By ETHAN HARTLEY It took almost seven months to get here, but the financial audit for the city of Warwick's fiscal year that ended June 30, 2018 is finally out - and among many highlights garnered during a cursory read through its 194 pages, the report
It took almost seven months to get here, but the financial audit for the city of Warwick’s fiscal year that ended June 30, 2018 is finally out – and among many highlights garnered during a cursory read through its 194 pages, the report shows an interesting disparity between fiscal assumptions made by Mayor Joseph Solomon earlier this year.
During his “State of the City” address held on February 26, Solomon reported that the city’s anticipated unrestricted fund balance (often referred to as a city’s free cash reserves or “rainy day fund”) was in a danger zone between $13-14 million; a far cry from the $22.5 million number that was reported in the prior year’s FY17 audit.
However the FY18 audit, posted to the state’s Department of Administration site on Friday, revealed an unrestricted fund balance of $22.6 million in Warwick.
“At the State of the City address, Solomon, Council President Merolla, and [City Council] Finance Chair Edgar Ladouceur all pointed to an exaggerated surplus,” said former Mayor Scott Avedisian in an email statement. “Actually, I was underestimating the surplus by more than $600,000.”
Reached for comment on Monday, Solomon said that when he made his financial prediction in February, it was predicated on an assumption that the city – which had a $22.5 million fund balance as of the FY17 audit – utilized $4.3 million from the rainy-day fund to balance its budget for FY18 and $3.8 million to balance the budget for FY19.
However, due to revenue coming in at $2.8 million higher than projected and expenses coming in $1.1 million under expectations, the fund balance was not needed to draw from in FY19.
“Our goal is to get to a point where we don’t have to use our rainy-day fund and that's what we're trying to achieve here,” Solomon said.
A release sent out by City Hall credited Solomon’s administrative decisions as having a positive impact on the city – although the specificity of those decisions are somewhat vague.
“Due to austerity and cost saving measures implemented by Mayor Solomon upon taking office in 2018, the City’s unassigned fund balance (funds available for use) at the end of fiscal year 2018 actually rose by $104,000, to $22.6 million, and the total fund balance, including restricted funds, was at $27.4 million at year’s end,” it reads.
Quick hits from FY18 audit
The audit shows that total revenue in the city decreased from $360 million in FY17 to $352 million in FY18. Total expenses also decreased from $373.3 million in FY17 to $367.9 million FY18. The city collected 73 percent of its revenue from property taxes, amounting to $228.3 million – which is down from $231 million in FY17. State aid increased by $2.3 million between FY17 and FY18.
The city’s bond rating remained the same from last year, with an A1 rating from Moody’s and an AA rating from Standard & Poors.
As of June 30, 2018 the city had a total of $133.9 million in outstanding bonds and loans, of which $45.9 million are general fund bonds. This means that, with a current debt limit of $278.4 million, the city of Warwick can still accrue another $232.5 million in debt.
Multiple areas of the city experienced cost overruns in the FY18 budget, including $137,261 in the sanitation division of DPW and $193,214 in insurance costs. However, the highest cost overrun belongs to the Warwick Fire Department, which went $1.6 million over budget.
The total net value of all assessed property in Warwick, after exemptions, is about $9.28 billion. Collections on this property garnered about $223.4 million in property tax revenue (which equates to a 97.4 collection percentage of the total tax levy). Unpaid property taxes amounted to $12.5 million after accounting for unpaid “uncollectable property.”
Long-term liabilities are sure to continue to cause strife among financial critics within the city, as the city’s total liability was reported to be $1.04 billion – although this is actually decreased from FY17, when total liabilities amounted to $1.07 billion. For FY18, this number includes $123.9 million in long-term debt, $405.8 million in net OPEB liability (other post-employment benefits, essentially healthcare costs) and $453.5 in net pension liability.
In terms of the city’s various pension plans, they break down like this:
l City’s municipal pension plan: 779 members (369 active employees, 379 retired and receiving benefits, 31 entitled to benefits but not collecting);
l Police and Fire 1 pension plan: 430 members (24 active, 406 inactive and receiving benefits);
l Police 2 pension plan: 346 members (158 active members, 184 inactive and receiving benefits, 4 eligible but not receiving benefits);
l Fire 2 pension plan (which is being challenged by the firefighter union): 212 members, (195 active members, 17 inactive receiving benefits);
l School department’s private pension plan: 507 members (336 active employees, 146 inactive and receiving benefits and 25 eligible for benefits who are not receiving them)
OPEB benefits broken down show that there are 1,649 members of the city departments collecting healthcare, 711 of which are active employees and 938 who are retired. This amounts to a total OPEB liability of $352,383,048.
The school department has 1,357 members receiving OPEB benefits, 1,295 of which are active employees and 62 that are retired, amounting to a total OPEB liability of $53,466,538.
Notable among the numbers is a $4.24 million decrease in total OPEB liabilities from last year’s audit, which Avedisian noted in his comments.
“That shows that the pension reform that I pushed for and Councilman Steve Colantuono and Councilwoman Donna Travis sponsored is working,” he wrote.
Some other interesting facts to note:
A step in the right direction?
Solomon viewed the report optimistically on Monday, saying, “It is a step in the right direction. I take pride in leading it in that direction. The ultimate beneficiaries will be the residents and the taxpayers and the city itself and its future.”
Similarly, Avedisian looked upon the report as vindication for his final term in office. He said that he was awaiting the FY18 report to respond to criticism of his administration. He also said he is waiting on a report from the Rhode Island Public Expenditure Council – which was said to be launched shortly after Solomon took office, but has not been released to date – and a five-year financial report from the City Council’s auditing firm, which was also never released in a finalized version.
“With a $22.6 million surplus for the Fiscal Year that ended a year ago, Warwick is hardly in a bad financial situation,” he wrote in his statement. “The Fiscal Year 2019 audit will prove to be interesting when it is completed.”
Others weren’t as rosy about the report.
“It hasn't been given to the council. We haven't seen it. We're reading about it in the press like you are, I don't know what to say,” said City Council President Steve Merolla when reached around noon on Monday. Merolla echoed sentiments regarding his concern over the annual required contribution needed to curb down OPEB liabilities increasing from $23 million to $34 million last year to this year.
“To say we're in great shape when we can't pay our bills is concerning to me,” he said.