September 29, 2014


The Honorable Mayor and Council Members;


Please find attached the Annual Detailed Financial Summary for the Fiscal Year ending June 30, 2014.  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, 2014, 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 has been drastically redesigned from previous years.  The first major change is that this entire report has been presented in a digital format.  To further the City’s effort of going paperless, minimum paper copies of this report have been produced.  This digital version is now available on the City’s website as well as to our employees via Google Drive.  The second major change is the actual look of the report.  While the sections have not changed from the last years report, the look of the sections has changed as well as new recap pages for each of the major sections.  My goal with this format is to make this annual financial report look and feel like an actual annual report.  I felt that previous reports were essentially a recap of the information that our financial system created and offered no insight as to the meaning of the information contained therein.  I also have strived to include more detailed information as to the actual operation of our Departments as well as a look at why the funds we have exist and their function.  Instead of a detailed analysis contained within my transmittal letter, you will find more detailed information pertaining to each fund or department along with the relevant financial information.  Each section of the report is color coded to tie together the corresponding funds/departments.

However, with adding additional narrative, I have consolidated the financial detail.  In the past, you would have seen a line by line accounting for expenses.  With this report, I have consolidated the expenditures to the major categories of revenue and expenditures.  An explanation of what type of revenues or expenditures may occur in each of the categories follows this letter.


The beginning section details the city’s property valuation, tax revenues and rates for the past few years and then continues on with other miscellaneous 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 $24,123.447.  This is a decrease of $17,337 (-0.072%) compared to Fiscal Year Ended (FYE) June 30, 2013 balance of $24,140,784.  The actual ending balance ended better than the City had anticipated when putting together the FY14 budget.  At the time the budget was created, the City anticipated that the overall fund balance would decrease by $1,568,610.   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 over what we had projected, but in the end were only $17,000 apart.  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. 



While not impacting the financial condition of the City covered under this report, the City must has begun to see the effects of the property tax reform that was adopted by the Iowa Legislature during their 2013 session.  The FY15 budget was the first budget to be prepared under the property tax reform rules.  As a result, the City saw the implementation of the first 5% reduction in commercial/industrial property values.  The impact that this had on the General Fund resulted in about $7,000 of new money coming from the increase in property values.  The Residential Rollback value increased, which assisted in the increase the City experienced in property valuations.  As a result, the City increased its property tax levy for the first time in several years.    The full impact of the reform will not be known for quite some time; however, current projections provided by the Iowa League of Cities estimate that the impact to the City’s budget by $577,965 in lost tax revenue in FY 2024.  These loses in tax revenue were compared to current law as if nothing was changed.  The projections are also missing a component for the change in multi-housing units transferring to the residential tax classification versus the current commercial classification.  Over the next ten years, the result of the property tax reform is estimated to cost the City of Spencer $2,622,739 of revenue.  Revenue that would be used to provide services to the community. 


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.   




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.




Brian W. Weuve

Finance Director