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Tuesday, October 23, 2018

News & Updates

Mayoral message: Financial State of the City

The following is the second in a series of four messages from Mayor Chris McBarnes regarding the financial status of Frankfort and the administration’s vision for addressing opportunities and challenges on the community’s horizon.

Frankfort Moving Forward: Financial State of the City

When our administration took office in 2012, we faced numerous challenges: many public facilities were falling apart including Old Stoney, department infrastructure was completely depleted, police vehicles were on their last leg and almost obsolete, we lacked a capable trash truck fleet, key pieces of fire apparatus were outdated, and our streets and park infrastructure were crumbling.

Our City General Fund, our largest and most essential fund had a cash balance of $1,646,309 the day our administration took office on January 1, 2012. Six years later, on January 1, 2018, our City General Fund boasted a cash balance of $2,113,157.

From day one we prioritized the financial decisions of our community involving holding department heads accountable for spending decisions, working together with state and federal agencies to reduce the burden of our local budget by bringing in outside dollars and creating public-private partnerships to fund transformational projects. Through each of these steps, we created and maintain a very fine-tuned financial strategy for our City.

Our overarching financial approach includes long-term planning when repairing and upgrading both our citywide infrastructure along with replacing infrastructure from within our departments (such as fire engines, police cars and the upkeep of our public facilities). Our administration focuses on financial planning year-round; it is not limited to the budget season. We constantly plan, observe and proactively tackle financial challenges thrown our way. We strongly believe in replacing and upgrading infrastructure and equipment along with maintaining a strong cash reserve. Our third philosophy centers on strategic investment. We choose projects that grow our City’s assessed value to ultimately reduce the tax burden for every Frankfort resident.

Under Governor Mitch Daniel’s administration, constitutional property tax caps were established. For example, as a residential property owner you cannot be taxed more than one percent of the assessed value of your homestead property, two percent for other residential property and farmland and three percent of all other property, including personal property. I firmly support this fiscally conservative policy that forces Hoosier communities to sharpen their pencils and live within their means.

Let me share some exact numbers regarding Frankfort’s strong financial condition. When I assumed office our cash balance across all city funds was $5,237,387. With the capital improvement plan our administration has championed and even after providing significant infrastructure upgrades citywide (see the list below), our City will have a cash balance of $5,306,585 which includes a healthy City General Fund balance of $2,437,308 by the end of my second term in 2019. Therefore, our administration has only built our cash position, not diminished it.

Our cash balance at the end of 2019 will mean our percentage of cash reserves will be at 33.30%. This percentage means that even if not one additional tax dollar came into Frankfort, we could operate the City for 122 days without losing one essential service. Most financial experts in municipal settings believe it’s good policy to maintain cash reserves at 30%, so we will be in outstanding shape at 33.30%.

As a snapshot, following are some of the necessary investments included within Frankfort’s capital improvement plan:

  • rebuild of Washington Avenue into a Complete Street
  • more than 35,000 square feet of new sidewalks throughout our City
  • investment of a new or rehabbed police station
  • replacement of key public safety apparatus
  • complete rejuvenation of our trash truck fleet
  • necessary equipment for our Street Department such as a bulldozer and new street sweeper
  • continuing payment of the Old Stoney bond
  • hundreds of thousands of dollars for street resurfacing
  • unsafe blighted property fund to tear down dilapidated structures
  • quality healthcare and wellness services for our employees
  • rebuilding of park restrooms and park amenities such as basketball courts, exercise trails and our TPA Pool.

Will unforeseen financial issues arise? Most certainly they will just as they do in every household. Which is why it’s so critically important to strategize, plan and build our cash on hand while addressing key community needs. For example, Obamacare brought with it steep premium increases. Our City General Fund (funded through property taxes) is our largest fund and pays for essential daily city services. A whopping 74% of this fund goes toward health insurance and salaries for our employees along with the City’s liability insurance, 40% of which is solely for the salaries of public safety officials. 2017 was an expensive year with our healthcare insurance claims because we were hit with an additional $800,000 of unexpected claims. But because we employed such a strategic spending strategy we were able to absorb those costs, all the while maintaining the forecasted numbers and projects I shared with you above.

Taxes you pay on your property, real or personal, are the main drivers of city government. These taxes are the workhorses of local government funding items such as salaries for our police officers, park employees, firefighters, employees’ health insurance and the City’s liability insurance. When we assumed office, our property tax rate was $2.0402 per $100 of assessed valuation. Our most current certified City tax rate (2016 pay 2017) is $1.8142 per $100 of assessed valuation. Thanks to the annexation of our industrial park our overall assessed value jumped from $294,575,556 in 2012 to $473,138,663 in 2013. This significantly reduced our City’s tax rate because we were able to spread overall costs over a greater taxing base, but over the past several years, we have fluctuated back closer to the 2012 tax rate. Why?

When we assumed office in 2012, City employees were severely underpaid, particularly our first responders and public safety officials and Obamacare was making a full impact on healthcare costs. Remember, 74% of our entire City general budget (funded by property taxes described above), go toward paying our City employees and providing them healthcare insurance. Keeping up with the dramatic premium increases Obamacare caused only added to the cost burden of running our municipal government.

I stand firmly behind our police officers and firefighters earning the money they deserve. I support all our hard-working City employees earning a respectable wage as part of a fundamental way to build a city that makes citizens feel they are seeing a good return on their investment. When we assumed office, a first-class police officer made $39,038 and a first-class firefighter made $39,038. Beginning January 1 of this year, a first-class police officer is making $52,088 and a first-class firefighter is making $49,389. In 2012, a street operator was earning $31,477 and in 2018 that employee is earning $37,218. To retain top employee talent and to maintain quality healthcare coverage (despite Obamacare premium spikes), our Corporate Rate (City General) which is part of our overall City rate rose approximately .35 cents. That still leaves us with a total tax rate (2016 pay 2017) of $1.81 which is lower than the $2.04 when we took office six years ago.

So that’s why our tax rate has risen back closer to the level we began at in 2012. All costs rise over time; it’s inevitable: healthcare costs, respectable wages for all employees, equipment and much more. If we remain stagnant with the same amount of businesses and individuals supporting the same services, but with the cost of those services increasing, it will place further pressure on everyone’s pocket books.

We are finding efficiencies and ways to save money every day, but there is only so much fat that can be trimmed before essential services are lost. By strategically investing to build a safer, beautiful and progressive city, we will attract families, investors and businesses which will help us support these vital resources and return our hard-earned money back where it belongs to taxpayers’ bank accounts.