Hillsboro auditor: The financial bucket is empty

Hillsboro Auditor Gary Lewis reported to the Hillsboro City Council this week that the financial outlook for the city is "not good," as the city has entered its fifth consecutive year of deficit spending, and that "our financial bucket is effectively empty."

Lewis told council during its regular meeting Monday that he knew there were "people in this room" who would try to dispute that Hillsboro has been deficit spending for five straight years, but he read through and explanation of budget numbers, starting in 2009.

"As I have mentioned in the past, we have had deficit spending within the general fund for five years now," Lewis said. "Some may dispute that comment, but I submit the following:

• In 2008, the city began the year with $1,502,000 in the general fund. Our receipts for the year were $5,104,000 and our expenses were $5,611,000. As a result, our ending balance went down to $996,000. That was deficit spending year number one.

• In 2009, our receipts were $7,646,000 and our expenses were $7,491,000. However, these numbers were inflated from the bond proceeds for the construction of the fire and police stations. If this were factored out of the equation, receipts would have been $4.926,000 and our expenses would have been $5,578,000. That was deficit spending year number two.

• In 2010 our receipts were $5,073,000 and our expenses were $5,250,000. That was deficit spending year number three.

• In 2011 our receipts were $4,875,000 and our expenses were $4,903,000. That was deficit spending year number four.

"Now for this year," Lewis said. "Currently our revised revenue stands at $4,692,000 and our estimated expenses stand at $4,965,000. Considering that we will be losing additional income, our ending balance will likely dip below $400,000. This will be deficit spending year number five."

The Highland County Press reported in April that, according to figures provided by Lewis, the city's general fund fell below $100,000 for the first time in 10 years. According to the city's fund report, the unencumbered balance was $99,707.49 for the end of March.

During Monday's council meeting, Lewis reported that the unencumbered general fund balance was $368,533 at the end of June.

"So, in five years, we've gone from a healthy balance of $1.5 million to where our financial bucket is effectively empty. As a result, ladies and gentlemen, we can no longer continue deficit spending, nor can measures that maintain the status quo be adopted," Lewis said.

Lewis said that because of the financial situation the city is in, contracting with the Paint Creek Joint EMS and Fire District would be the most economically responsible action for the city.

"In regard to the most recent proposal, the contract Paint Creek Joint EMT and Fire (district), I compared it to the proposal submitted by the local fire union," Lewis said. "I estimated at that time that contracting with the district would save approximately $300,000. However, the two largest of the remaining townships (Liberty and New Market) have opted to join the district and that estimate is no longer valid."

Questions were posed regarding the recent concessions proposal that had been submitted by the Hillsboro Firefighters union, in which the 12 full-time firefighters offered to take a total $100,000 cut in salaries and benefits. The Hillsboro administration said they had not read the concessions proposal.

Following the meeting, Hillsboro firefighter Ryan Passet even though the administration said they have not read the union's concessions proposal, it has been emailed to Hillsboro Safety and Service Director Rick Giroux.

"It was emailed to the safety and service director, because he is the one who requested it," Passet said.

Lewis told council that he has made recommendations over the years and tried to make the city take action prevent the current fiscal state.

"As is my duty, the financial health of the city is my primary concern," Lewis said. "Therefore, I support the proposal to contract with the district and I would urge you members of council to do the same. In the past I have advised council of the Auditor of State's desire to assist local governments in identifying cost savings through shared services and I have urged council to take advantage of the AOS performance audit process. Becoming a part of the district is an excellent example of how agencies across the state are coming together, consolidating and sharing resources and saving taxpayer money in the process."

Council's finance committee chairperson Pete Pence said the committee had considered the performance audit options and met with representatives from the state auditor's office. One department in particular council had considered was a performance audit on was Hillsboro Fire and Rescue. The committee did not move forward, he said, because the city was undergoing a change in the administration and they were uncertain what action the new administration would want to take.

Pence said, "It turns out, if we'd have done the fire department this year, it could have been a waste of money."

Lewis said he had urged a performance audit for the fire department two years ago, "and no action was taken."

Council member Dave Shoemaker said he wanted to know how the city was in deficit spending for five years, when each year there was a carryover from the previous year's budget.

"Isn't a carryover extra money?" Shoemaker asked.

Lewis said, "If you look at those carryovers, whenever you compare each year, that carryover has slowly gone down every single year ... This year we'll likely have a carryover, but it will be less than $400,000. In your experience on council, you have always been told - not only by me but by the previous auditor - that a safe carryover amount it $1 million. And we haven't been anywhere near that in quite some time."

In closing, Lewis said that council has few options available to them now.

"I realize that this is a tough decision to make, but your options have been drastically decreased," Lewis said. "I believe that for the safety of the citizens of Hillsboro and the financial health of the city and all of its departments, contracting with Paint Creek EMS and Fire is the most practical decision."

Following the meeting, when asked about the city's next step in address the issue, council president Lee Koogler said that drastic cuts could be possible.

"If the city is unable to pay its current debts, we'll have to make decisions about how we're going to pay what we need to pay," Koogler said. "That could be layoffs. That could be trimming budgets within departments down to really next to nothing, making it very hard for them to operate. I think we have some very difficult decisions facing us, and this is one that essentially affects all the others."