Avon Park Borrowing Has Auditor Concerned

The city of Avon Park borrowed from itself, and this has the city's auditor concerned.

"They could have borrowed from a bank but they've done it through the government itself," James Halleran said. Halleran and Yan Lapointe, CPA, were at Monday night's city council meeting presenting councilors a slide show of the draft Comprehensive Annual Financial Report for the year that ended Sept. 30.

The total amount borrowed by the Water and Sewer Fund, and the Airport Fund, was $1,797,678, Lapointe said. A portion of that money - $859,320 - was "restricted," he said. The restricted money was borrowed from the Infrastructure Fund, money meant to be used for capital improvements. The city used that money to cover operational expenses. That's prohibited by state statute, said Halleran, a CPA from Moore & Co.

Halleran is not aware of any state deadline for repayment. He was also unaware of any penalties by the state. He compared it to "borrowing on a line of credit." In other words, the city now owes itself money. To get it back Halleran made a suggestion.

"My recommendation is to increase cash flows," Halleran said.

"Increase charges for services or try to see if you can reduce costs," he said. "The city is exploring both of those choices. They have (requested) a rate study of Water and Sewer."

That study will be made by another firm, he said. The same comment was included in last year's audit.

"They did it last year, too," Halleran said. His firm did not complete last year's audit year.

He expected the rate study to be presented at next month's city council meeting.

Councilors expressed concern after the presentation.

"Basically we don't generate enough money to pay our bond obligations," said Councilman Joe Wright. Councilman Al Joe Hinson agreed.

City Attorney Gerald Buhr recommended that the city do a periodic review of its rates.

Mayor Sharon Schuler said her biggest concerns also include the pension fund.

Halleran said that an actuary report would be given to the city in several months that would determine what the city's contribution to the pension fund should be.

"This will affect the 09-10 budget" and not the present budget, Halleran said.

The city has had to deal with a decreased state budget because state revenues are down. The state cut the city's budget twice in the past year. The first reduction was $157,000. Monday the city's budget was reduced by $109,000, said City Manager Sarah Adelt.

Adelt said that the city dealt with the first state reduction by not replacing employees who retire and being more cautious about spending.

At the meeting Halleran told councilors that the general fund only has about one and one half months of savings. After the meeting Halleran said that did not concern him.

The government recommends that municipalities keep somewhere between 10 to 15 percent of expenditures for the year in the account, he said. Avon Park has 9 percent. Some municipalities want six months of reserve left in the fund like a savings account for a rainy day and others don't want any money sitting there, he said.