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Finance director says no changes necessary in General Fund budget

By Bill ShortFlag City Logo

Millington Finance Director John Trusty has said no changes are necessary in the General Fund budget, because the city’s finances are comparable to last year.
He said revenues for July were about the same, while expenditures were “slightly less” than they were for the same month a year ago.
Trusty made the comments during a report he presented to the Board of Mayor and Aldermen at its Sept. 3 regular monthly meeting.
While acknowledging that expenditures did exceed revenues by approximately $300,000 for this July, he said that is not a “significant” cause for concern. He noted that governments with fiscal years that end on June 30 will “traditionally” go several months with a deficit, because taxes and “some of the other things” have not yet been collected.
“So, that is not something to be concerned about, unless it is not typical from prior years,” he said. “And in our case, it is typical from prior years. It’s the way the cash flows from a revenues-expenditures standpoint.”
Trusty said revenues generated in July for the Water Fund were approximately $6,000 more than for the same month last year.
The city reads meters mid-month and mails out bills at month’s end for the period that begins halfway through the previous month. So, Trusty acknowledged that only half a month’s revenue is recorded in the Water, Sewer and Sanitation funds for July.
Although revenues were still “slightly ahead” of last year, exceeding expenses by almost $22,000, Trusty said that is not counting the expense for depreciation or other post-employment benefits.
“That’s basically our life and health insurance for retirees and what the other post-employment benefit costs are,” he noted. “So, that $22,000 represents positive cash flow.”
When the costs that do not affect cash flow are included, Trusty said, expenses exceeded revenues by approximately $9,000 for the month. He called that a cause for some concern.
The Water and Sewer funds are supposed to be operated like a business, he said, because revenues should cover expenses.
Trusty recalled that, several years ago, the Tennessee Water and Sewer Board was requiring Millington to report to it. And it suggested that, if the city did not “take care” of the proper rate structure for water and sewer, the state would do so.
“The rate structure was adjusted at that time,” he said, “and everybody thought it was going to cover everything. The water rate structure still needs to be reviewed.”
Trusty noted that, since he was hired as finance director, some rate increases have been added to the Sewer Fund, and it is “very healthy” at this point. He also said nothing currently in either the Water or Sewer Fund is at a “level of concern” that would cause the state to start asking questions.
“Water customer revenues were about $10,000 higher than the same month last year,” he said. “That is a good sign, because that means we’re actually having some growth in sales.”
Although the Sewer Fund has revenues from customers who are also water customers, Trusty noted that there are “a couple of other” customer categories.
Revenues from Shelby County and the Navy are called “direct in-flows,” he said, because Millington does not sell them water, but they discharge into the city’s sewerage system. Those were also approximately $6,000 more than the same month last year.
Not counting depreciation and post-employment benefit costs, Trusty said revenues in the Sewer Fund exceeded expenditures by almost $64,000. But even when those costs are included, the revenues still exceeded expenses by approximately $20,000 for the month.
The finance director acknowledged that, after the renovation of the Wastewater Treatment Plant is completed, there will be additional assets that start depreciating and adding to that expense.
“I still believe that our Sewer Fund’s current rate structure will support that,” he noted. “I don’t believe we’re going to be looking at a rate structure change, unless something significant happens in the near future in the Sewer Fund.”
Trusty said revenues in the Sanitation Fund are approximately $9,000 more than in the same month last year, with $8,000 of that coming from residences. The remainder came from a combination of late payments and commercial businesses.
Expenditures were comparable to the same month last year.
“The Sanitation Fund has a deficit fund balance,” he acknowledged, “so we need to recover that. Revenues for the month exceeded expenditures by $12,000. So, we need to be generating that kind of a monthly surplus in that fund.”
Trusty said there was no activity for July in the Capital Projects Fund, except for the new fire truck that has been ordered. Because that is partially funded by a grant, he said the city will not be “seeing the expenses” until the truck is delivered.
After payment of expenses already incurred from lawsuits, he said, the city’s Sales Tax Fund currently has $601,000 in “net collections.” He noted that it is averaging $105,000 a month over the eight months that the revenue has been generated.
Trusty said all the other funds had “no significant activity” during the month of July, except for what is expected as part of the budget that the board approved.

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September 2013
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