Welcome!

October 18, 2016

 

  

The Honorable Mayor and Council Members;

 

Please find attached the Annual Detailed Financial Summary for the Fiscal Year ending June 30, 2016.  This report is required by Title 1, Chapter 7A of the Spencer City Code.  Enclosed in this report you will find detailed information regarding the city’s financial status as of June 30, 2016, including receipts and expenditures for each of the city’s operating departments as well as the restricted, special revenue, project and agency funds that the City has.  The fund balances, transfers, and account balances and transactions contained in this report are unaudited and appear in this report as reported by the City’s financial software as of the date of this report.  The City’s annual financial audit is scheduled was conducted the last week of August and afterwards, this report may be amended or updated. 

 

The layout of this report is similar to last year’s report.  Again, this report is presented in a digital format and will be available to everyone via the City's website.  To navigate through this report, you can click on the Table of Contents tab above.  From there, you will be able to access the detailed information regarding the City's finances, departmental revenues and expenses by clicking on the section you wish to view.     

The beginning section details the city’s property valuation, tax revenues and rates for the past few years and then continues on with other financial information recapping the revenue and spending for the most recent fiscal year.  The detailed fund information is presented similar to last year’s report.  The funds are presented in numerical order as to their fund number.  These are also categorized in the following categories: General Fund; Restricted Cash; Special Revenue; Debt Service; Capital Projects; Permanent Funds; Business Type Activities and finally Agency Funds. 

 

Overall, the City of Spencer had another good year, financially speaking.  Our fund balances remain strong.  At the end of the year, the City had a combined fund balance of $25,977,779.  This is an increase of $917,000 (+3.66%) compared to Fiscal Year Ended (FYE) June 30, 2015 balance of $25,060,779.  The actual ending balance ended better than the City had anticipated when putting together the FY16 budget.  At the time the budget was created, the City anticipated that the overall fund balance would decrease by $987,465.   This was the difference in what we projected would be the expenditures over revenues.  In reality, our projections for revenue and expenditures were off and both came in under what we had projected, but revenue exceeded expenses.  This is a result of the budget timing, when we have to predict what will happen over 18 months away.   As you read through this report, numbers may not always add correctly, this is due to rounding of the original calculations. 

 

NOTES FOR THE FUTURE

 

The FY16 budget saw an additional 5% reduction in commercial/industrial property values.  This reduction, coupled with the Residential Rollback increasing, had a negative net impact on the General Fund of $235 less in FY16 than the FY15 budget.  Therefore, even though the City saw increases in the Residential values, these were wiped out by the mandatory reduction in the Commercial/Industrial values.  FY15 saw the final reduction in Commercial/Industrial values, so the City anticipates that our overall property valuation will again begin to rise in the coming fiscal years.  However, in FY17, the City will begin to experience the impact of the multi-residential rollback.  This rollback is scheduled to decline approximately 3.75% per year until it equals the residential rollback n FY 2024.

 

Spencer has been, and will continue to be, a fiscally conservative community when it comes to our budgeting practices, however with any loss of revenue in a situation where the budget does not allow much flexibility, means that other sources of revenue may need to be explored, cost cutting measures implemented or service levels curtailed.

 

While it is too early to state what measures the City will have to take or sound the “sky is falling” alarm, it is prudent to be aware of the coming financial challenges that lie ahead as the new property tax system is implemented.   

 

CONCLUSION

 

The City continues its practice of maintaining a minimum 25% balance in any major operating fund.  Most of our funds either meet or exceed this requirement with the exception of the Golf Course operations fund, however major gains were made and it is anticipated that the fund will reach this goal in the coming couple of years.  Any excess balance over and above the 25% recommendation was transferred to a restricted cash reserve to be used for later projects, equipment, or to cover shortfalls in the future.  The City of Spencer continues to be fortunate enough to have cash reserves to pay for projects and not solely rely on the sale of bonds.

 

Overall, I would relay to the Council that the fiscal condition of the City is good.  We have been able to meet our obligations while investing in our community through infrastructure upgrades, attraction of new businesses to town all the while increasing cash reserves in most areas of operations.

 

If you have any questions about any aspect of this report, please feel free to contact me.

 

Sincerely,

 

Brian W. Weuve

Deputy City Manager / Finance Director