Clintonville may need new sources of revenue
By Bert Lehman
In an effort to get its debt under control, the city of Clintonville has adopted financial policies and guidelines.
Clintonville City Administrator Chuck Kell said he assembled the policies and guidelines using recommendations from Standard & Poor’s and other rating agencies as to what they feel good fiscal management by municipalities should include.
He told the Clintonville Finance Committee at its Aug. 8 meeting that he compiled the policy and guidelines because the former Finance Committee had requested it, and he had an upcoming ratings appointment with Standard & Poor’s.
When going through the document, Kell said that a sound financial policy includes the following items: General fund undesignated and unreserved fund balance, tax rate stability, preservation of general obligation borrowing capacity, debt management structure/duration, and maintenance and enhancement of credit rating.
Kell said good city budgeting consists of conservative revenue forecasting, tight expenditure controls and multi-year budget planning. He said he feels that the city of Clintonville is doing those three things.
“I think we’re making a good step towards this with these fiscal policies,” Kell told the Finance Committee.
Kell said the policy and guidelines are not ordinances, and are flexible enough to be modified in the future.
The policy calls for the city Clintonville to maintain an undesignated fund balance at a minimum of 25 percent of general fund revenue. Kell said he’s seen recommendations ranging from 5 percent to 40 percent.
“I’ve always felt that 25 percent was a good place to be,” Kell said. “It means that you’re going to have a bank account that can handle emergencies if something comes up.”
The policy also stipulates that if the city has to use money from the undesignated fund balance, the money isn’t spent on short-term items. Types of long-term projects the money can be used for is listed in the policy.
Regarding tax stability, the policy recommends the city maintain an equalized tax rate for debt at a level which does not exceed $2 per $1,000 of equalized valuation for purposes of financing its five-year capital improvement plan.
Based on the current valuation of the city, Kell told the committee that equates to only $370,000 a year going toward debt payments. He said currently the city is paying $740,000 per year in debt payments.
“That’s a lot of belt tightening, and it’s not going to happen in one year,” Kell said. “But we need to work towards getting to that.”
The policy also states the city should be at a 50 percent debt ratio. Once its recently approved borrowing is completed, the city will be around 70 percent.
Committee member Mike Hankins said he feels the policy and guidelines need to be discussed every year.
“What I’m afraid of is that we’re going to pass this and not make any head-way on this in five years,” Hankins said.
He added that reviewing it every year will help the city monitor its progress in reaching the recommendations.
“I think that’s a good idea,” said Finance Committee member Jim Supanich. “I think if you can keep this out in front of everybody so that they understand, especially at budget time, to review this.”
Hankins acknowledged that the city may not reach the recommendations within five years, but said it is important for the city to start moving in the right direction. He said the recommendations would be more achievable if they are done in pieces.
Supanich also warned that if the policy and guidelines are approved, and in five years the city was still in the same financial situation, the ratings companies would not look favorably at the city.
“Even if you could figure out how to get there in 10 years that would be a big accomplishment,” Kell said.
“I’d be thrilled to get there in 10 years,” Hankins said.
Finance Committee Chairman Mark Doornink told the committee that in two election cycles, it could be a completely new council.
“That’s one of the reasons you have something like this,” Kell said.
He added that Clintonville has two factors happening that he doesn’t typically see in other municipalities.
The first factor is the value of the city of Clintonville is going down.
The second factor is the city of Clintonville is relying on taxes and debt to pay for everything.
“I think you have to seriously look at some other funding sources,” Kell said.
He added that some communities assess a portion of the street replacement costs to the property owners. He said a lot of communities are also imposing a wheel tax on their citizens to create a revenue source to replace the streets.
“I think one of the things you need to do is start seriously talking about other revenue sources to pay for the things you want to do,” Kell said.
Kell acknowledged that he didn’t know if a wheel tax would be the answer, but rather just one new revenue idea.
When presenting the policy and guidelines to the Clintonville City Council the next night, Kell told the council this was “new territory” for the city.
“I don’t believe that the city has ever taken a policy position relative to the finances of the city and issues like fund balance and debt,” Kell said. “Quite honestly I believe this is very important for the city.”
Kell shared much of the same information that was discussed at the Finance Committee the prior day.
When discussing alternative sources of revenue at the council meeting, Kell said the city will not be able to borrow the money to do all the projects it wants to do and to purchase all the equipment department heads have requested.
“It’s going to be tough,” Kell told the council. “But listening to the Finance Committee last night, they’re committed to working on this.”
The council unanimously approved the financial policy and guidelines for the city, which was recommended by the Finance Committee.
At a special Finance Committee meeting on Wednesday, Aug. 17, the committee began discussing a plan on how to meet the recommendations of the newly passed financial policy and guidelines. See next week’s Clintonville Tribune-Gazette for information from that meeting.