City’s 2016 financials show improvement

The city’s financial position improved from 2015 to 2016, according to the statutorily mandated audit presented to the Hot Springs Board of Directors last month.

The independent audit prepared by Jordan, Woosley, Crone & Keaton LTD and based on the city’s 2016 Comprehensive Annual Financial Report showed the net position of the city’s governmental and enterprise accounts both improved relative to 2015.

Governmental accounts, which include the general, police, fire and street funds, improved by almost $1.7 million. Assets grew by $6.5 million and liabilities by $4.8 million. The accounts had $51.1 million in assets compared to $70.6 million in liabilities, which includes part of the city’s pension obligation. Accounting rules now require pension liabilities to be included in financial statements instead of being disclosed in the statement’s notes, said Dorethea Yates, the city’s finance director and treasurer.

Enterprise accounts, which include the water, wastewater, solid waste and stormwater funds, improved by $2 million. Assets grew by more than $700,000 to $265 million, and liabilities decreased by $1.2 million to $114 million.

Bond-financed improvements to the city’s water and wastewater infrastructure increased the value of its capital assets by almost $11 million to $231 million after depreciation. Capital assets increased in value largely as a result of paying down debt that financed the improvements, Gary Welch of Jordan, Woosley, Crone & Keaton told the board.

The city’s bond debt fell by almost

$2.8 million to $97.6 million. The $680,000 for improvements to the Davidson Drive wastewater treatment plant was the only new bond debt the city issued last year. Welch told the board the city’s decision to refinance several bond issues reduced its debt obligation.

“Bond refunding saves you a lot of money,” he said. “For every one-eighth of

1 percent on interest rates savings on rates you save $120,000-plus.”

The general fund finished 2016 with a

$4.7 million balance, almost $1.2 million more than the 16 percent of expenses a city ordinance requires be kept in reserve. Transfers to the police, fire and street

funds accounted for most of the general fund’s $21.3 million in operating expenses last year.

The police and fire funds receive 60 and 40 percent respectively of the half-cent public safety sales tax voters approved in

1999. The sales tax supplements the fixed annual transfers to both funds from the general fund. Per city ordinance, the police fund’s fixed transfer is $4.8 million, and the fire fund’s is $3.6 million.

An additional general fund transfer of $1.6 million last year and $2.1 million this year was required for the police fund to meet expenses. The fire fund required a $1.8 million additional transfer last year and an almost $2 million extra transfer this year.

The city firemen’s pension and relief fund’s $451,382 in net assets at the end of last year covered less than 2 percent of its $28.6 million total pension liability. Welch told the board the liability represents the actuarial-computed benefits owed to current and future retirees.

The police pension and relief fund’s $14.6 million in net assets at the end of last year covered

63.6 percent of its $23 million total pension liability.

Funds the city held in reserve for future retirees when it joined the Arkansas Local Police and Fire Retirement System, or LOPFI, weren’t equal to the pension costs of the retirees it added to the system. The city’s been paying down the difference annually.

Yates said 19 years are left on the amortization schedule.

“That’s based on assumptions about things like mortality and interest rates,” Yates said of the length of the payment term.

According to the city’s 2017 budget, the police fund is contributing 35.6 percent, or $2 million, of the fund’s total salary expense to LOPFI. About 15 percent of that is paying down the pension debt. More than 50 percent of the fire fund’s salary total, or $2.2 million, will be contributed to LOPFI, with more than 30 percent paying down the pension debt.

Fire and police fund employees contribute 8.5 percent of their salaries to LOPFI.