News and Tribune

December 4, 2012

Cash on hand, but for how long?

Umbaugh presents financial status of Jeffersonville

By BRADEN LAMMERS
braden.lammers@newsandtribune.com

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.



TIF SPENDING

A greater source of divisiveness between the city administration and the council is how and when to spend Tax Increment Finance dollars.

“We took a look at what are the estimated revenues in the TIF areas, how does that compare to the debt service that is currently outstanding, and also plugged into the model some projects that the administration kind of has an agenda of projects it’d like to do,” said Brian Colton, with Umbaugh and Associates.

The projects Colton referenced were offered by Mayor Mike Moore to use city TIF money to pay for several projects he has outlined as priorities, including dedicating $2.5 million for Veterans Parkway, $12 million for the Veterans Parkway and Holmans Lane project, $1.25 million for Falls Landing Park and $2.025 million for the Big Four Station project, among others.

Harmon said the TIF analysis was undertaken to help determine the reimbursement for funding a new police station, but also to determine the remaining capacity the city could pay, or bond, for out of the TIF districts.

“Even if we were to pay cash, we still have sufficient capacity if there were an emergency to arise, or if some large company came in that we didn’t foresee at this time that we would still be able to build roads or do development that they would expect us to partner in,” she said.

However, the project that offers the greatest disagreement between the mayor and the council is the 10th Street revitalization and widening project that totals $13.5 million.

Several council members in attendance at Wednesday’s meeting said the city should wait and apply for funding through the Indiana Department of Transportation instead of paying for the project out of TIF funds.

“[The] biggest project, which is 10th Street at $13.5 [million], we could wait for an 80 percent match,” said Councilman Dennis Julius.

And if the city were able to secure the 80 percent matching funds from the state to pay for the 10th Street project, the money could be used elsewhere.

“It frees it up for other projects,” he said. “It only makes sense. Our thing is it’s so huge, it would release so much capital from the city to go to other projects.”

“You could really cut that price and that project down considerably by doing your due diligence,” Smith said in agreement.

Smith said that by going through the state to secure funding, it could delay the project, but he said he was unsure how long of a delay it might create. He said he believed the project could still be completed in a three to five year window if the city were to wait for the matching money from the state.

But Moore tried to clear the way to use the funding immediately and asked if the projects could be pursued as planned.

“Does this look like a sound business plan here ... basically to do these projects with cash?” he asked Colton.

Colton said it could be done.

“That’s part of what we were asked to do,” he said. “Could we pay for the projects and still have room for the bonds? The answer, just looking on based on what we have today, yes. When I talk about you’ve got capacity for $17 million in the Falls Landing TIF area, if you do about half the project were talking about [you’ll have] $12 [million] or $11 million additional capacity beyond the police station bond.”

The use of TIF money has been muddied further by being part of a lawsuit the mayor has filed against the city council. Moore, in his suit, claimed that the council does not have statutory authority to approve TIF dollars.

According to the petition, “the redevelopment commission, as a separate taxing unit, has the sole and exclusive statutory authority to approve such expenditures,” and as a result asks for ordinance 2006-0R-6 that spells out who has control over TIF expenditures to be declared invalid.

City Council President Ed Zastawny responded in a letter sent to the News and Tribune last week. In it, he wrote, “The city council, which is the fiscal branch of government, has been reviewing and approving Redevelopment TIF claims since 2006 and this system has worked fine under the previous ... administrations. The council does ask questions and reviews claims, but to date, I am not aware that the council has declined any TIF claims during 2012 so the council is not even sure why this was brought up by the mayor.

“The real question is why the mayor does not want fiscal oversight and what the mayor plans to do with all the Redevelopment TIF dollars?”