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April 30, 2020 - 9:35am

CPA: Town deemed financially fit to take on pandemic-related decrease in revenue

posted by Mike Pettinella in news, town of batavia, Freed Maxick, three+one, COVID-19.

The Town of Batavia has the financial strength and stability to weather the inevitable loss of income brought on by the COVID-19 pandemic, according to the certified public accountant assigned to review the municipality’s books.

Reporting during a Town Board work session on Wednesday, Laura L. Landers, MPA, CPA, director of government services practice for Freed Maxick, said that the Town has “adequate assets … to absorb” a blow to its balance sheet.

“Management believes that tax revenues will be lower in 2020 than anticipated in the adopted 2020 budget,” she said, “but they’ve also assessed the financial condition and the potential impact on revenues, and it has been determined that the town has adequate assets of fund balances to absorb this potential decrease in revenues.”

The work session was conducted via the Zoom videoconferencing service.

Landers said that the Town, at the close of 2019, had unrestricted net funds of $9.8 million and a general fund balance of $6.6 million, with $5.4 million of that in the unassigned category.

Favorable percentages realized

“That unassigned equates to about 138 percent of expenditures versus the prior year when it was 140 percent, and total fund balance of a little over $6.6 million is 171 percent of expenditures versus 164 percent in the prior year,” she said.

She also noted that the Town has set aside a bit more than $1 million to balance the 2020 budget, a prudent move in light of the prospect that sales tax revenues will decrease.

“Unlike years past, I don’t see (sales tax increasing) in 2020. And even in 2019, where the general fund ended up with an excess of revenues over expenditures of about $983,000, I don’t see that’s going to happen (in 2020),” she said. “There may be some surplus; we’re going to have to wait and see where sales tax comes in.”

Landers also predicted that New York State would withhold most or all of the Video Lottery Terminal funds generated by Batavia Downs Gaming. In 2019, the Town received $160,000 from the VLTs.

Other pertinent financial figures:

-- On the revenue side, sales tax came in about $492,000 over budget in 2019, an increase of about $140,000 from 2018.

-- The Town received about $302,000 from state sources -- Revenue sharing, $29,000; VLT, $160,000; CHIPS (highway improvement grant), $58,000; and records management grant, $55,000 for records management grant.

-- General fund reserves are $130,000, with $56,000 for park improvement and $73,000 for economic development.

-- General fund revenues were $4.8 million and expenditures were $2.9 million, prior to the transfer of $942,000 to the highway/townwide fund.

-- The highway/townwide fund had a surplus of $129,000 in 2019 compared to $335,000 in 2018, and the highway/townwide capital reserve fund balance was close to $760,000.

Landers said that both the water and sewer funds ended 2019 with more revenues than expenditures, with water at $725,000 and sewer at $386,000. The unreserved fund balance for the water fund was at $1.7 million and for the sewer fund was at $2.1 million.

Tapping into fund balances is possible

“Overall, the Town as it stands at 12/31/19 has good fund balances and has built up its fund balances, but I see that – depending upon economic recovery – some of those fund balances are going to be utilized in 2020 because of the decrease that I see in state funding … and sales tax,” Landers said, adding that the financial statement referenced the impact of the coronavirus.

She said a single audit was conducted since the Town spent more than $750,000 (actually $1 million) in federal funds for highway planning and construction.

“The result of that audit we did not note any significant or material weaknesses in the internal control over financial reporting or compliance, or on compliance related to the federal programs that were tested,” she said.

On a separate management report, Landers said she found “one minor control deficiency” connected to utilities reporting, but no significant deficiencies or material weaknesses related to the operation of the Town or as a result of any audit procedures that were conducted.

First quarter investment review

Town Supervisor Gregory Post followed Landers’ presentation by reviewing the Town’s 2020 first quarter investment report prepared by the three+one investment consulting firm of Pittsford.

Per the report, the Town had an average of $9.8 million invested into certificates of deposits, ending the period at $10.8 million. This is up from the last period average invested of $9.1 million.

In the past 12 months, the Town has earned $176,625 in interest, with $29,674 being earned in the first three months of 2020. A key factor in the amount of interest earned is the Town’s policy of locking in CD rates for various periods of time, the report indicated.

The Town received five-star ratings from three+one in terms of percent of funds invested, liquidity proficiency and effective interest rates earned.

It fell just short of five stars in cash flow optimization, with a recommendation to use more electronic payments, and in investment policy, with a recommendation to update the list of allowable investments, including using pooled investment services.

'Well-positioned’ going forward

Post said he is encouraged by the Town’s financial standing.

“You can see that we’ve grown our cash position substantially in the last couple of quarters, and are well-positioned to meet the pandemic crisis financial concerns,” he said.

“That return on investment, coupled with not spending money appropriated for the design and construction management of the Town Hall expansion, should keep us in pretty good fiscal shape throughout this year and well into next year – even with as much as a 35 percent loss in sales tax revenue and no anticipated increase in property taxes.”

Post also addressed the “repopulating” of Town Hall, saying that the plan is “to bring back one or two staff members at a time as needed to get everybody in the building and inspection departments in as they need to be.”

He said health department officials have indicated they will be monitoring businesses and agencies in two-week intervals to watch for any medical problems that might arise.

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