City revenue kept pace in 2022, official reports

New developments and defrosting hiring freezes helped raise revenues and keep the city fiscally sound last year, Gardner city officials learned Monday night.

Gardner City Finance Director Matt Wolff presented the 2022 financial report during the Gardner City Council’s regular meeting.

Wolff said the report was a comparison of the actual performance review to the revised 2022 budget.

He noted the numbers presented were unaudited figures. Audited figures will be available in June, he said.

An overview of the city’s 2022 performance began with a summary of the city’s general fund.

Wolff said city revenue was favorable to estimate by 8.5 percent or $1.4 million and expenditures were favorable to estimate by 1.9 percent or $325,000. The ending fund balance increased from 50 percent of expenditures in 2021 to 53 percent in 2022. After making adjustments for certain fees and agreements, the fund balance was closer to 51 percent.

Wolff said told council members that approximately half of the general fund monies was due to one- time, development revenue.

“We are becoming more reliant on volatile sales and use tax,” he said. “Despite the increase in total sales tax collections, we are beginning to see salestax leakage.”

Wolff shared the results of a state report which measures the dollars Gardner residents choose to spend in other communities over the past few years.

In 2020, the factor was .79, in 2021 it increased to .822, but dipped to pre-pandemic levels in 2022 at .74.

“It was nice seeing the trends going up, but unfortunately in 2022 it went back down to basically pre-pandemic levels,” he said. “It is disappointing, but it basically shows that during the pandemic, people were shopping here locally for food and groceries and then when things got back to normal they decided to go back to shopping in other communities.”

City expenditures in 2020 were low because of the city’s hiring freeze and budget cuts implemented during the pandemic.

“…2021 expenditures restored some of these budget cuts,” Wolff said. “(In) 2021, expenditures were 2.1 percent higher, which means three of those years were essentially flat for expenditures. Then in 2022, we had a 15.8percent increase. This was (in) large part due to the $1 million transfer to the CIP (Capital Improvements Program) reserve for the West 167th Street corridor preliminary plan.”

Wolff said there were also the contributing factors of 5.7 percent inflation, cost-of-living adjustments for employees and police wage adjustments.

In 2021, the city had a general fund balance of nearly $7.2 million. In 2022, it was nearly $8.8 million.

“Keep in mind that was revenue coming in higher than expected, and half of that $1.4 million was due to development revenue,” Wolff said. “It can’t be relied upon in future years.”

Wolff gave brief overviews of the city’s utility funds, including electric, water and wastewater monies.

He said the revenues and expenditures for the electric fund were inflated from higher energy prices. Revenues were up by $3.7 million and expenses unfavorable by $7.5 million.

“These huge variances were due to being based on early estimates,” Wolff said.

The city had a projected $3-million surplus, but ended up with a $863,000 shortfall.

Wolff said despite the operating shortfall, the ending electric fund balance increased from 51 percent in 2021 to 53 percent in 2022. Electric fund expenses were related to electric wholesale purchases, commodities, two large vehicle purchases and capital expenses.

Wolff said the 2021 electric fund expenditures were higher than 2022’s numbers because of the city’s polar vortex event. The 2021 fund balance was nearly $13.6 million and in 2022 was about $12.7 million. The capital reserve fund for 2022 was nearly $3.2 million.

“Overall, we still have a strong fund balance in the electric fund with the recent decrease in electric rates and suspension of power cost adjustments,” he said. “We expect to continue to see operation shortfalls in the future. This is part of our multi-tier plan to reduce fund balance while reducing energy bills for Gardner residents and businesses.”

Wolff said the water fund revenue was unfavorable by 6.8 percent or $641,000 and expenses were favorable by 21.4 percent or $2 million.

“These were kind of due to timing of projects on the revenue side,” he said. “We were planning to issue temporary notes on the revenue side because of the new transmission line, but that project got delayed so we didn’t issue the temporary notes and didn’t have that revenue come in.”

Wolff said, in addition, the city also delayed the design of the intake structure of the Hillsdale Water Treatment plant. The timing of the projects affected the variances.

Wolff said expenses were higher in 2021 due to a one-time payment to Water One and infrastructure extensions for the Prairie Trace development.

The water fund balance in 2021 was $2.36 million and in 2022 it was $3.8 million.

“Even though the water fund balance seems strong, it is mostly inflated due to the delay of the capital projects,” Wolff said.

The wastewater fund saw a small revenue variance of 1.6 percent or $230,000. Expenditures were favorable by 13.2 percent or $822,000. Wolff said the favorable expenses were primarily from a delay in the inflow and infiltration program.

The ending balance in 2021 was minus 4 percent and jumped to 160 percent in 2022. Wolff said this can be contributed to the Big Bull Creek treatment plant right-to-use sale and debt to proceeds for Prairie Trace infrastructure.

The wastewater fund went from negative $385,000 in 2021 to a positive $8.6 million in 2022.

Other fund balances were $543,000 for the park improvement fund, $129,000 in the special parks and recreation fund, $1.9 million in the street improvement fund and $333,000 in the economic development fund. New developments in Gardner, Wolff said, have helped to build up those funds.

Wolff said the general fund was at 53 percent, which was above the city’s target of 30 percent. The electric and water funds were also at 53 percent. The wastewater fund was at 160 percent.

“Overall, at the end of 2022, our funds (were) fiscally sound,” he said.

Next week, city officials have scheduled a retreat next week to review the budget.