The city ended 1998 with a surplus of $818,961 according to a draft audit prepared by the city's outside auditors, Deloitte & Touche.
The draft statement details the city's financial condition as of Dec. 31 as well as a list of concerns and recommendations by the auditors. City Administrator Anthony J. Restaino said he expects to prepare his response to those in next two weeks.
The financial statement will be presented to the City Council when it meets at 4 p.m. Tuesday.
Among the items listed under "internal control and record keeping considerations" are several issues that the City Council has been proposing or complaining about for several years, such as the need for a long-range financial plan and capital plan, better collection procedures and better controls over expenditures, such as for the use of cellular telephones.
Deloitte & Touche recommends that the city take a more aggressive stand toward improving its bond rating and refinancing outstanding bond issues which have interest rates as high as 10 percent. Even though the city's current bond rating precludes it from borrowing at favorable rates, the auditors believe there are opportunities to refinance certain portions of the debt for significant savings.
Restaino said the city already has pursued one such avenue -- refinancing of the $70 million water plant construction bonds through the state in order to receive a 50 percent subsidy of the interest rates. Restaino said the city's first application was turned down, but he believes a second application will be approved.
He said the auditors' suggestion that the city challenge Moody's Investors Service over its low bond rating or use an alternative rating agency has been considered. He said representatives of Evanson & Dodge, the city's financial advisers, recommended waiting to see how the financial picture looked this year before taking that action.
The auditors also noted that the amount of uncollected water and sewer bills has risen significantly in recent years. They suggest that the city take a more aggressive approach to collection by assessing higher late fees, offering a discount for early payment, shutting off water for nonpayment or other options.
"While uncollected amounts are transferred to city tax bills, there is no guarantee that those amounts will ever be collected. Eventually, these uncollectible accounts cause rate increases on those that are timely with their payment," the draft states.
Restaino said toughening up collection procedures is difficult if the ultimate threat of turning off the water cannot be accomplished. He said shutting off utilities is a difficult thing to do especially for residences because of the danger to health and safety. He said he believed the city published the names of delinquent customers in 1997 and "I think we did see some acceleration of payments."
The auditors also recommend that the city evaluate the operation of the golf course and other recreational programs to make sure that the city isn't subsidizing the course or subsidizing other programs "for which the benefit does not warrant."
Setting up separate funds or other means of accounting for the services would allow the city more readily to determine the income or losses for such services. Some City Council members have been pressing for such accounting for all city services, so that their exact costs versus the value to the taxpayer can be assessed.
In another area of concern for the Council, the auditors recommend the city tighten up controls on cellular phone usage through a formal telephone use policy and to hire a consultant to analyze its telephone use and search for the best plan. Such consultants usually charge a percentage of the savings. City Council members have been complaining about the proliferation of cellular phones and have asked repeatedly for reports on usage of the phones.
As to a long-range financial plan, which is something Councilman and mayoral candidate John G. Accardo has been supporting for five years or more, Restaino said it makes a lot of sense "theoretically but there has to be a will on both sides to follow a plan or it isn't worth the paper it's written on."
Neither is a capital plan "worth the paper" if the city can't borrow to implement it, Restaino said. However, the City Charter mandates that the mayor propose a capital spending plan every year whether borrowing is involved or not, which Galie has not done. And, the auditors say such a plan is essential to prioritize needs, make efficient use of limited resources and assist elected officials in making orderly decisions, among other advantages.
Among other conclusions were that the city maintains more bank accounts than it needs. Generally, cash control, record keeping and investing efficiency can be improved by using the fewest number of accounts possible, the report says.
It also says, that while the city follows an investment procedure that has been in place for some time, it lacks a written policy as required under state General Municipal Law to ensure that investments are secure and within legal guidelines and that they mature as cash is needed and provide a competitive rate of return.
The report said the city ended 1998 with an accumulated fund balance of $1,887,003. The balance had been $3,242,141, but the City Council used $1,355,138 to reduce this year's budget, according to acting City Controller Sandra A. Peploe.