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Serving Northern St. Louis County, Minnesota

Clerk outlines improvements to structure of city budget

Marshall Helmberger
Posted 10/21/20

TOWER— City clerk-treasurer Victoria Ranua presented the most detailed look at the city’s budget in decades on Tuesday, as she outlined a number of significant changes she’s made to …

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Clerk outlines improvements to structure of city budget

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TOWER— City clerk-treasurer Victoria Ranua presented the most detailed look at the city’s budget in decades on Tuesday, as she outlined a number of significant changes she’s made to the structure of the budget during weeks of work.
The two-and-a-half-hour-long meeting covered plenty of ground, including Ranua’s explanation of how the city’s budget is now in compliance with the Minnesota accounting and financial reporting standards established by the state auditor— something that hasn’t been true in the recent past.
“An unprecedented amount of work has gone into the budget this year,” said Mayor Orlyn Kringstad as he introduced the topic. “This represents the city moving from an ad hoc budgeting process to one that follows state budgeting procedures,” he said. “This process will make this much easier in the future and will bring greater transparency to our citizens.”
Creating separate accounts was one way that the new budget will provide greater transparency, because revenues for the various city functions, from the airport to police, to water and sewer, will be clearly identified and anticipated revenues and expenditures will be accounted for. In addition to a chart of accounts and spending proposals, Ranua’s budget included a narrative portion that described the various funds and their purposes.
Ranua, who has just completed her first year as clerk-treasurer, noted that the city had gotten itself in trouble with deficits in many accounts over the course of some prior years because it didn’t properly budget for known expenses. In some cases, known expenditures totaling hundreds of thousands of dollars were not accounted for in city budgeting. “I think that’s where some of the issues came in the past,” said Ranua. She noted that the nearly half million dollars in identified deficits in the harbor development was the result of improperly budgeting for the expenses the city incurred on the project. By definition, budget deficits reflect spending over a budgeted amount, and that had been routine in the past in Tower. Frequently, major cost items, such as known increases in payroll or major equipment purchases, were not included in annual budgets. Now, Ranua tries to keep city spending in line with budgeted amounts, or she requires the council to approve a budget amendment— as is required by law— something the city did not do in recent years.
Ranua identified a number of accounts that she separated out as “enterprise funds,” which are those city functions that tend to, or at least could, produce a profit. “What I like about considering these as enterprise funds, is you look at it in a different way, to generate revenue for a purpose, such as buying down property taxes,” she said.
In the past, the city lumped accounts, such as airport fuel sales, within the general fund, which tended to mask whether the city was generating actual profits. She said her analysis of fuel sales suggests the city had been losing money for several years. She said by better identifying the city’s costs associated with the sales, and paying more attention to fuel pricing, she hoped the city could generate $10,000 annually in profits, which would eliminate the need to use property taxes to fund the city’s share of airport operations and maintenance.
Ranua also said the city should be reinvesting in its various facilities, many of which are aging. “Hoodoo Point Campground has been a workhorse for the city, that helps to keep the city’s property taxes lower,” she said. “We need to think about rolling some revenues back into upgrading the campground,” she said.
Ranua created a separate account for Hoodoo Point this year to be able to better track the facility’s profits and to segregate the proceeds from a fee that the campground has charged users for several years to help pay for upgrades. In the past, those fees weren’t segregated and ended up in the general fund, creating questions about how much was actually available for campground upgrades. Ranua said the campground has traditionally transferred about $60,000 a year to the city, but she said her current budget includes no transfer for 2021. She noted that the cost of paying off bonds for the sewer extension to the campground, at over $37,000 a year, has cut into the amount that can be transferred and she argued that the city should consider putting those funds back into the campground, at least for a time.
Ranua noted that she has also budgeted funds for the first time in years to undertake a forest inventory. The city has significant forest land ownership and Ranua said she’s yet to find a forest management plan for those lands since her arrival. But before any management decisions can be made, she said, an inventory is needed so city officials understand what kind of resources they actually have.
Ranua questioned the propriety of land sales that the city undertook between 2015 and 2018, noting that the charter directs that city forest lands be administered for “the perpetuation of such forest in the best interests” of the city. “We’ve been selling a lot of these lands to cover some of these things that weren’t planned well for, but that’s not the best approach,” she said.
Ranua’s new system of accounting provides for substantially greater transparency, because it clearly identifies sources of funding for each budget account, including where everyone’s tax dollars actually go.
The budget also clarifies sources of funding for the city’s debt, by setting up a separate debt service account. Her budget identifies that most city debt has clear funding sources. Debts owed on TEDA buildings, for example, are more than covered by lease payments. Water and sewer debts are paid for by the Tower-Breitung Wastewater Board, while Northstar Addition infrastructure is covered by tax increment financing, or TIF. The only debts financed by property taxes are the general obligation bonds the city sold in 2015 to cover $258,000 in harbor debt along with the $250,000 extraordinary expense loan that the city received from the League of Minnesota Cities in 2019 to cover a cash flow crisis stemming from prior mismanagement of city funds.
In total, Ranua’s budget includes revenues to the general fund totaling $638,403, with estimated expenditures of $611,417, for a $27,000 surplus. Across all funds, she expects the city to generate $2,866,293 in revenue, with $2,696,570 in expenditures. Of the $394,761 the city expects to raise in property taxes next year, $311,708 is earmarked to the general fund, $5,000 to TEDA, $7,500 for ambulance replacement, and just $70,000 for debt service.
Ranua said she’s waiting for the completion of the business plan for the ambulance service before finalizing an ambulance budget for next year. She’s also waiting for further discussion with the council on the city’s utilities account and is waiting for budget figures from the Tower Economic Development Authority, which is expected to approve its 2021 budget at its meeting on Nov. 5.

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