Most readers, I suppose, would rather go to the dentist than look through 100 pages of financial reports, but that’s what The Daily Freeman Journal did recently when the city released results of its annual audit.
Rather than a detailed, technical analysis of the report, we present a much-abbreviated look into what the audit shows about fiscal management of the city at this point in time.
Like a business, the city’s income, expenses and assets are audited annually. The auditors must be independent of the City of Webster City, and must examine the financial records to see they’re free from misstatement, whether from fraud or error. At the end of their work, the auditors issue a report, including their opinions. The city employs Williams & Company, of LeMars, as its independent, external auditor. Williams reported to the City Council of Webster City Monday on its audit of the city’s books as of June 30, 2023, which is the end of the city’s fiscal year.
The audit follows Government Auditing Standards issued by the Comptroller General of the United States, ensuring that the audit is unbiased, and can be trusted as truthful and accurate, as well as comparable with other, similar, government entities.
Here, in very simplified form, is a summary of what the auditors found:
— Webster City had $8.9 million in construction during the 12 months to June 30, 2023;
— The city completed the First Street lighting project, mini-pitch soccer complex in East Twin Park, and the 2021 Hot Mix Asphalt (HMA) street repaving project, all classified as “large capital projects.”
— The city spent $170,000 for vehicles for the Webster City Police Department. This is part of an ongoing effort to update and improve the fleet over several years.
— There are two main functions performed by city government in Webster City:
1. Those classified as “principally supported by taxes and intergovernmental revenues,” including public safety, public works, health and social services, culture and recreation, commercial and economic development, and a general catch-all account called “general government,”and;
2. Those classified as “business activities” and includes electric, water and sewer utilities, funded largely by ratepayers. The report states: “the goal of the City of Webster City is to have revenues exceed expenses in the business-type activities. The goal was obtained for all utilities for the year ending June 30, 2023 … “
— The audit report highlighted the importance of the electric utility to the city: “the electric utility is the main function of the City of Webster City business-type activities, making up 72% of the total charges for services. Rates are monitored in each of the utilities on an ongoing basis to maintain their financial stability.” In other words, the electric utility is the city’s big money-maker, and has been for many years. Try to be thankful for this the next time you pay your monthly bill.
We can’t claim to have a financial review without some numbers, but we’ve kept them to a minimum. Both government activities and business-type activities increased in 2023 versus 2022 as shown here:
Government activities Business type activities
6/30/2022 6/30/2023 6/30/2022 6/30/2023
$39,785,303 $42,239,611 $43,590,075 $46,296,428
Adding together the government and business-type activities yields $83,375,378 for fiscal year 2022, and $88,536,039 in fiscal year 2023. Here’s what the auditors had to say about it all:
“At the end of the current fiscal year, the City of Webster City is able to report positive balances in all three categories of net position for government as a whole, as well as for its separate business-type activities.” Bottom line: there was more general government activity in 2023 than 2022, and more use of the city utilities — electric, water and sewer — in 2023 versus 2022.
Property owners are always interested in property taxes. In Webster City, they make up about half the city’s income each year. Other sources of income include charges for services, operating grants and contributions; capital grants and contributions; and other taxes, including local option taxes, such as our hotel/motel sales tax.
Like an individual person, the city has a “credit limit.”
Here’s what the auditors had to say about Webster City’s long-term debt as of June 30, 2023: “The City of Webster City’s total long-term liabilities decreased by $1,667,232 during the fiscal year. State statutes limit the amount of general obligation (bond) debt including tax increment financing.
“A government entity may issue up to 5% of its total assessed valuation. The current debt limit for Webster City is approximately $21,891,739, with general obligation debt being $11,445,000 and tax increment debt being $2,257,798.
“The City of Webster City is at 63% of the debt limit.” At least for now, our credit isn’t maxed-out.
A general obligation bond is secured by the “full faith and credit” of the city, meaning all available resources, even taxes, will be used to repay bond holders. Tax increment financing (TIF) is ordinarily used for urban renewal. Often, it comes in the form of assistance to private firms who agree to make improvements in a designated zone. A local example is the new apartments built in the Red Bull Area Urban Renewal Area east of Van Diest Medical Center.
So, there’s a short course in city finance. Now, hopefully, you know more than you did about the city’s financial condition, it only took a few minutes, and still, we think, beats a trip to the dentist’s office.
View this article as it originally appeared in the Daily Freeman-Journal.
Last modified: February 7, 2024