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City’s audit shows improvements in Broadband Services Fund

By Natalie Anderson
natalie.anderson@salisburypost.com

SALISBURY — The city’s financial audit for the 2019-20 fiscal year shows that, while the city’s fiber-optic network fund remains in a deficit, the city has, for the first time, generated a positive cash flow within the fund.

C.J. Palmer, a CPA with Charlotte-based Elliott Davis, PLLC, presented the report to city council members Tuesday, which spans from July 1, 2019 to June 30. In the report, both Salisbury Finance Director Shannon Moore and Finance Manager Wade Furches say the audit shows that the financial future of the city appears to be bright, but that caution should be taken when looking ahead due to the yet-to-be-seen impacts from the pandemic.

The report shows a smaller deficit in the Broadband Services Fund than past fiscal years. As of June 30, the Broadband Services Fund sits at a deficit of approximately $4.92 million. That amount is a decrease of $1.19 million from the 2018-19 fiscal year and a decrease of $2.32 million from the 2017-18 fiscal year.

Nonetheless, it’s a stark drop from the $10 million deficit in the 2015-16 fiscal year, said council member David Post.

Post said it’s important to note the city’s operating losses total in that fund dropped from $963,838 in 2018-19 to $192,083 in the 2019-20 fiscal year.

And a significant portion of that operating expense includes depreciation costs, Palmer said. However, this is the first year that there were positive cash flows from operating activities in that fund before factoring in debt service costs.

“That’s important for the public to know, that our broadband system generated $750,000 of cash this year,” Post said. “That’s an incredible turnaround.”

Though the fund is still in a deficit when factoring in debt service, Post said it’s still a positive as the city has, in previous years, lost money with broadband services on top of paying debts. Debt service for the city’s fiber-optic network is set to expire in 2029.

Overall, Palmer said the city’s fund balance in the general fund remained relatively stable throughout the last fiscal year. The fund balance increased from $18.49 million in 2018-19 to $18.98 million last fiscal year.

And since the 2010-11 fiscal year, the city has more than doubled the available fund balance in its general fund.

“That really speaks to management and the city’s ability to control costs,” Palmer said.

He added that the largest financial impact to the city throughout the pandemic was within the fourth quarter, which includes the months of April, May and June.

The report also shows 32.22% of the available fund balance was spent on expenditures and transfers last fiscal year, which is higher than the city’s rate of 10%. Though the state’s rate is set at 8%, Mayor Karen Alexander said the city’s rate was set in 2013 after the rate began declining too much.

“It’s important for the public to know that we have four times as much required by law, and the reason the number’s dropping is because our revenues are going up, not because the dollars are going down,” Post said.

The general fund revenues and expenditures/transfers remains similar as it has been in the past few years, with revenues totaling $42.62 million and expenditures/transfers totaling $42.13 million. Both of those amounts are up from the 2018-19 fiscal year, when revenues totaled $39.86 million and expenditures totaled $37.14 million.

A breakdown of expenditures and transfers show public safety costs comprised $16.86 million, while $9.42 million went to general government costs, $6.85 million were for transportation costs and $6.86 million were for other sources such as culture, recreation, community development and environmental costs.

“Very consistent year over year,” Palmer said. “The things you would expect are kind of a larger expenditure, like public safety.”

Post noted that transportation costs in 2019-20 increased by more than $3 million compared to 2014-15. Furches said the relative increase in total expenditures/transfers can be attributed to several capital projects. For example, about $1.5 million has been spent for the Newsome Road widening project in addition to sidewalk projects, the Grants Creek wastewater treatment project and the ongoing Salisbury Greenway Project. While some of that reimbursement has been received, the city should expected to receive its full reimbursement for the Newsome Road project by the end of the current fiscal year, Furches said.

The report shows that $22.56 million of the city’s total revenue came from property taxes, while $11.76 million came from sales tax, $9.42 million from general government, $6.85 million from transportation and $6.86 million from other sources, such as donations, insurance claims and interest proceeds.

“The breakdown (of revenue) is relatively consistent and what you would expect with a city of your size,” Palmer said.

Other findings show the Water and Sewer fund ended the 2019-20 fiscal year with a positive net position of $121.92 million, while the Stormwater Fund and Transit Fund ended with positive net positions of $2.62 million and $559,724, respectively.

The city’s full comprehensive annual financial report can be viewed by visiting salisburync.gov/Government/Finance/Accounting.

“Retail sales are strong, and we believe they will continue to grow as more businesses expand and others come to our area,” Moore and Furches stated in the audit report. “We will get through this pandemic together and will continue to strive.”

Contact reporter Natalie Anderson at 704-797-4246.

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