Roswell City Manager Chad Cole told Finance Committee members last week that restructuring the city government’s finances will be a long-term process.
“Right now we’re not in a good place,” Cole stressed.
The city isn’t bankrupt — as some in local government have been saying — but efforts need to continue to restore a balance between revenues and expenditures that doesn’t exist currently.
Roswell had a $7.77 million gap between revenues and expenditures during the first quarter of this fiscal year, the period from July 1 to Sept. 30.
Among the city’s enterprise funds were several examples of expenditures exceeding revenues. The Water Department’s expenditures were more than $404,000 higher than revenues, South Park Cemetery’s expenditures were $111,000 more than revenues and the Solid Waste Department was in the negative by about $48,000, according to the first quarter financial activity report for this fiscal year.
Without water service and sanitation “you don’t have a city,” Cole said to the committee members.
Heavy use over years of the city’s cash balance to cover the cost of unforeseen expenses is a major reason why the city is in need of financial restructuring. This process becomes a necessity when a government’s cash balance is depleted or expended. Once recurring expenses are met, the cash balance can start to be reestablished.
And it’s a “finite resource,” he noted.
The Roswell Air Center was $1.33 million behind in its revenues. Work to correct problems identified by the Transportation Security Administration continues at a total estimated cost between $2 million and $3 million over four years.
It was pointed out that the airport — another enterprise fund — is especially reliant on state and federal grants to operate. Payments from these government entities can take time to be realized, however, according to city staff.
Cole also explained that employee salaries and benefits are often the largest recurring costs for local governments, including Roswell. He noted that over the past several years, Roswell city government has given employees higher-percentage raises than those provided to federal employees.
He emphasized that employee representatives are overly optimistic about the effect of better-than-expected Gross Receipts Tax (GRT) revenues during the past few months. The wages of the city’s blue-collar workers are more heavily based on how the enterprise operations are faring than GRT.
And all the more reason why “we need focus on enterprise funds,” he said.
Keeping costs and revenues in balance is something not practiced for a long time in city government. Achieving it will “take a few years because of our debt load,” Cole emphasized.
The city still owed in gross receipts tax service about $706,000 in the first quarter of this year. Even the Lodger’s Tax was more than $35,000 away from achieving an equal balance between revenues and expenditure,. City staff reported that this likely happened because some of these local businesses have been falling behind with their payments.
Earlier this year, a document discussed by members of the Finance Committee noted that city budgets going back to the 2015-16 fiscal year ended with expenditures outpacing revenues in varying degrees. In the fiscal year 2015-16, the difference was slightly more than $7.1 million, and in fiscal year 2018-19, that amount was an eye-popping $63.5 million.
The annual imbalances have been offset with cash payments so the city isn’t bankrupt. But having too many expenditures being paid with cash is leaving the city with too few alternatives to react when emergency expenses arise, he said.
Cole emphasized that Roswell must operate its finances in a more sustainable fashion. Balancing revenues and expenditures would not only be for the sake of proper budgeting. A more complete accounting of recurring revenues and expenditures and less use of cash would benefit the city’s residents and businesses.
Reaching that revenue-expenditure balance while ensuring there’s enough money available to pursue state and federal grants for the array of needed projects and operations is what the city needs to achieve a better future, he said.
He explained to committee members why not having enough money available in emergencies — or for allocating matching funds often required to obtain most grants — could negatively affect the quality of life in Roswell.
One significant reason why it’s important is to keep a healthy cash balance on hand: State and federal agencies usually require grant applicants to demonstrate the ability to financially maintain what a grant is going to provide. Being responsible for a percentage of the cost for projects, equipment or services that the grant would give is a common application requirement.
That’s just one more reason why “we need to focus in on enterprise funds,” he said.
He has been focusing on how to improve the city’s finances even before starting work in city government this past April.
