Salisbury gets clean bill of financial health

By Emily Ford

eford@salisburypost.com

SALISBURY — The city of Salisbury has received a clean bill of financial health from auditors.

The annual financial report on fiscal year 2010-11 pointed out two deficits in city finances. Both the Fibrant enterprise fund and the Employee Health Care Fund operated in a deficit last year, audit manager Matt Braswell said.

Although that violates state law, “this finding is simply a notation in these statements and does not result in any penalty,” Braswell told City Council on Tuesday.

Fibrant is the city’s new fiber-optic utility that sells Internet, phone and cable TV services to Salisbury residents. The broadband fund operated at a $1 million loss last year, which was anticipated.

“We already said in the first four years, we would not break even,” City Councilman Brian Miller said. “That’s not a surprise to anyone.”

According to documents, the city expects Fibrant to become cash-flow positive after four years. The city billed the first Fibrant customers one year ago in December 2010.

The city expects Fibrant to eliminate its deficit as more people sign up and revenues increase. The utility, which competes with private providers like Time Warner Cable, has a 13 percent market share, interim City Manager Doug Paris said, and is billing about $200,000 a month.

“We’re growing in what is an extremely tough market,” Paris said.

Paris said after the meeting Fibrant has about 1,600 customers. The utility needs about 4,500 to become cash-flow positive.

Fibrant’s first year compares well to the first year of operation for the successful broadband utility Greenlight in Wilson, N.C., Paris said. He met with Wilson officials last week.

“We were in the same place after one year that they were,” he said. “And we will continue to work that operation and show improvement in upcoming budgets.”

Miller said he wants the city to spend time discussing Fibrant details at the Council’s annual goal-setting retreat in February and called for a “state of the utility” address.

The city’s two other enterprise funds ended the fiscal year in the black, with net income of $330,000 for Salisbury-Rowan Utilities and $22,000 for the transit system.

The Employee Health Care Fund operated with a $469,986 deficit last year due to several large claims, Braswell said.

The city, which pays the total cost of health insurance for employees, has increased premiums 11 percent this year to eliminate the deficit and cover increased claims, Assistant City Manager John Sofley said.

The city pays $52 more per month for each employee than it did last year, he said.

Sofley said the Employee Health Care Fund was never broke. The deficit was due to an estimate of what claims would have been at the end of the fiscal year, Sofley said, and the fund actually had $113,000 in cash on hand.

Sofley, who serves as the city’s finance director, said he was pleased with the audit.

“Overall, considering the economy last year and that we set up the budget as an assumption, we felt like we ended up well in maintaining a strong financial position for the city,” he said.

Information in the audit about the two deficits, called “findings,” would not have been included in previous years, Braswell said. The N.C. Local Government Commission recently required auditors to publish any city fund operating at a deficit.

It’s not unusual for municipal governments to run deficits occasionally, Braswell said.

He also reported the city’s fund balance fell about 5 percent last year to $8.5 million. Of that, about $3.8 million is available to the city to spend, compared to $4.7 million in 2010.

Total revenues in the general fund were $33.5 million, while total expenditures were $34.4 million.

That means the city spent about $418,000 more than it generated in income, Sofley said. That was due to late reimbursements for several grants, including those for greenways and sidewalks, he said.

The city has about $87 million in debt, well below the legal limit of $189 million, Braswell said. The city paid off $4 million in debt last year, he said.

Property tax revenue increased slightly last year to $17.4 million, up from $17.3 million the year before. Sales tax revenue did better, increasing from $4.5 million in fiscal year 2010 to $4.7 million.

Contact reporter Emily Ford at 704-797-4264.