Rosy Results For City’s 2010 Audit

Smart fiscal management, Inver Grove Heights city officials say, have kept the city’s finances healthy, despite the declining market value of homes in the city and a dearth of state aid funding.

The city’s efforts show on its 2010 audit report, released to the Inver Grove Heights City Council during its work session on Monday. The report, conducted by Kern, DeWenter and Viere, LTD., paints a relatively rosy picture of the city’s finances.

Between 2009 and 2010, the balance in the city’s general fund grew from roughly $5.08 million to $5.23 million. The city’s total cash and investment balances also increased, rising from $61.7 million in 2009 to $64.6 million in 2010.

“I think the city is in decent financial condition, we had a clean audit,” said Finance Director Ann Lanoue.

The report comes at a financially challenging time for many municipalities across the state. Inver Grove Heights hasn’t received any state aid since 2002. The city’s Market Value Homestead Credits — reimbursements the city receives from the state as part of a property tax relief program — have also been drastically reduced, from nearly $700,000 in 2002 to just $22,003 in 2010.

The lack of state aid has forced the city to rely on property taxes for revenue; in 2010, property taxes made up roughly 85 percent of the city’s general fund revenue.  Thanks to declining home values, however, the city’s property tax capacity shrunk 6.7 percent between 2009 and 2010.

In response to the shrinking tax capacity, the city raised its tax rate by 10.24 percent between 2009 and 2010, Lanoue said.  While the increase seems large, the drop in market value for many homes undercut it. In actuality, Lanoue said, the amount the citied levied in 2010, roughly $15.69 million, is only a small increase over the $15.42 million the city collected in 2009.

City Administrator Joe Lynch attributes the city’s financial position to the proactive approach took to its finances in 2008 and 2009.

“I think early on we looked at our budget, we looked at the economy and we looked at the bottom line, and there were some changes made,” Lynch said. “We have made very good financial decisions in light of the recent economic downturn.”

According to the administrator, the city cut staffing in its community development department and established two-year contracts with a fuel provider to secure reduced gasoline prices for the city’s vehicle fleet, among other changes.

According to the audit report, Inver Wood Golf Course and Veterans Memorial Community Center continue to operate at a loss. The golf course, which underwent an operational audit last year, incurred a net loss of $368,146 net loss in 2010, or, compared to $311,501 last year. City staff members, Lynch said, continue to look at ways to reduce the expenses of the golf course. Recently, the golf course implemented a new fee system and more automated services, which allowed the city to reduce staff at the facility. The course, Lynch and Lanoue noted, is also burdened with roughly $450,000 in annual debt payments.

By reducing staff and changing its programming, the city has been able to significantly reduce expenses at the community center, from a $711,466 net loss in 2009 to a $576,330 net loss in 2010.

The police department was the city’s single most expensive department in 2010: accounting for roughly $5.34 million in expenditures. Street- and park-related expenditures were next, together totaling roughly $3.7 million. Total expenditures in 2010 were up to roughly $15.33 million, from $15 million in 2009.