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City auditor report complete; consultant outlines receivables, interfund balances and planned borrowing for sewer and water projects
Summary
Financial consultant Chip Stearns told the council the audit is complete and reviewed interfund balances (down to $803,000), cash ($1,000,002.75), a $10.27 million tax receivable, and plans to pursue targeted borrowing for sewer ($875,000 target) and bond anticipation financing for water projects; council scheduled a special Oct. 27 meeting to consider rate adjustments.
Chip Stearns, the council's financial consultant, opened his Oct. 20 presentation by announcing, "The audit is complete," and then walked council through a series of financial reports and implications for city operations and near-term borrowing.
Stearns said interfund balances owed to the general fund have been reduced to about $803,000 and that cash in the bank was $1,000,002.75 as of a recent Friday morning. He described a tax receivable of $10,270,000 (which includes amounts owed to the city and the Newport City School District) and an allowance for doubtful collections of roughly $545,000. "That doesn't mean we collected the money," Stearns said while noting the receivable is an accrual entry that increases reported fund balance but not cash on hand.
On borrowing, Stearns summarized previously authorized and planned financing: a tax anticipation note had been authorized up to $2,800,000 with $1,800,000 drawn to date; he said the sewer fund was authorized to borrow up to $1,000,000 and staff are targeting a $875,000 10-year note to convert short-term interfund indebtedness into a long-term liability. For water, Stearns described a bond anticipation note of up to $2,827,000 to finish the East Side water tower and accelerate water meter installation; he cautioned that interest and draws on that note will affect near-term fund positions until proceeds are spent and capitalized.
Stearns also flagged reporting and budgeting quirks: the city had to book an $868,000 entry related to a fire truck purchase that appears as revenue and expense under auditing rules; the current chart of accounts uses nonuniform object codes, making it difficult to aggregate salary and benefit lines. He said he has proposed a renumbered chart of accounts to standardize expense objects so the city can more easily report total wages and other categories across funds while keeping the detailed backup for public review.
Council members pressed for clarification of several points: how receivables translate into cash after the Nov. 15 tax due date, implications for the general fund, and the timing of bond bank applications. Chip and staff confirmed KBS auditors will present to the council in early November, and council scheduled a special meeting for Oct. 27 to consider water and sewer rate adjustments the task force plans to recommend.
Next steps: staff will finalize paperwork for the proposed sewer and general fund loan execution on Nov. 3 if the council approves; the council will also review the proposed chart of accounts and receive the KBS audit presentation in early November.
