City still mired in debt

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Audit shows sum $16M-plus

By Jeff Bryan

While the city’s latest financial audit shows officials trending in a positive direction in terms of cash flow and reserves, one figure remains hard to ignore. According to the Fiscal Year 2016 Audit, the city’s debt service remains at $16 million-plus.

The report, prepared by Powell & Jones, showed the city’s general fund debt as $3.2 million with its water/sewer enterprise operations debt at $12.85 million.

The staggering sum isn’t lost on officials, especially Councilman Larry Winkler.

“We’re slowly climbing out of it, but it’s going to take 20 years, that’s my opinion,” Winkler said about the debt.

One key in further reducing the debt, he added, is cuts.

“Before I went into office, I said, ‘we’re going to have to make hard choices,’” Winkler explained. “I’ve got my feet on the ground, and the hard choice is going to be made. Mayor (Walter) Green had said we need to eliminate the fire department.

Employees are your best asset in any business, but they’re also you’re biggest financial liability, Winkler said.

“We’re going to have to make some hard choices,” he added.

Without developing revenue generators, Councilman Chuck Dillon said, that figure will continue to loom large.

“I know people don’t like (the thought of parking meters or fire inspections), but if we don’t start generating more money, then we’re going to go further and further in debt,” Dillon countered. “Then what will we do? All we do is get deeper in debt.”

You are reducing debt and still increasing cash a little bit, said Richard Jones, who presented the report May 8 to the Council.

“I see that as a successful financial administration,” Jones added. “Financially, you had a successful year.”

Reserves throughout the city show a positive increase, with most figures showing the city has enough to continue operations for upward of five months.

“Now you’re building them back,” Powell said about reserves. “It’s good to have a formal fund balance policy. You would adopt target amounts, and there are triggers that would have to happen that would alert officials.”

The city should consider a fund balance policy, Powell recommended. That is in the works, according to Jan Smith, the city’s finance director.

“I’d be happy, once she develops one, to look at it,” Powell told the Council.

Mayor Walter Green asked Jones if he has seen other cities throughout the state in better shape or with comparable conditions to that of Dunnellon.

“When you see reserves are diminishing, that’s when you start to have problems,” Jones said. “I can see a positive trend. You’ve adjusted your operations and obligations. I see that as a positive.”

The audit also showed the city’s water and sewer system valued at $33 million dollars. That total includes deprecation of $9 million, which is bothersome for Dillon.

“They’re evaluating system at $33 million, which to me is just a false figure, because you cannot sell it to anyone for that price,” he said. “If you look at the true value, you have to add that depreciation back to the debt. If we’re not putting money back into it to account for the depreciation, you’re losing money, because at some point in time, you’re going to have to replace parts of the system.

“I don’t think it gives you a true indication. If the plant was to fail tomorrow, and we’ve had depreciation allowances, we don’t have that money to replace the system.”

That system, Winkler said, is in need of a lot of repairs, which will cost a lot of money. Winkler shunned the idea of issuing bonds to facilitate those repairs, favoring piecing together more affordable projects.

“Yes, sure will,” he said when asked if he meant piece mealing repairs. “We’ll have to.”

In other action, the Council:

* Rescheduled its July 5 workshop for 5:30 p.m. Wednesday, July 19, while also rescheduling its July 10 meeting to Monday, July 24.

* Authorized an expenditure for $10,364.02 with Dell System Network Server via state bid for City Hall. Passed 5-0.

* Authorized Mayor Green to sign Amendment No. 1 to Agreement No. 2017-07, grant agreement between Florida Department of Economic Opportunity and the city of Dunnellon. Passed 5-0.

* Approved the first reading of Ordinance No. 2017-02, golf cart regulations, by a 4-1 vote.