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City discusses strained finances

Meeting for a work session Tuesday night, the Park Hills City Council discussed the city’s financial situation with the city’s auditor Curt Boyer of Boyer & Associates before voting to approve a newly-developed budget for fiscal year 2018-2019.

The council first voted to pass a resolution amending the previous year’s budget to reflect actual expenditures in the sanitation and senior center funds. The sanitation fund was originally budgeted $408,993 and was amended to reflect a budgeted amount of $413,895. The senior center fund was originally budgeted $447,749 and was amended to reflect $458,805.

City Administrator Mark McFarland introduced Boyer to the council, saying he would be explaining the actualities of the city’s financials to the councilmen.

In the budgeting process, Boyer said his role has been in assisting with the mechanics of budget preparation.

“My role tonight, then, is to kind of help you understand what was sent to you the other day and how those numbers play out in the overall picture, and then what you got this afternoon as an updated budget.”

Boyer said when he first received a copy of the first proposed budget for fiscal year 2018-2019, he became concerned about the amount of deficit-spending present in the budget.

“Whenever I saw the budget as it stood yesterday, I had some concerns about the size of that deficit,” he said. “Mark had relayed to me that maybe there was some misconception, or maybe I misspoke, as to the situation whenever we were talking about the fiscal year ’17 audit.”

Boyer said the numbers provided to the council during the audit report reflect city balances at the fund level, but not necessarily at the cash balance level. This difference is important, as fund balances may appear healthier because of the inclusion of prepaid expenses and other items that don’t necessarily represent actual cash.

“Today, that cash balance has gone from about $2.2 million down to about $1.4 million,” Boyer said. “So that means that we have probably run a deficit for the current fiscal year of about $800,000. When I saw this number of $1.2 million or $1.3 million deficit budgeted for fiscal year ’18-’19, then my alarms went off.”

Boyer said if the council had adopted the initial budget that had been sent to them, the city’s cash balance would be reduced to approximately $100,000 by the end of the year, putting the city on the cusp of insolvency.

Even with the second, trimmed-down budget that had been provided to the council on Tuesday, there still exists a $686,000 deficit. He stressed the importance of the city searching for new revenue sources, cutting existing costs or doing some combination of the two.

“Where we’ve been struggling for a number of years, maybe a decade or more, has been on the governmental side,” Boyer said. “There’s limited sources of revenue on the governmental side to cover all of these things that we’re trying to do with parks and recreation, sanitation and the roads and those things. There’s a tremendous amount of expenditures that occur on the governmental side that don’t have a huge source of revenue like water and wastewater has. And that’s the struggle.”

Saying that similar to other entities such as a college or a public school district, approximately 70 to 75 percent of the city’s budget is made up of payroll expenses for employees. After discussing specific concerns or possible courses of action raised by councilmen, Boyer said there are several viable options for the city, but the budgetary issues of the future must be looked at now.

“The bottom line is that we need to start working toward balancing the budget,” Boyer said. “With the amount of cash we’ve got right now, we can’t go through it at a half a million dollars a year. We’ll be back having this same conversation next year if we don’t find some way to reduce this deficit from $600,000 down to something that’s more manageable like $100,000 or $150,000.”

Mayor Daniel Naucke said no matter the council’s decision on the budget, the budget should be reexamined six months into the fiscal year to determine if there need to be further corrections.

Leaving the podium, Boyer remained in council chambers to be available to answer any questions in ensuing discussion.

The first budget given to the council had a total of $11,557,933, with the second totaling $10,942,973. The second budget reflected $3,776,267 in the general fund (down $16,610 from the first budget), $1,239,708 in the transportation fund (down $46,850), $440,793 in the capital improvement fund (down $551,500) and no other changes in the debt service, sanitation, parks, TIFs, senior center, grants or water and wastewater funds, for a total difference of $614,960.

McFarland said he made the following cuts from the first budget to arrive at the second most recent budget:

  • $25,000 cut from street paving (there had been a $25,000 proposed increase from fiscal year ’17-’18, which was removed in the second budget)
  • $15,000 cut from storm drainage (there had been a $15,000 proposed increase in storm drainage funding from fiscal year ’17-’18, which was removed in the second budget)
  • $14,000 for a proposed park pavilion was cut
  • $335,000 for the proposed lift station at the fairgrounds drive project was cut
  • Dump truck, rock buster and parks department truck purchase requests were cut
  • City hall improvements were cut, except for roof repair
  • Software purchase request for the Community Development Department was cut
  • Console and docking station purchase requests for the police department were cut

McFarland stressed that the budget is not absolutely set in stone and can be amended during the year if problems arise. Additionally, he and the mayor can place a freeze on city spending if needed.

The council then voted to approve the second, lower budget for fiscal year ’18-’19, with all councilmen voting yes except for Ward 1 Alderman Adam Bowers. Ward 4 Alderman Steven Weinhold was absent.

Curt Boyer of Boyer & Associates explains his concerns regarding the city's initial proposed budget and describes potential courses of action for the city moving forward.

Curt Boyer of Boyer & Associates explains his concerns regarding the city’s initial proposed budget and describes potential courses of action for the city moving forward.

Jacob Scott is a reporter with the Daily Journal. He can be reached at 573-518-3616 or at jscott@dailyjournalonline.com.

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