Despite concerns about the potential costs of repairing water line breaks this winter and eventually replacing the entire water system, the city or Ranier is in pretty good fiscal shape.
The Ranier City Council Monday heard a review of the 2007 financial report from Don Zierke of the firm of Miller McDonald.
The report, which will be submitted to the state auditor as policy, showed that Ranier scored well for a small city with a strong general fund, according to Zierke. Despite being over and under budget in various categories, he said the general fund carried a good balance with a strong discretionary reserve to carry the city for about 10 months.
Mayor Ed Oerichbauer said he was pleased that the city is just a few percentage points from carrying enough revenue to cover the expenses for the city and liquor store.
Zierke scored the municipal liquor store operations statements, noting that it is managed well, but needs to be operated as a business, with attention to earned interest, sales, income and net assets.
“There is good equity with cash in the bank,” said Zierke. “The inventory is strong and the business is in good shape.”
The water, sewer and utility portion of the report focused on anticipated higher expenditures and added residences. The net loss from the operating statement was attributed in part to depreciation and severe maintenance problems.
The city is paying out more than it is taking in for water and sewer, and Zierke said the city needs to raise rates after it has transferred general funds two years in a row after operating at a loss.
In 2006, Zierke said that without depreciation, the city would have gained from operations. It still shows a loss in 2007 with or without depreciation. He noted that it is difficult to determine the appropriate cash on hand for utilities because the cost to replace the aging system and anticipated high maintenance is unknown.
He also recommended having funding budgeted to hire engineering firms for studies and analysis.
With information that more residences will be added to the city water line, he recommended that the city raise water rates to build net assets and have cash on hand to fix the system and prepare for repairs.
Zierke said that in the past the combination of state and federal funding would cover up to 90 percent of assistance for such projects. However, in the current economy, this is no longer available and that the city could turn to the Minnesota Public Facility Authority for low interest rate loans to pay for the system upgrade.
“We have highest rates right now and we can’t raise them,” said Oerichbauer after the meeting.
Oerichbauer said the problem with the water line is costing nearly a hundred thousand dollars over the past two years alone. As a small city, he said Ranier cannot budget for those situations, and that the city will need to “beat the bushes” to find funding to pay for the upgrade.
As a small government without an accounting department, Zierke recommended the city convert from spreadsheets to Quickbooks for daily data for ease in reporting and internal control.
Oerichbauer said that as a small city, without an accounting department, Ranier relies on the council to provide close scrutiny and monitoring of expenditures. He said that with short funds and bigger budget deficits, the city investments are all insured and nothing is at risk.
“We have taken every precaution and everything is paid for,” he said. “This is our money and we have to be careful.
