Manager/commission answer questions that have been raised

by Angie Asam-Staff Writer

Over and over again in the past several months the Onaway city commission and city manager have been accused of not answering the public’s questions regarding finances as they relate to the elimination of the Onaway Police Department.

Last Thursday during his manager’s report city manager Joe Hefele took some time to answer some of the questions being raised.

“At the last meeting, one of the members of the audience handed out a piece of paper. That piece of paper was stuff that I’m sures he  had printed off the Internet,” said Hefele.

Like all cities, townships, villages and counties throughout the state of Michigan, Onaway is required to have its audit reports online at the state website (www.michigan.gov) under treasury. The city of Onaway is audited every other year unless it recieves a certain amount of federal dollars, which would prompt an every year audit.

“On that particular handout two numbers were highlighted, one of them was the city’s long term debt as of March 31, 2012 of $2,856,500. This isn’t anything anyone is hiding. Almost all of that debt is associated with the sewer system, which was about $2.5 million in loan and $11 million in grant. The loan is spent first then you can tap into the grant,” said Hefele.

In February of 1998, three years before Hefele was hired and with a different city commission in place, the voters of Onaway approved by a vote of 211-59 to authorize the city to borrow up to $3.5 million to do the sewer system. The number got lowered to $2.5 million because of grant money that the city obtained later.

“That debt gets paid through sewer billing revenues. A portion of each person’s bill goes to pay that debt, no general fund dollars are going to pay sewer debt. So the idea that the sewer debt had anything to do with the elimination of a general fund department such as the police department is just unfounded in anything to do with fact. There is no debt whatsoever in the general fund,” said Hefele.

Mayor Gary Wregglesworth then posed a question, a question he knew the answer to but wanted to have it explained to the public. “Then why can’t we just take money from the sewer fund to fund the police department,” he asked.

“What we were doing in the past was moving money from the sewer fund, the water fund and the street funds into the general fund to balance the budget. By law we can take 10 percent of the street funds and we were taking the maximum 10 percent. There are no restrictions on how much you can move from the water and sewer funds, however, the Department of Environmental Quality was here and their thought was you have a water system study on file with us, it says that you’re supposed to be doing these things to improve your water system, why are none of them happening? They wanted us to raise rates, so we could build money up to do the things in that study. We told them we didn’t need to raise rates, that we were moving money to the general fund. They said that cannot continue to happen. You need to take that money and fix your system. You need to make the fixes that your study says you need to make,” said Hefele, and those changes have been made.

Hefele went onto say that the other numbers highlighted on the handout were Onaway’s unrestricted net assets, as of March 31, 2012, the last time the city was audited. Hefele then did a little background on municipal finance.

 

“The various funds included within the city budget are divided into governmental funds and enterprise funds. Governmental funds include the general fund, which once included the police department, and includes the street funds. Enterprise funds include the water and sewer funds. Municipal finance requires them to be broken down and separated in our audits,” he said.

“The unrestricted net assets which include cash and accounts receivable in the city’s governmental funds as of March 31, 2012 were $267, 816. Most of that was the general fund cash balance, which was about $205,000 on March 31, 2012, that equals about six and half months of our general fund expenses. It’s imperative, as pointed out by the auditor, that you have at least six months and preferably more of operating capital on March 31 of each year because you don’t collect any new tax revenue until Dec. 1, eight months later. The gap is filled in by revenue sharing payments, those get us by. If you have less than six months, by the time October and November roll around you are going to go bankrupt, that’s why it needs to be there,” said Hefele.

Unrestricted net assets in the enterprise funds as of March 31, 2012 were $349,782. “Most of that is sewer fund cash. It’s important that money be there so we can make the big debt payment on April 1, the very next day, the balance goes down the very next day. Our auditor said that that number should be higher, but we don’t want to raise rates and that is the only way to raise that balance,” said Hefele.

The grand total of unrestricted net assets, adding governmental fund and enterprise funds together as of March 31, 2012 was $617,598, which is the general fund balance of six months that the city has to have to avoid bankruptcy and money to make the debt payment for the sewer.

Hefele felt it important to point out these things tied to the finances because those numbers continue to come up and some people are led to believe that the city has money they are saying they don’t have.

Wregglesworth compared it simply to the work a farmer does, they have to make the money earned from this year’s harvest last so they can purchase seed in the spring. If they spent all their earnings now and had nothing to buy seed with in the spring, they would be in trouble for next year.

The city has to have money set aside because it doesn’t have money coming in each week, it has to wait for tax revenue to come in.