Tower financials show overall improvement, 2017 audit reports
MONDAY, JUNE 11, 2018 — The City of Tower 2017 audit, performed by Walker, Giroux and Hahne, LLC, certified public accountants, demonstrates that the city’s net position increased by $1,207,813 at the close of 2017. The increase is “in large part due to a contribution from the county in the form of improvements to a city owned bridge” (Iron Ore Bar bridge), Walker, Giroux and Hahne wrote in its 73 page audit report. The city’s governmental activities is $10,997,774, of which $9,803,836 is net investment in capital assets. The net position of business activities is $1,203,681 with investment in capital assets totaling $1,322,817. However, governmental fund balances decreased by $197,490 in the General, Commercial Rehab, Harbor capital project renovation funds.
Greg Knutson explained to the city council, at last week’s regular Monday meeting, that the auditing firm was again able to offer an unmodified opinion on the city’s financials. This is the highest rating an auditor can offer a governmental unit reflecting a true and accurate picture of Tower’s finances.
According to the 2017 audit “revenues of the city’s business-type activities were $188,078 and expenses were $238,514” Walker, Giroux and Hahne reports. This is similar to the previous year, however expenses decreased slightly, and revenues increased.
The Tower Airport capital projects fund deficit has grown to $64,450, about $11,000 higher than it was at the end of 2013. In 2016 the city undertook airport apron reconstruction which increased its deficit here.
In 2017 the city sewer and water accounts produced a deficit of just over $49,000. City Clerk–Treasurer Linda Keith explained that most of this deficit was due to $41,000 in depreciation. Only about $7,000 was an actual cash loss and late last year the city council increased 2018 water and sewer rates hoping to generate enough income to keep pace with rising costs.
The Hoodoo Point Campground and the Historic Harbor Project still reflect deficit balances at the end of 2017. The Harbor project year-end 2017 deficit balance is $419,944 and the campground deficit was at $181,951. The harbor project is ongoing and expected to come to fruition over the next couple of years. It is expected that the city will benefit from increased property taxes generated by the project and will be able to reduce the deficit over time. The city is also looking for grants and loans so it can complete the project. Although much of the Hoodoo Point Campground project expanding the number of campsites and providing connection to the wastewater ponds generated expense in 2017 it is expected that 2018 revenues will increase and the city will see additional camping receipts in the years to come. In early 2018 the city was successfully able to sell $500,000 in bonds to complete the financing of the campground project.
At the end of 2017 the city’s long-term debt totaled $691,003 compared to the $804,131 in debt the previous year. The state limits the amount of debt to three percent of the market value of all taxable property in the city. Currently the maximum debt Tower could carry and be in compliance with state regulation is $925,029. The city is comfortable below that number.
Over his four-year-term, Mayor Josh Carlson, City-Clerk Treasurer Linda Keith and the city council has been able to significantly address the deficits the city maintains by over $244,000.
At the end of 2013 the Historic Harbor Renovation balance was at $514,469. At the close of business 2017 the city has reduced the balance to $419,944, a reduction nearly $95,000, while the project continues.
The 2011 North Second Street sewer, water and street project has been reduced to $157,375, a figure $20,000 less than it was at the end of 2013. The infrastructure development to support the the North Star Addition has been reduced to a 2017 balance of zero, compared to the 2013 balance of $25,558. The debt incurred to clean up of old East Two River dump site has also been reduced to zero since its 2013 balance of over $91,000. Subsequently the city was able to generate $32,142 in the sale of the property to a private party.
The Martin and Elizabeth Gundersen Trust generated interest income totaling $8,997. The audit notes that two of the trust’s investments did not comply with state statutes governing the type of investments cities can purchase. This resulted when the city converted the trust into a city operated trust rather than the private trust which was established at the Gundersen Trust’s inception. A death of the secretary of the Gundersen Trust in 2016 left the list of signatories inaccurate. Both situations have been corrected.
In conclusion Walker, Giroux and Hahne recommends that the city take corrective actions in these matters:
A routine challenge for small governmental bodies like Tower is to create a segregation of duties assuring that the financials are accurate. While this is recognized it is impossible to afford the personnel required. The audit recommends that the city continues its oversight and be aware of the pitfalls created by the city’s small size.
The audit discovered that an Iron Range Rehabilitation Board grant for Main Street amenities did not agree with how expenditures were reimbursed. It has become a chronic problem for the city to get civic organizations to manage their activities in the same manner the city must when the city oversees IRRRB grant funds on behalf of the non-profit organizations. It has been an uphill battle and the city and city council has worked diligently to have all parties in compliance and will continue to educate the city’s partners hopefully eliminating this problem in 2018.
The audit also suggests that the city review billing procedures so it can better track ambulance receipts from area townships.
It seems that the auditors were searching for opportunities to suggest corrective actions when it was noted that the city did not cut-out the signature line on all the checks that were marked VOID.