Credit watch removed, city finances on track
August 8, 2011 · Updated 10:44 AM
Wednesday’s mid-year budget review lacked the same kinds of emotional fireworks seen this time last year.
Instead of anger and frustration councilors shared gratitude and perhaps even a sigh of relief.
The city has been taken off Moody’s credit watch and is well-positioned to end the year within budget expectations, according to Ellen Schroer, the city’s finance director.
This mid-year review stood in stark contrast from 2010, which in part, cost former Finance Director Elray Konkel his job after he informed the council that cash flow would be down some $900,000 more than anticipated by the end of the year.
“This is an amazing turn around, especially in a down economy,” said Councilor Hilary Franz. “To be able to do this in one year, even in a good economy, is really difficult.”
Interim City Manager Brenda Bauer said the removal of the credit watch will save the city a large amount of money over the long term as it prepares to issue nearly $6 million in bonds on Aug. 10 to repay the $3 million short-term loan from the water utility to the sewer utility in order to pay costs for the Waste Water Treatment Plant project.
Moody’s removed the negative outlook and applied an A1 rating to the city.
“The rating actions primarily reflect the city’s moderately sized and declining tax base, satisfactory general fund reserve levels, and the city’s stable financial operations as a result of new leadership and a viable plan to build reserves. The rating actions also reflect the city’s manageable levels of debt,” according to the Moody’s statement.
AA and AAA are higher ratings, but A1 is an “upper-medium grade” and subject to “low credit risk.” Bauer said she credited the staff reorganization, dropping city employees down from 152 to 111 as a major factor.
“It is rather unusual to move as quickly off credit watch as the city has in one year,” said Bauer.
Though the city looks to have “right-sized” enough to bring expenditures and revenues on par, the revenue stream still doesn’t represent the cash needed to begin checking off the city’s long capital project backlog or failing infrastructure needs. Closing that gap is something city administration is working on through strategic planning with the council.
As of June 30 operating revenue was at $15.1 million, or about 45 percent of the total budget. Schroer said the city expects about $3.5 million in Winslow Way grant funds to trickle into the city as the year progresses, which brings the city on target.
Operating expenditures are at $9.3 million, or 47 percent of the total budget.
The city’s reserve cushion has been replenished after dropping from $2 million to zero during the beginning of the recession crisis. The city is on target to meet a $400,000 contingency reserve target and the emergency reserve was boosted with a $400,000 state grant. The council has yet to decide how it plans to use the $2 million in Washington State Ferry settlement money that is sitting in the city coffers.
Despite the dead construction market, other portions of the city’s sales tax revenues have improved over 2010. Construction is down $75,000 or 20 percent from a dismal 2010, but overall sales tax is down just 3 percent comparatively.
Retail, which makes up the second largest component of sales tax revenue, is actually up by about four percent as compared with 2010.
“The one part of the report with room for improvement is sales tax,” said Councilor Barry Peters. “Winslow retail, however, seems to be holding its own.”
Downtown Winslow has seen a 1.6 percent increase in 2011 as compared to mid-year 2010, but the city gets its sales tax revenue on a two month delay so it will be several more months before the city can measure the actual impact of the construction on business revenue.
Overall the utility funds are projected to end the year at $9.2 million or 101 percent of budgeted revenues. In anticipation of the bond issuance the city expects the water utility to be repaid, which will bring the fund to $4.4 million of unrestricted reserve.
That is a 244 percent increase from the $1.8 million year-end 2010 balance.
The city is still waiting for the consultant to present their final recommendation on the future of the city water utility.
The new $50 parking fee implemented by council during the last budget cycle hasn’t generated the cash flow projected in the budget.
Revenues are 30 percent lower than annual estimates, which Schroer attributed to the increase from two to three hour parking in Winslow, construction and a delay in hiring the second parking enforcement officer until May.
Though bolstered reserves and a credit watch removal show progress, Councilor Bill Knobloch said the city still has tough decisions ahead.
“Yes we are paying bills at City Hall, but we still have to answer to the community about what they are getting for their tax dollar,” said Knobloch. “We have to do better to maintain what we have.”
Councilor Bob Scales also warned the city has yet to identify revenue streams to plan for future infrastructure needs.
“This is a cautionary pat on the back for getting operation costs under control,” said Scales. “Now we have a huge back load of capital projects and no new money or revenue streams to pay for it.
“We still have a lot of work to do and that’s where the strategic planning process will come into play.”