You ask, the mayor answers

At the recent Town Meeting at the American Legion Hall, a citizen suggested that I institute a column in the Review to address citizen questions – to “loop back to the people that are paying the bills” – from you, our taxpayers. This is the first of a series of columns that will address commonly asked questions, and I want to use it to respond to some of the questions about the city’s financial well-being that I heard at the meeting.

“Is the city out of money?”

No. The city is safely in the black. And, like other governments and businesses across the state and the nation, we are reassessing our income projections given the current economic downturn.

Elray Konkel, the city’s Director of Finances and Administration, has projected that overall revenue at year end is likely to be $2.5 million short, or 6.8 percent, less than the $36,601,149 figure that was projected when the 2008 budget was developed last summer. This is a result of lower-than-expected revenue from real estate excise taxes and building and development permit and inspection services — revenue sources closely tied to home sales and residential development.

We are not alone in needing to make a mid-course adjustment to our revenue forecast; in recent weeks, The Seattle Times reported that Snohomish County is projecting a $4 million revenue shortfall in 2008, while King County is anticipating a $20 million gap between budgeted revenue and current projections. The state is predicting a revenue shortfall of $423 million.

The City of Bainbridge Island has no difficulty in meeting its obligations, and maintains a significant cash balance for its needs. However, it is prudent for us to plan to modify our expenditures to meet this shortfall. As our new City Administrator, Mark Dombroski, likes to say, “a budget is a plan for the future based on our best assumptions at a given time; as the year unfolds, we make adjustments to reflect what is really happening.”

Our 2008 budget is a thorough and thoughtfully constructed plan, and it will guide us as we modify planned expenditures to meet the new economic reality. On April 14, I asked our department directors to review their budgets and project lists, and propose adjustments to projected activities and levels of service, which will allow us to reduce expenses and ensure that the city remains “in the black.”

The Directors have briefed me on their recommendations, and I am working with the City Council to achieve alignment on a package of spending reductions. I will report back to you on our strategy as soon as this process is complete.

“Do we need to have the city’s finances audited?”

They are.

The city is audited each year by the Washington State Auditor’s Office. According to the office of Auditor Brian Sonntag, the purpose of this audit is to “assure users of a government’s financial statements that those statements are ‘fairly presented,’” and to provide users with “an independent basis for relying upon management’s assertions concerning the government’s financial position, results of operations and cash flows.” The audit is a thorough process, in which a member of the auditor’s office spends four to seven weeks here at City Hall inspecting records, interviewing staff, and observing and evaluating the city’s financial processes.

The city has received an Unqualified Opinion from the auditor’s office each year that the Finance Department has been under Elray Konkel’s management. This means that, under “generally accepted auditing standards,” the auditor has found that the city’s financial statements are a fair presentation of fact and that the city has complied with all state and local laws and regulations. Elray is confident that this year’s audit will also result in an Unqualified Opinion.

“Shouldn’t the city have final 2007 financial statements by now? How do we know how much money we have?”

We do a daily assessment of how much cash we have in the bank. However, that’s not the same as having fully reconciled and closed financial statements. State law requires the city to submit its final financial statement, called an Annual Report, 150 days after the close of the fiscal year. The city’s Finance Department is on track to complete the Annual Report for 2007 on schedule next week. This is consistent with the timelines followed by the majority of cities in the state: according to the State Auditor’s Office, 60 percent of the cities in Washington also file in May; 20 percent file earlier; and 20 percent file late or not at all.

Currently, our finance staff is reconciling subsidiary ledgers and making final closing entries. It will then produce final statements and prepare explanatory Notes and a Management’s Discussion and Analysis.

In addition to its Annual Report, the Finance Department produces a report at the close of each month; these reports, which reflect revenue and expenses and drill down to the line-item level for each city department, are distributed to the City Council and staff. That also are posted on the Finance Department page of the city’s web site for public review. (Go to www.ci.bainbridge-isl.wa.us/budget_financial_reports.aspx).

Darlene Kordonowy is mayor of the City of Bainbridge Island. She may be contacted at 842-2545, or mayor@ci.bainbridge-isl.wa.us.

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