EagleHerald staff writer
MARINETTE—Following an exhaustive review in March, the process aimed at providing accountability and assurance concerning the fair and accurate representation of the city’s financial transactions, wrapped up during a 2020 city audit debriefing to the City of Marinette Common Council June 9.
Certified Public Accountant Greg Pitel presented the audit’s findings to Marinette council members during a special meeting at City Hall. Pitel works with Certified Public Accounting Firm KerberRose, and the report he delivered painted a good and solid picture of the city’s fiscal infrastructure over the past year.
“The objective of the audit is to obtain reasonable assurance about whether (the city’s) financial statements are free from material misstatement,” Pitel said, leading into a more detailed presentation on both audits. “(The city has) a clean, unmodified audit opinion.”
Audits at the municipal level of government seek to provide an impartial and scrupulously detailed evaluation of the complicated flow of financial interactions related to policies, programs and operations that keep a city healthy and functioning within the bounds of state/federal regulations. Like the words used to define it, the audit’s presentation is equally impartial and detailed and while its delivery often includes the dry delivery of accounting details, the story it tells to the discerning and learned listening offers a wealth of information and a municipalities state of finances.
“Marinette is in a good financial position,” said one of those discerning listeners, Marinette Finance Director and City Treasurer Jackie Miller. “And part of the reason we are in the financial position that we are is that, first, our department heads are very mindful of their budgets. They watch how they spend money. They don’t spend frivolously.”
Secondly, Miller emphasized the city’s zeal for pursuing every grant for which it can qualify. Sometimes the payoff of those efforts reaps tremendous reward for the Marinette and its taxpayers. Case in point, the U.S. Department of Commerce’s Economic Development Administration (EDA) recently awarded Marinette a $3.895 million grant for various infrastructure upgrades to accommodate continued growth in business, industry and other development throughout the area. That grant will help the city fortify its roads and utility infrastructure to better facilitate industry capital expansion projects such as the work currently underway at Fincantieri Marinette Marine’s (FMM).
“We (Marinette) go after every grant that we can,” Miller said. “When we get those grants it saves money to be used somewhere else. And that only benefits the city … these grants are huge things: Menekaunee harbor was grant after grant, and the cleanup of the (Menominee) River was grant money. We go after whatever we possibly can.”
Throughout the presentations, Pitel highlighted various indicators that help inform auditors and city officials about the municipality’s financial health. And like a solid pulse and steady vitals, those signs provide a clean bill, financially, for the city.
Aligning with a preliminary audit report made in April, and statements to the same by Miller, Pitel affirmed to council members that the city finished with a positive net change to the general fund balance by $314,000, bringing the total end-of-year (2020) balance to approximately $7.1 million. A positive net change in general funds renders only one factor that helps bolster a municipality’s rating when it comes to borrowing. Similar to the net income of a business, that $314,000 represents funds leftover and available for reallocation on projects or operations for the next year.
“It helps with (the city’s) bond rating so that when we go to borrow money we get better interest rates,” Miller said.
As a measurement of the city’s financial footing, Pitel also pointed out that $6.3 million of the general fund represented unassigned balance, which is approximately 53% of the city’s general fund expenditures for the year.
Over a year, between periods of tax collection and reception of state aid, municipalities can experience lulls in revenues. However, through the maintenance of a strong fund balance, a city can sustain those lulls without incurring additional debt.
“Financially, (Marinette) does have a very good fund balance,” Miller said. “And that has allowed us to (avoid) borrowing money in the low times (of city cash flow). We get tax money in March and …. we don’t get state aid until the end of November. So there are months in between where it is good to have that money (general funds) in the bank so you are not borrowing money to make payments.”
A city’s general fund typically provides for the majority of operating services within the city such as police, fire, general government (city council, clerks), parks, recreation and community development.
During his presentation, Pitel summarized the fact that unassigned general funds equating to 53% of general fund expenditures, indicates the city’s solid bond rating and overall creditworthiness.
“20-30% from a bond rating standpoint is considered strong and anything above 30% is considered extremely strong,” he said.
AUDIT LOOKED AT MANY FACTORS
Miller also added that the factors/indicators that influence a city’s bond rating depend on more than just the fund balance. However, the rigorous and meticulous audit raked over those factors as well, delineating the city’s various financial statements that included many funds and other financial interactions such as revolving loans, capital projects, tax increment financing districts, debt service funds, the Community REC Center fund and the Harbor Assistance Program (HAP) Fund. The HAP stems from an approximate $30 million Harbor Assist Grant for which Marinette Marine Corporation serves as the beneficiary. The HAP was awarded to help cover the cost for current upgrades and additions under construction at the shipyard to accommodate future growth in facilities, workforce and shipbuilding capacity.
Other audit indicators looked at cash flow and income statements and the city’s debt service as a percent of its operating expenditures. According to Pitel, in 2020 the city’s debt service stood at 12% of operating expenditures
“Anything under 20% is considered a pretty desirable rate,” he said.
Miller expanded on other factors that informed auditors as they generated a 2020 audit report for the city. They evaluated the city’s debt structure, cash flow, area unemployment rates, and business activity in the area. In Marinette’s case, that complete evaluation assists the city in acquiring its A-1 bond rating. Stated simply, an A-1 rating reflects the city’s credit risk analysis and its capacity to repay various financial obligations. While not the highest rating, A-1 is good.
However, Miller added that due to the city’s recent growth in activity related to expansions at the shipyard, that rating may receive a bump up next year.