Summary

of 2011 Financial Report and 2012 First Quarter Report

As presented to Town Council on April 23, 2012
Part1YearEnd2011
Department Stores/Warehouse Budgeted Deficit No ActualPerformance YearEndStatus

Spentmorethanwhatwasbudgetedbut Good alsohadmorerevenuestocoverthe expenses Thecentralpurchasing,warehousing,andservicecenteroperationsoftheBorough ThisisanInternalServiceFund(abusinessfundsupportedbytheotherfundsoftheBorough) Electric Yes, Eventhoughitwasbudgeted, Concern usecash expendituresexceededrevenues;the reserves overagewasreduced Thisimportantutilityoperationisanticipatedtorundeficitsthrough2012 ThisisanEnterpriseFund(abusinessfundsupportedbyratepayersandthesaleofelectricity) Gas No Revenuesexceededexpenditures Good Thisimportantutilityoperationisanticipatedtorunsurpluses through2012 ThisisanEnterpriseFund(abusinessfundsupportedbyratepayersandthesaleofnaturalgas) Water Yes, Expendituresexceededrevenuesby Problem, usecash $838,000 notasustainableplan reserves Thisimportantutilityoperationisanticipatedtorundeficitsthrough2012 ThisisanEnterpriseFund(abusinessfundsupportedbyratepayersandthesaleofwater) Sewer No Revenuesexceededexpenditures Good Thisimportantutilityoperationisanticipatedtorunsurpluses through2012 ThisisanEnterpriseFund(abusinessfundsupportedbyratepayersandtheprocessingofsanitarysewage) Sanitation Yes, Eventhoughitwasbudgeted, Concern usecash expendituresexceededrevenues;the reserves overagewasreduced Thisimportantutilityoperationisanticipatedtorundeficitsthrough2012 ThisisanEnterpriseFund(abusinessfundsupportedbyratepayersandthecollectionoftrash) MotorEquipment No Revenuesexceededexpenditures,excess Good moneyiskeptonaccountforfuture vehiclepurchases ThemotorpooloperationsoftheBorough ThisisanInternalServiceFund(abusinessfundsupportedbytheotherfundsoftheBorough) Engineering No Revenuesexceededexpenditures Good Thecentralizedengineering,surveyandmapping operationsoftheBorough ThisisanInternalServiceFund(abusinessfundsupportedbytheotherfundsoftheBorough) Parking Yes, Eventhoughitwasbudgeted, Concern usecash expendituresexceededrevenues;the reserves overagewasreduced ThisutilityoperationissupportedbyfundsfromtheElectricDepartmentforstreetlightsandtrafficsignals ThisisanEnterpriseFund(abusinessfundsupportedbyparkingmetersandtransfersfromtheElectricFund) AdministrativeServices No Revenuesandexpendituresbalanced Good Thecentralizedfinancial,accountingandcustomerservice operationsoftheBorough ThisisanInternalServiceFund(abusinessfundsupportedbytheotherfundsoftheBorough) GeneralFund Yes, Eventhoughitwasbudgeted, Problem usecash expendituresexceededrevenues;the reserves overagewasreducedbutnotenough ThismainfundoftheBorough,homeofpolice,emergencyservices,recreation,highway,landuse,andothers ThisisaGovernmentalFund(supportedbytaxrevenueandfees)andnotinbalancefor2012 PleasenotethatthereareotherfundsoftheBoroughandthisisjustasummaryofsomemajoraccounts

Part2ForecastforEnterpriseFundsin2012 EnterpriseFundsaretheBoroughsutilities: ElectricDepartmentAswehaveallbeennoticing,thecashbalanceoftheElectricOperatingFundhas beendiminishingsteadilyoverthecourseof2012.Thisshortcomingofourrevenuestobeabletofully coverourexpenseswasanticipatedandmadeknownin2010whenratesweredecreasedinaneffortto softentheimpactofthePowerSupplyContractweareunderwithDTEETthroughan alreadytryingeconomictime.ItisexpectedthatthebalanceoftheElectricOperating FundwillcontinuetodeclineuntiltheendofthecontractwithDTEETonDecember31,2012.Afterthat timethefundwillbegintorecoverunderthesubstantiallylowerPowerSupplycontractsthatthe BoroughhasbeenabletosecureforitsElectriccustomersfor2013andbeyond. GasDepartmentDuetotheabnormallywarmwinter,GasDepartmentsaleswereapproximately $900Klowerthanexpectedinthe1stQuarter.Approximately$300KofthistotalisduetotheBorough powerplantscontinuingtobarelyrun.Despitethesenegatives,highersalestoseverallargecustomers, aswellastheadditionofnewcustomersconvertingtogasfromheatingoil,havetemperedtheimpact totheGasDepartment.TheGasDepartmentcashbalanceendedthe1stQuarteralmost$100Khigher thanatthesametimelastyear.TheGasDepartmentiscurrentlyinverystrongfinancialcondition,and isexpectedtostrengthenfurtherastheyearprogressesandweatherreturnstonormal. WaterDepartmentWaterrevenuesaretrackingaccordingtobudget.Throughout2011andinto 2012,waterproductionhasdecreasedfromlevelsof35yearsago.Asignificantportionofthis decreaseisduetothereductionofunaccountedforwater.2011unaccountedforwaterwas200,000 gallonsperdaylessthan2010levels.Operationalimprovementsaswellasadecreasedproductionhave reducedprojectedexpensesbyapproximately$125Kforthefirstquarter. SewerDepartmentSewerisperformingasexpectedfor2012.Revenuesaretrackingaccordingto budget.Expendituresarelessthanprojectionasexpectedforthistimeoftheyear.Typically, maintenanceexpendituresincreaseduringthewarmermonths.Cashbalancecontinuestobeapositive story.Thebalancehasrisenfromnegativelevelsinlate2010to$1.4millioncurrently.Asnotedinthe 2012Budget,an18%rateincreaseisprojectedforAugust2012tocoincidespecificallytotheBoroughs costtoundertakeourshareoftheJ.HaseMowreyRegionalWastewaterTreatmentFacility. SanitationDepartmentTheSanitationDepartmenttypicallyrunsina56yearcycle;forafewyearsit runsatadeficit.The7thyearusuallyresultsinarateincrease,whichfixestheproblemsufficientlyto allowanother34yearsofdeficits.Thisisthe7thyearofthedeficit,sowewilllikelyaskforarate increasein2013. ParkingDepartmentAswasplanned,theBorough'sParking,TrafficandStreetLightingfundis supportedwithproceedsoftheElectricDepartmentwhosupplystreetlights,trafficsignals,andother trafficcontroldevices.IfnotbutforthecontinuedfinancialsupportoftheElectricDepartment,the proceedsoftheParkingFund(permitsandparkingmeters)wouldbeinsufficienttocovertheexpenses. Therefore,in2012,itisanticipatedthatthefundwillbebalanced.
PleasenotethattheEnterpriseFundsmakeupthemajorityofannualBoroughspending

Part3GeneralFundAnalysis Majorexpendituresuses(MEU):94% Majorrevenuesources(MRS):83% Emergencyservices**38% Realestatetaxes40% Earnedincometaxes17% Policedepartment36% Localservicestaxes9% Recreationdepartment12% Ambulancerevenue9% Highwaydepartment8% Recreationdepartment4% Deedtransfertax3% Policefines/revenues1% **FormerlycategorizedasFire,Ambulanceand FireCode. Realestatetaxes,earnedincometaxes,localservicestaxes,anddeedtransfertaxesaccountfor 69%oftherevenueintheGeneralFund(realestatetaxesaccountfor40%alone) EmergencyServicesandthePoliceaccountfor74%ofalltheexpensesintheGeneralFund Forthefirsttime,EmergencyServicesspendingisslightlymorethanpolicespending In2011,theGeneralFundhadaslightlyhighercashbalanceatyearsendthatwasbudgeted.However, ifnotforhigherAmbulance&RecreationReceiptsaswellasbiginterfundtransfersandtightcontrolson spending(expenditures)theGeneralFundwouldnothavemadeitthrough2011performingaswellasit did.In2011,theGeneralFundtaxrevenuesareparticularlytroubling.
Major Rev Sources: Real Estate Tx Earned Inc Tx Local Service Tax Ambulance Service Deed Transfer Tax Recreation Recpts Police fines/rev Total Major Rev All Other Revenues TOTAL REVENUE % Major Rev Srces 2011 Actual 3,731,681 1,578,210 691,809 979,753 251,816 412,401 130,338
7,776,008

2011 Budget 3,785,000 1,650,000 860,000 870,000 240,000 385,000 141,000

7,931,000

Positive Variance (53,319) (71,790) (168,191) 109,753 11,816 27,401 (10,662)

(154,992)

Realestatetaxrevenuewas$53,319lessthan budgeted. Earnedincometaxrevenuewas$71,790lessthan budgeted. LocalServicestaxrevenuewas$168,191lessthan budgeted. Majorrevenues,intotal,were$154,992lessthan budgeted.However,duetotransfers,whicharenot sustainable,thetotalrevenuewasaslight$41,851 overbudget.

1,760,193 9,536,201 81.54%

1,563,350 9,494,350 83.53%

196,843 41,851

Also,theamountofdelinquentrealestatetaxesturnedovertothetaxclaimsincreasedby140%, whichincludesanincreaseof38%injustoneyear;in2011,approximately$53kwasturnedovertotax claimsanamountapproximatelyequaltotherealestatetaxundercollectionin2011. Taxdelinquenciesareup,inlargepartbecausefolkscannotpaymoretaxes.

TAXLIENS
250 200 Thousands 150 100 50 0 2007 2008 2009 2010 2011

Part4Apeekattheyeartocome?Howhasthefirstquarterof2012gone? Sofar,inthefirstpartof2012,GFrevenueshaveincreasedby$119K(6.4%)whileGF expenditureshavefurtherdecreasedby$217K(8.5%).Thesetwodevelopmentshaveresulted inanimprovementof$337Kascomparedtotheabysmalresultsforthesameperiodin2011. Ourcashbalance,isstilltoolow($498K),butitisconsiderablylarger(almost3x)thanitwas afterthefirstquarterof2011($170K). Expendituresare$217Klessthansameperiod2011andthreecategoriesoftaxesarehigherby $130Kabovetherecordlows. Asfarasthecomparisonbetweenthefirstquarterof2012andthatof2011,weseemtohave bottomedoutin2011. Thispotentialbrightspotneedstobetemperedwithsomecoldhardfacts: Thiscomparisonismadewithasmallperiod(1stquarter2011)thatwaspartoftheworstperiod oftimefortheGFinrecenthistory. TheGFcashbalanceforthisonequarter(2012)actuallydroppedbyalmost$200Kor28%. Atthisrate,wewillstillrunoutofGFcashbytheendofthisyear(thereforeusingotherfunds cashtofinishtheyear). Overthisperiodoftime,theamountofdelinquentrealestatetaxesturnedovertothetax claimsincreasedby140%,whichincludesanincreaseof38%injustoneyear. Soalthoughitissomegoodfinancialnews,considerthecontextoffromwherewehavecome. Iamreallyinterestedinwhathappensduringthenexttwoquartersofthisyeartoseeifan actualturnaroundhasstarted.


- Expenditures Beginning Bal + Receipts + Trans In Cash Avail

1st Quarter 2012

1st Quarter 2011

Positive Variance

690,252 1,974,675 372,286 3,037,213 2,338,149 201,105 497,959

813,878 1,855,366 355,050 3,024,293 2,555,692 298,000 170,601 336,852 217,543 119,309

- Trans Out Ending Bal

Despiteagoodfirstquarter2012,theGFcashbalanceisstillsignificantlydownfromaJanuary1,2011, amountof$813,878toasmall$497,959onMarch31,2012.Thisafteraexcellentfirstquarterof2012 revealshowmuchcashbalancewasneededdespitethelargeunsustainabletransfersof2011. Intotal,themajorrevenuesourcesunderperformedby$155Kfor2011ascomparedtothe budgetnotgoodnews. Utilitytransfersintothegeneralfundhaveincreasedfrom$1.22Min2008to$1.42Min2012 (budget)notsustainable. NonUtilitytransfers,otherthanLiquidFuels,intothegeneralfundhavegonefrom$75Kin 2008to$230Kin2011notsustainable. Infiscal2011,thegeneralfundperformedinamannerveryconsistentwiththebudget.Even thoughthemajorcategoriesunderperformed,thefundhadapositivevarianceof$57K. Withaglimmeroflifeandaslightimprovementcomparedto2011,thereisapossibilitythat thelocaleconomybottomedoutin2011. Whilekeepingexpendituresundercontrol,IfeelthatCouncilshouldcontinuetomonitortax revenues,especiallythoserelatedtoeconomicactivity.Whereweareafterthesecondquarter shouldtellusalotabout2012.
GENERAL FUND CASH BALANCE AT 3/31/12
3.0

GFcashbalancehasdecreasedfrom $2.57Min2008to$.69Min2011(73%)
2.5 2.0 Millions 1.5 1.0 0.5

GFcashbalancehasdecreasedby$123K (15%)inoneyear

GFcashbalancehasdecreasedby$192K (28%)inonequarter

0.0 2008 2009 2010 2011 3/12

Conclusion Thegeneralfund(GF)isstillinjeopardy Revenuesideofthegeneralfund(GF)isstillveryweak However,2011mayhavebeenthebottom,as1stQuarterof2012looksbetter Taxdelinquenciesareup,inlargepartbecausefolkscannotpaymoretaxes Transferscannotcontinueastheydidin2011 Unlessmorepositivechangesoccur,theGFwillrunoutofcashbytheendof2012(thereby runningonotherfundscashbalances) TheJuly2012reporttoCouncilwillbeimportant