Crestwood’s ’07 overall balance up $1.3 million from previous year

City officials press on with 35-cent tax-rate increase ballot measure

By BURKE WASSON

While an independent audit of Crestwood’s 2007 fiscal year shows that the city increased its overall fund balance by more than $1.3 million, city officials are asking voters to approve a tax-rate increase in August.

The audit, compiled by Schmersahl Treloar & Co., was scheduled to be presented to the Board of Aldermen Tuesday night — after the Call went to press.

The city’s governmental funds reported a combined fund balance of $7,403,658 at the end of 2007, according to the audit.

This is an improvement from 2006, when the year-end fund balance was $6,056,822 in all funds.

While the general fund contributed to that balance by ending 2007 with $3,393,532, the audit reports that $2,443,218 of that general-fund balance is “reserved for subsequent year expenditures/commitments.”

Between these future expenses and some unexpected costs in 2008 along with a drop in revenue in 2008 compared to 2007, aldermen voted 7-1 in May to place a tax-rate increase of 35 cents per $100 of assessed value on the Aug. 5 ballot.

Coupled with sinking revenues and rising expenses, city officials believe a property-tax increase is needed. The measure would generate an estimated $1,130,528 per year.

For an owner of a $200,000 home, the tax-rate increase would cost $133 per year, or roughly $11 per month.

A presentation of city finances at an April 30 town-hall meeting showed that while the city had budgeted $12,676,109 for city services in 2008, officials believe that “the city may not have enough revenue to cover those expenditures.” City officials have not projected the city’s overall revenues and expenses for 2009 and beyond, but fear that continued drops in revenue as well as rising costs for services will hurt the city’s finances.

Additionally, Mayor Roy Robinson recently estimated that the city currently has between $3.5 million and $4 million in cash on hand, which he has said is “$2 million less in cash on hand” than the city had at the end of 2007 due to some one-time expenditures as well as a drop in revenue.

Among those one-time expenses was a $525,000 prepayment in March on the city’s remaining $2.08 million in debt on an annual-appropriation note with Royal Banks of Missouri and $377,600 in February for a new police communications system.

Schmersahl Treloar & Co. point out in the city’s 2007 audit that because the note is tax exempt, the city could have some challenges with its 5-percent general-fund balance limit. That provision would essentially charge the city more for improving its finances, which the proposed property-tax increase aims to do.

“The note with Royal Banks is tax exempt and under IRS regulations, the city is not allowed to have a cash reserve that exceeds 5 percent of its general-fund annual expenditures,” the audit reports. “The city’s cash reserve has improved over the last couple of years and the city had a positive cash position during FY 2007. As a result of the cash position in FY 2007, the city was required to make an additional payment on the note with Royal Banks in the amount of $525,000 in FY 2008 to maintain the tax-exempt nature of the debt.

“Should the city continue to improve its cash position, it will be required to make additional payments each year to Royal Banks. The city may have some challenges increasing its cash reserve in the near future, due to the cash-reserve limitation on the note. The higher the cash reserve increases, the higher the payment that the city will be re-quired to make to Royal Banks the following year.”

The audit also reports the city’s total revenue collected in its government funds in 2007 was $13,275,868. This marks a decrease in revenue of $749,000 from 2006. Included in that decrease, the city saw a $446,976 drop in property-tax revenue from 2006 to 2007 and a $266,160 drop in sales-tax revenue from 2006 to 2007.

The audit does note that the $446,976 decrease in property taxes is “due in part to protested taxes that were not received within two months after year end.”

Of that $13,275,868 collected in revenue, the city collected $10,662,310 in taxes — which represents 77.3 percent of all revenues — with 67 cents per dollar coming from sales tax, 15 cents per dollar from utility tax and 13 cents per dollar from property tax. Additionally, charges for licenses and permits account for 7 percent of the city’s overall revenue and charges for service represent 6 percent of the city’s revenues. Remaining revenue is from state and federal grants, interest earnings, gains on sale of capital assets and miscellaneous revenues.

The city’s total cost for all programs and services in 2007 was $12,143,773. The biggest chunk of the 2007 expenses comes in public safety, on which the city spent $5,464,235 — or 45 percent of all expenses.

The city’s expenses increased by $845,753 from 2006 to 2007. This $845,753 increase was due in large part to debt-service payments of $553,275 on the city’s annual-appropriation note.

The note was financed with Royal Banks of Missouri and designed to pay off $2.87 million in remaining debt in late 2006, when the city also “took out general-obligation bonds on which the city made a full year of payments in 2007,” according to the audit.

In addition, expenses for capital outlay increased $297,126 from 2006 to 2007.

The audit points out that besides debt service and capital outlay, all other operating expenditures decreased in 2007.

The report also shows that the city’s assets exceeded the city’s total liabilities at the end of 2007 by $12,467,633.

The general fund closed the year with a balance of $3,393,532. Revenues exceeded general-fund expenses by $568,465 — excluding transfers of $303,791 out of the general fund. The audit notes that this “is a decrease from the revenues in excess of expenditures in 2006 in large part due to debt service payments on the 2006 appropriation note.”

The audit reports that the capital-improvement fund ended 2007 with a balance of $2,014,284. Revenues exceeded expenses in this fund in 2007 by $436,556, excluding transfers received of $370,346.

The park and stormwater fund ended 2007 with a fund-balance deficit of $48,497. While this marks the second consecutive year that the park and stormwater fund has had a fund-balance deficit, 2007’s $48,497 deficit is an improvement from 2006, when the fund had a year-end deficit of $295,405.

The park and stormwater fund is also responsible for the principal and interest payments of $1,031,395 on the 2001 certificates of participation debt service to the city’s Aquatic Center as well as net transfers of funds in the amount of $883,209. With that $883,209 transfer, the park and stormwater fund’s deficit improved by $246,908.