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Auditor praises Salisbury fund balance, tell City Council to watch Fibrant

SALISBURY — An auditor praised Salisbury for increasing the city’s fund balance last year but encouraged City Council to keep an eye on Fibrant.
Matthew Braswell, an accountant with Martin Starnes & Associates, on Dec. 17 presented an independent audit of the city’s fiscal year 2013, or the period between July 2012 and June 2013. Councilman Pete Kennedy asked Braswell if there were any issues raised by the audit.
“There is nothing out of the ordinary that I could say watch out for this, or anything like that,” Braswell said. “Continue to work diligently on the broadband services fund to keep that progressing, customers and everything like that, to get that to where that’s self-sustaining.”
The city’s general fund in 2013 brought in about $1.7 million more than in 2012, thanks to a higher property tax rate, higher fees and more grants, Braswell said.
The general fund also spent about $1 million more than the year before, including a restructuring where some employees were moved to the general fund, he said.
The city’s fund balance grew from 11 percent in 2011 to nearly 25 percent in 2013, increasing about $2.7 million to $13.3 million, giving the city about three months’ worth of expenses on hand.
“It’s very impressive to go from 11 percent to 25 percent in two years,” Braswell said.
The state’s Local Government Commission warned the city in February 2012 that Salisbury’s fund balance “appears to be much lower” than comparable cities, and Fibrant “shows signs of financial stress.”
A fund balance of 8 percent is considered the minimum standard.
Since the warning, the city has cut costs and increased taxes and fees to build up the general fund. The city’s workforce dropped to 428 employees in 2013, down from 454 employees the prior year. The city has the smallest workforce in a decade.
Fibrant, the city’s relatively new high-speed broadband utility, lost $4.1 million in 2013.
The loss was expected, City Manager Doug Paris said, and included a nearly $2.6 million loan Fibrant took out from the city’s water and sewer reserve fund. Since it was created in 2008, Fibrant has borrowed more than $7 million from the water and sewer reserve.
According to the 2014 budget, Fibrant will not borrow from any other city fund and will make enough money to break even by the end of the year.
The city cut millions of dollars from Fibrant’s budget by refinancing some of the 20-year debt, moving employees out of the department and renegotiating contracts with providers of phone, cable TV and Internet services. As a result, Fibrant made a small profit — about $8,000 — in the first quarter of the current fiscal year, July through September.
“It’s getting closer to being self-sustaining,” Braswell said. “That’s what we want with enterprise funds.”
The city’s other enterprise funds made money in 2013. The water-sewer fund reported net income of about $2 million, and the new stormwater fund had a gain of $269,501. The public transit fund, which includes the city buses and is subsidized by the federal government, had a gain of $47,661.
At the end of the 2013 fiscal year, the city owed $51.9 million on Fibrant debt, including $13.1 million in interest. To date, the city has paid off $16.2 million in principal and $7.95 million in interest on Fibrant.
After the broadband network added a redundancy system in 2013, the city ramped up sales in an effort to make the utility profitable. Fibrant increased its customer base by 23 percent last year to nearly 2,500 customers, and sales increased by 31.6 percent.
The redundancy system — a back-up Internet provider that kicks in if the main system fails — has improved the system’s reliability. Fibrant, which had been plagued by outages, has not gone down for an extended period for months.
The city has stepped up marketing Fibrant to businesses, and Integro Technologies has signed on as a customer. The tech firm, which has more than 500 clients worldwide, is receiving cash incentives from the city for the company’s new $3.2 million headquarters on South Main Street.
The 164-page audit details other financial information about the city and Rowan County.
Although retail sales in Rowan from July 2012 to June 2013 decreased by nearly $34 million, the city’s sales tax revenue increased $43,039 from the previous year to $5.3 million. That represents a 17 percent increase during the past three years.
Rowan County’s retail sales dropped 3.5 percent drop from the prior fiscal year to $941 million. However, the county’s retail sales in 2012 — $975 million — were the highest ever reported.
More than 90 percent of first floor business and retail space in downtown Salisbury was occupied when the audit was prepared. The current occupancy rate is not available because Downtown Salisbury Inc. does not have an executive director.
In 2013, downtown gained four businesses and saw six building renovations and 11 facade renovations. The city used a $290,000 state grant to transform North Lee Street with wider sidewalks, new street lights and landscaping.
The city’s total long-term debt in 2013 was $82 million, including $3.3 million in general obligation debt and $30.5 million in revenue bonds.
The city owes $38.5 million on various installment purchases.
The city’s long-term debt decreased by $3.7 million or 4.3 percent in 2013, and the city paid off $5.9 million of debt.
Last year, the city reached about 20 percent of its debt limit of $223 million. The city’s legal debt margin was $177 million.
Other details from the 2012-2013 audit:
• The city is saving more than $500,000 a year in staffing and equipment costs after Rowan County took over 911 emergency dispatch operations for the Salisbury Police Department.
• The property tax collection rate increased to 95.96 percent, up from 95.31 percent.
• Property tax revenues were up $534,209 over the previous year due to growth and a tax rate increase of 2.39 cents.
• Sales tax revenues were up $777,373 from three years ago due to the improving local economy and new businesses in the city.
• The city collected $1 million more in service charges, due to the new stormwater fee and higher garbage fees.
• The city finished extending water and sewer lines to the Old Mocksville and Hawkinston Road area, the most recently annexation area, which cost $2.96 million.
There are still areas of the city that were forcibly annexed that do not have water and sewer service, Paris told the Post. He said the city no longer forces annexed residents to hook into the city’s water system but will extend services if requested.
• The average unemployment rate in Salisbury last year was 9.6 percent, down from 10.9 percent the prior year.
• Home sales in Rowan County increased 9.6 percent, the first increase during the past seven years, when sales fell 59 percent. The average home sale price, about $130,000, remained relatively stable but increased to $147,290 in April-June 2013.

Contact Emily Ford at 704-797-4264.

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