Story originally printed in the Vernon Broadcaster or online at www.vernonbroadcaster.com
Published - Tuesday, July 01, 2008
Auditor says city of Viroqua is in good financial position
The city of Viroqua is in good financial shape, but may need to increase sewer and water rates to pay for projects that have been completed over the past couple of years.
That was news delivered by city auditor Jack Vig last week. Vig addressed the city council's committee of the whole and delivered the results of his annual audit of the city books.
"I think the city is in very good financial position," said Vig.
Vig said the city has had a fair amount of construction in the sewer and water departments with the reconstruction of Decker Street. Some of the projects were paid for with state money and grant money, but the city did have to borrow to pay for a portion of those projects.
"The utilities are solvent and standing on their own, but you have a number of project commitments over the last couple of years and in the water utility in particular we want to talk about their rate status," said Vig.
Both water and sewer rates might be due for a modest increase, Vig said. Vig said it may be possible to do the water rate increase first and the sewer later.
"I think given the amount that has been invested. and the additional debt that they have. we wanted to make sure we had a discussion about that," said Vig.
Vig said the water utility has operating revenue of about $785,000 a year and the sewer utility shows about $900,000. The water utility recorded more than $558,000 in system improvements over the last year and the sewer utility showed $494,000 in improvements.
"Another way of looking at that was the way of financing that was a combination of debt and finance dollars," said Vig.
Vig said the utilities should show revenues equal to at least 1.25 percent of debt and both utilities are at that level.
Vig said the water utility has had some major projects to tackle in the last couple of years beside the Decker Street project. There have been major well improvement projects and both water towers have been repainted.
"So, we have some significant expense factored in as well," said Vig
Vig said the state is allowing the city to spread the cost of the tower painting projects over a 12-year period versus taking the on in a one- or two-year period.
Vig said many water utilities throughout the state have seen a drop in water consumption and Viroqua's water department also saw a drop in usage. Because water usage was lower, sewer revenues were also lower, said Vig.
Vig said water utility expenses were lower and some of that was due to changes in staff.
In the sewer utility, Vig said much of the cash for services goes to pay for a significant amount of debt left from the sewer treatment plant construction. Vig said the utilities had $6.8 million in debt and took another $1.9 million in debt in the last year.
"So, your utilities need to have strong earnings in order to keep their debt pledge," said Vig.
Vig said water rates are regulated by the Public Service Commission and it generally takes five to six months to get a rate increase. Vig said the adjustment is not to make up for past debt but to prepare for future costs.
When asked about how much the sewer would need to be adjusted to keep in compliance Vig said he would guess in the five to six percent range.
"It is not as much as you have had in the past when you had increases but construction is not plant related," said Vig.
Vig said water rates have not been adjusted since 2004 and sewer not since 2003.
Public works committee chairman Marc Polsean said he has been studying the issue and a 10 percent increase in sewer base rate is necessary. Polsean said a 10 percent increase in a $25 base rate would amount to $2.50 increase per user (per month).
"I think that is a pretty good estimate," said Vig.
Vig went on to discuss the remaining parts of the city's financial picture. In terms of debt, Vig said the city is currently carrying about $5.6 million in debt and still has about 53 percent of its borrowing capacity available.
"That's pretty conservative borrowing I think given the fact that you have had these major projects in the last couple years," said Vig.
Vig said the city has about $1.5 million in reserve and that is about four months worth of spending. That is about average for a city the size of Viroqua, said Vig.
Property values have increased by 45 percent over a six-year period starting in 2002, said Vig. Much of that increase is due to construction and from 2006 to 2007 there was a 7.6 percent increase. Total equalized value stands at $237 million.
Vig said in that same period the tax levy has increased 31.4 percent which is "significantly lower than the growth in values." The city tax levy for 2007 amounted to $1.48 million.
A breakdown of city taxes show that 37 percent goes to local schools, 28 percent to city government, 21 percent to the county, 8 percent goes to the vocational district, 5 percent is for TIF districts and 2 percent goes to the state.
The city gets 42 percent of its revenue from taxes and assessments, 41 percent from state aid, 10 percent from charges for services, 3 percent from interest income, 2 percent from licenses, permits, penalties and forfeitures and 2 percent from miscellaneous sources. Vig pointed out that 83 percent of revenues comes from local tax and state aid and they are "limited in their ability to grow."
The city spends 20 percent of its money on public works, 19 percent on public safety, 19 percent on debt service, 17 percent on recreation, culture and development, 11 percent for capital outlays and 4 percent on health and social services.
All stories copyright 2006 Vernon Broadcaster and other attributed sources.