"Thomas Jefferson said a democracy is dependent on an informed citizenry. I don't care whether it sounds corny or not. It's the truth." -Jim Lehrer
Carefree Truth
Issue #981, January 10, 2022
Issue #981, January 10, 2022
Gary Neiss explained that the goals of the annual audits are to assure financial statements are free from material misstatements, verify appropriate accounting practices and principles are being used, confirm compliance with the Governmental Accounting Standards Board (GASB), guard against fraud and misuse of funds, and provide an additional level of transparency. Once again, this year the Town and the Consolidated Courts have clean audits.
The finances are very transparent in Carefree. It was one of the first towns to have its check registry reviewed on a monthly basis by the Council. There are many checks and balances in place. That's the good work of Town Accountant Jim Keen, who has worked closely with the auditors over the years to review Carefree's receipts to ensure the Town is meeting all the required principles.
The Town reserves have increased significantly this past year. $2.8 million has been added, bringing the total to $13.767 million, some of which is restricted to the Court, and to infrastructure. Some came from the Federal government for Covid relief. The Rainy Day Fund is holding steady at $2.5 million and is carefully maintained because Carefree is heavy reliant on a few top performers in retail sales tax revenue, which is volatile.
Carefree has about $7 million dollars in streets projects over the next few years, which will include approximately 45% of the public streets. As the streets age and oxidize, the cracks and repairs are more significant. These are petroleum based products, and the increasing cost, as you can see by what you are paying at the pumps, impact these costs too.
Also, the fire truck needs to be replaced. The manufacturer is no longer in business, and it's getting harder to find parts. That will cost between $650,000 - $700,000, and there will be some additional costs associated with the fire emergency service program capital requirements.
Because the one time construction sales tax revenue stream that funded the capital projects in the past will be diminishing as the town reaches build-out, Carefree must be cognizant about these future investments and also about future revenue streams that will fund Town operations and capital projects.
Jim Keen explained that he always has sheets that match the departments' line item reports against the line items in the audits. There were no adjusting entries this year. The total amount of revenue and the total amount of expenditures matched to the audit. He appreciated working with the auditing company, Heinfeld Meeth.
Councilman Stephen Hatcher asked if he read it correctly that the sales tax revenue comes in at about $4.5 to $5 million a year. Gary replied that this past fiscal year, it was at an all time high. It fluctuates depending on the economy each year, but the 18 year average has been about $3.8 million per year. Mr. Hatcher asked where the other income originates. Mr. Neiss said some comes from user fees. State Shared Revenue is about 20%. 80% comes from municipal sales tax, which is 3% of the product, and user fees. User fees include building permits, business licenses and other fees charged to cover the costs of those respective services. Mr. Hatcher asked if a percentage of the tax revenue collected from the previous year is contributed to the Rainy Day Fund each year or is it a fixed amount. Mr. Neiss replied that it is a fixed amount, established by past Councils.
Vice Mayor John Crane thought it would be a good idea to revisit the amount placed into the Rainy Day Fund. It was set many years ago and should be looked at in relation to today's world. Mayor Peterson agreed that with inflationary pressures it would be a good idea to take a look at the future needs of the town.
Councilman Vince D'Aliesio asked if Carefree would be doing what it had done in the past, piggybacking off of other municipalities for street work to save money, because the savings were significant when Carefree did that in previous years. Mr. Neiss replied that piggybacking works when there is a hard contract out there that has a piggybacking provision. In the past, there was a provision to piggyback on the project that involved doing a fiber micro surface. Carefree was not able to do that with the latest streets project that was recently approved because numerous treatments were being packaged as one to meet the specific needs of the town. The treatment is married to the level of distress on the streets, so the Town will see what is out there. There may not be piggyback opportunities that meet the needs of the town's streets at the time, although opportunities are always sought.
Mr. Hatcher thought he remembered that the Town spent about $4 million on the street project that started in 2018. Mr. Neiss confirmed that was when the fiber micro seal was begun. Mr, Hatcher said it had been anticipated that $7 million would be spent. He asked if the cycles are every 7 years. Mr. Neiss said the cycles vary. It's based on Carefree's 10 year program and the distress being encountered on the respective streets. The state of the streets is being continually re-evaluated. The $7 million was slated to be spent over the 10 year plan. The Mayor added that work on the streets affected by the Water Consolidation Project would be postponed until that project was completed because it would be wasteful to pave them only to tear them up again later.
Councilman Tony Geiger noticed that the interest rate on the bonds for the water project was 4%. The audit for the Water Company said 2.9%. He asked if that was incorrect on the Town's audit page. Mr. Keen explained that what the Town pays is different. That loan was originally taken out with the Water Infrastructure Finance Authority (WIFA) in 2003, and that interest rate doesn't change. The Water Company pays the Town back at a different rate. Mayor Peterson said they looked at refinancing and consolidating some of the loans when they went out for the bonds, but as a result of their calculations, it made sense to keep some of them in place. Vice Mayor Crane suggested taking another look at the language to make sure it was not confusing.
Greg Crossman, head of the Water Company, clarified that 4% is the coupon rate on the water revenue bonds. When you look at the information from the Town's bonding agent, and the all-in costs, which take into account all the bond funds that came into the Water Company and the payback over time, the actual all-in interest rate that is paid on those bonds is 2.92%, which is the number referred to in the Water Company's audit report. He said it did not get changed in the Town's audit report and should be revised to make it consistent with the UCFD's audit report. The Mayor said they were making notes of that.
Moving on to the audit of the Carefree/Cave Creek Consolidated Court, Judge Parascondola was very pleased with the findings. They had a completely clean audit, reflecting the careful and detailed work that Court Administrator Marilyn Dodge does every single day, and it reflects the strict compliance with the accounting standards, and all of the protections and procedures that have been in place at the Court. The Mayor thanked her, noting that it is a difficult task.
The audits for the year ending June 30th, 2021 were unanimously accepted for the Town and the Court, as was the Annual Expenditure Limitation Report for the Town of Carefree.
https://vimeo.com/657637572
During the January meeting, the accrual reversals for the fiscal year 2020/2021 were discussed. Mr. Keen explained that the Town moves money that's received in July and August that gets put back into the previous fiscal year. The money came in during this fiscal year, so that's reversing those entries and taking them out of the current year. The biggest were the sales tax received in July, August, and September that were put back into June. There were also IGA monies that came in. Business licenses start on July 1st, so that deferred revenue is moved forward to the new year. The total of all these transactions is $801,329. The financial reports for July, August and September have these amounts backed out of them and have been restated. That's a process the Town goes through each year to make sure these accruals are taken out of the current year, so no one thinks it can be spent because it's already booked into the previous fiscal year.
Mayor Peterson reiterated that it was a completely clean audit and this is an anticipated reversal of accruals that is something the Town does every year.
Mr. Hatcher asked what the main item was that is listed under deferred revenue. Mr. Keen said about 50% of it is for licenses. There are also payments that were made for rent at the fire department. There's a list of about 5 items.
The motion to approve the reversal of accruals was unanimously approved.
https://vimeo.com/662480042
Lyn Hitchon
Prepared by Carefree Truth
Copyrighted
Visit our website at www.carefreetruth2.com If you know anyone who would like to be added to the Carefree Truth email list, please have them contact me. Feel free to share Carefree Truth with others on your list.
Visit www.carefreeazbusinesses.com to see more info about businesses in Carefree. Please support our merchants.
The finances are very transparent in Carefree. It was one of the first towns to have its check registry reviewed on a monthly basis by the Council. There are many checks and balances in place. That's the good work of Town Accountant Jim Keen, who has worked closely with the auditors over the years to review Carefree's receipts to ensure the Town is meeting all the required principles.
The Town reserves have increased significantly this past year. $2.8 million has been added, bringing the total to $13.767 million, some of which is restricted to the Court, and to infrastructure. Some came from the Federal government for Covid relief. The Rainy Day Fund is holding steady at $2.5 million and is carefully maintained because Carefree is heavy reliant on a few top performers in retail sales tax revenue, which is volatile.
Carefree has about $7 million dollars in streets projects over the next few years, which will include approximately 45% of the public streets. As the streets age and oxidize, the cracks and repairs are more significant. These are petroleum based products, and the increasing cost, as you can see by what you are paying at the pumps, impact these costs too.
Also, the fire truck needs to be replaced. The manufacturer is no longer in business, and it's getting harder to find parts. That will cost between $650,000 - $700,000, and there will be some additional costs associated with the fire emergency service program capital requirements.
Because the one time construction sales tax revenue stream that funded the capital projects in the past will be diminishing as the town reaches build-out, Carefree must be cognizant about these future investments and also about future revenue streams that will fund Town operations and capital projects.
Jim Keen explained that he always has sheets that match the departments' line item reports against the line items in the audits. There were no adjusting entries this year. The total amount of revenue and the total amount of expenditures matched to the audit. He appreciated working with the auditing company, Heinfeld Meeth.
Councilman Stephen Hatcher asked if he read it correctly that the sales tax revenue comes in at about $4.5 to $5 million a year. Gary replied that this past fiscal year, it was at an all time high. It fluctuates depending on the economy each year, but the 18 year average has been about $3.8 million per year. Mr. Hatcher asked where the other income originates. Mr. Neiss said some comes from user fees. State Shared Revenue is about 20%. 80% comes from municipal sales tax, which is 3% of the product, and user fees. User fees include building permits, business licenses and other fees charged to cover the costs of those respective services. Mr. Hatcher asked if a percentage of the tax revenue collected from the previous year is contributed to the Rainy Day Fund each year or is it a fixed amount. Mr. Neiss replied that it is a fixed amount, established by past Councils.
Vice Mayor John Crane thought it would be a good idea to revisit the amount placed into the Rainy Day Fund. It was set many years ago and should be looked at in relation to today's world. Mayor Peterson agreed that with inflationary pressures it would be a good idea to take a look at the future needs of the town.
Councilman Vince D'Aliesio asked if Carefree would be doing what it had done in the past, piggybacking off of other municipalities for street work to save money, because the savings were significant when Carefree did that in previous years. Mr. Neiss replied that piggybacking works when there is a hard contract out there that has a piggybacking provision. In the past, there was a provision to piggyback on the project that involved doing a fiber micro surface. Carefree was not able to do that with the latest streets project that was recently approved because numerous treatments were being packaged as one to meet the specific needs of the town. The treatment is married to the level of distress on the streets, so the Town will see what is out there. There may not be piggyback opportunities that meet the needs of the town's streets at the time, although opportunities are always sought.
Mr. Hatcher thought he remembered that the Town spent about $4 million on the street project that started in 2018. Mr. Neiss confirmed that was when the fiber micro seal was begun. Mr, Hatcher said it had been anticipated that $7 million would be spent. He asked if the cycles are every 7 years. Mr. Neiss said the cycles vary. It's based on Carefree's 10 year program and the distress being encountered on the respective streets. The state of the streets is being continually re-evaluated. The $7 million was slated to be spent over the 10 year plan. The Mayor added that work on the streets affected by the Water Consolidation Project would be postponed until that project was completed because it would be wasteful to pave them only to tear them up again later.
Councilman Tony Geiger noticed that the interest rate on the bonds for the water project was 4%. The audit for the Water Company said 2.9%. He asked if that was incorrect on the Town's audit page. Mr. Keen explained that what the Town pays is different. That loan was originally taken out with the Water Infrastructure Finance Authority (WIFA) in 2003, and that interest rate doesn't change. The Water Company pays the Town back at a different rate. Mayor Peterson said they looked at refinancing and consolidating some of the loans when they went out for the bonds, but as a result of their calculations, it made sense to keep some of them in place. Vice Mayor Crane suggested taking another look at the language to make sure it was not confusing.
Greg Crossman, head of the Water Company, clarified that 4% is the coupon rate on the water revenue bonds. When you look at the information from the Town's bonding agent, and the all-in costs, which take into account all the bond funds that came into the Water Company and the payback over time, the actual all-in interest rate that is paid on those bonds is 2.92%, which is the number referred to in the Water Company's audit report. He said it did not get changed in the Town's audit report and should be revised to make it consistent with the UCFD's audit report. The Mayor said they were making notes of that.
Moving on to the audit of the Carefree/Cave Creek Consolidated Court, Judge Parascondola was very pleased with the findings. They had a completely clean audit, reflecting the careful and detailed work that Court Administrator Marilyn Dodge does every single day, and it reflects the strict compliance with the accounting standards, and all of the protections and procedures that have been in place at the Court. The Mayor thanked her, noting that it is a difficult task.
The audits for the year ending June 30th, 2021 were unanimously accepted for the Town and the Court, as was the Annual Expenditure Limitation Report for the Town of Carefree.
https://vimeo.com/657637572
During the January meeting, the accrual reversals for the fiscal year 2020/2021 were discussed. Mr. Keen explained that the Town moves money that's received in July and August that gets put back into the previous fiscal year. The money came in during this fiscal year, so that's reversing those entries and taking them out of the current year. The biggest were the sales tax received in July, August, and September that were put back into June. There were also IGA monies that came in. Business licenses start on July 1st, so that deferred revenue is moved forward to the new year. The total of all these transactions is $801,329. The financial reports for July, August and September have these amounts backed out of them and have been restated. That's a process the Town goes through each year to make sure these accruals are taken out of the current year, so no one thinks it can be spent because it's already booked into the previous fiscal year.
Mayor Peterson reiterated that it was a completely clean audit and this is an anticipated reversal of accruals that is something the Town does every year.
Mr. Hatcher asked what the main item was that is listed under deferred revenue. Mr. Keen said about 50% of it is for licenses. There are also payments that were made for rent at the fire department. There's a list of about 5 items.
The motion to approve the reversal of accruals was unanimously approved.
https://vimeo.com/662480042
Lyn Hitchon
Prepared by Carefree Truth
Copyrighted
Visit our website at www.carefreetruth2.com If you know anyone who would like to be added to the Carefree Truth email list, please have them contact me. Feel free to share Carefree Truth with others on your list.
Visit www.carefreeazbusinesses.com to see more info about businesses in Carefree. Please support our merchants.