, it provides options to fund budget shortfalls,” said Paige Sanson, certified public accountant with Umbaugh.

The pattern of the city’s finances is similar to many other local municipalities in the state, as local revenues are shrinking and expected to maintain that trend.

Presently, however, the city’s finances are in good shape.

CASH RESERVE

Sanson said all of the Jeffersonville’s operating funds held a cash reserve balance above the recommended 15 percent, except for the city’s general fund, which was averaged 9 percent.

“Even at 9 percent thought that is commendable, considering the fact that 14 percent of your property tax dollars are lost due to circuit breaker credits. However, that said, the cash reserves are projected to decline in most funds of proposed budgets in 2013.”

With anticipated diminishing revenues, the concern for city officials is that the reserve funds the city holds will be used to cover expenses.

“Whenever disbursements exceed receipts, it means you’re using fund balance,” Sanson said. “You’re using cash to supplement the funding of your budget. You need to have some kind of cushion to fall back on.”

She said a cash reserve of 50 percent is ideal, but a reserve of 15 percent is kind of a rule-of-thumb.

Another concern presented is the losses in revenue the city has experienced due to the circuit breaker property tax caps, which sets the amount of property tax the city can collect at 1 percent for personal property, 2 percent for rental property and 3 percent for commercial property.

Sanson recommended the city developing a plan to absorb circuit breaker losses and diminishing revenues.

Among the suggestions to boost revenues that Umbaugh presented were to establish a user fee for sanitation, which would generate an estimated $520,000; re-establish the Cumulative Capital Development fund back to its maximum rate to 5 cents, which would generate $532,400; make annual transfers from the Cumulative Capital Cigarette Tax fund to the general fund at $120,000; and use Public Safety Local Option Income Tax money to cover operating expenses for the police and fire departments and to pay the debt on the bonds for the proposed police station.

The user-fee for the city’s sanitation fund was offered because it is projected that the cash reserves for the fund will decline and actually be depleted by the end of 2013 if the city spends the proposed budget in that fund, Sanson said.

According to Umbaugh’s report, the 2013 estimated budget is $2.98 million, $706,000 of which is unfunded. But adding a user fee to cover those expenses was not something that at least one council member is not willing to consider at this time.

“Right now, I can’t support a user fee [for sanitation],” said City Councilman Mike Smith.

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