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State audit cites Saratoga Springs for loans to cover deficits

Review of city finances generally favorable

Thursday, February 28, 2013
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— Saratoga Springs city officials must stop loaning money from the city’s general fund to the water and sewer funds to make up deficits in those accounts, a newly released state audit found.

“During the period reviewed, the [city] council did not address cash flow problems in the water and sewer funds,” says the audit released Thursday by state Comptroller Thomas DiNapoli.

“Instead the council routinely relied on increasing amounts of interfund loans from the general fund to finance operations in the water and sewer funds,” the audit says.

The combined balance of those outstanding interfund loans increased from about $1.4 million in 2008 to $1.8 million at the end of 2011 “with no plan for repayment,” the audit says.

This is one of the only problems the auditors found in what on the whole was a favorable audit of city finances for the period Jan. 1, 2008, through Dec. 31, 2011.

The City Council adopted a 2013 budget last year of $39.8 million that included a slight tax rate decreased from 2012.

The audit says the city’s general fund unexpended surplus has increased significantly from $165,723 on Dec. 31, 2006, to $6.2 million on Dec. 31, 2011.

As of Oct. 31, 2012, the 2012 water budget of $2.97 million and sewer budget of $3.67 million appear “generally on track with city officials anticipating a small operating deficit in each fund,” the audit says.

The city Finance Department controls the city’s general fund budget while the water and sewer budgets are controlled by the city Public Works Department.

“It’s an excellent audit but we have some work to do with the water and sewer budget. We need a plan,” said city Finance Commissioner Michele Madigan.

She said her office will ask the city’s consulting auditor to develop a long-term plan to repay the general fund the money owed by the water and sewer funds.

She said city taxpayers shouldn’t have to subsidize the water and sewer funds through general fund loans.

The audit recommends that the City Council carefully monitor whether there is enough money in the water and sewer funds to finance these essential city operations. The audit also recommended that the City Council plan to repay the interfund loans between the general fund and the water and sewer funds.

Public Works Commissioner Anthony “Skip” Scirocco said revenue in the water fund fluctuates from year to year.

A portion of the 2012 summer was dry, so revenue generated by water sales increased last year as compared to a very wet year of 2011. He said there may be as much as $400,000 surplus money in the 2012 water fund.

At Tuesday’s City Council meeting, Scirocco said, the City Council will discuss having Bollam, Sheedy and Torani, the city’s consulting accountants, do an audit of the water and sewer funds going back some years.

“The auditors have to go back and find out how we got into this mess in the first place,” Scirocco said.

In her letter of response to the state audit, Madigan said her department has talked with the city’s independent auditors to “develop a multiyear plan that will incorporate not only [water and sewer] rate increases but also budget analysis and cash flow evaluation.”

The audit said the city should consider raising water and sewer rates to provide those funds with sufficient revenue.

Last year the city increased water rates by 3 percent and this year the Public Works Department is recommending another 3 percent water rate increase for most residential customers. Scirocco said for those using greater amounts of water, 4 percent and 5 percent increases are being recommended.

The City Council will hold a public hearing on the proposed 2013 water and sewer rates at Tuesday evening’s meeting in City Hall.

 
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