Tower reviews 2015 audit — “financials are in good shape”

MONDAY, JUNE 27, 2016 —The full city council met this evening to review the 2015 audit. It was the council’s second meeting in June. Walker, Giroux & Hahne, LLC Certified Public Accountant Devin Ceglar told the city council, “our unmodified opinion is that your financials are in good shape.”

At the end of 2015 the city adopted recommended new accounting guidance standards which provide better clarity in reporting pension funds. The change of accounting methods shows that the Firefighter’s Relief net pension is over funded by $78,350. This means that if every pension was immediately due, the city will still have a balance of funds available to pay future pensions. However, the city’s Public Employees Retirement Association (PERA) net pension account is under funded by $222,848. This is why the PERA payments keep increasing, according to Ceglar. It was emphasized these new numbers are due to the new accounting standards, and even though PERA is underfunded, it is a long-term liability and does not raise much concern.

The city council turned its attention to the water and sewer enterprise funds (municipal water). The city and Breitung Township operate a joint powers board, (Tower-Breitung Wastewater Board), separate from either community, and the city buys its water and sewer treatment from this entity. Tower collected, in 2015, $195,216 from water and sewer accounts, but paid $222,256 for charges from the joint powers board. This created an operating loss of $27,040. Alderman William Hiltunen asked, “Does this mean we are not charging enough?” The city has two options, either cut expenses or increase quarterly water rates. City Clerk-Treasurer Linda Keith told the board that in looking at the deficit, an increase of $27.25, per quarter would balance income and expense. “Increasing rates would be a hardship to many residents,” Clerk Keith said. “Would raising the rate only $2.00 per quarter, show a good faith effort?” Keith asked. The issue of deficit spending for water and sewer will certainly be looked at by the city council in the future.

The city council reviewed other items from the 2015 audit. They included:

• The Martin and Elizabeth Gundersen Trust has an asset balance of $968,992, but reflected in that amount is $372,000 from an inter-fund advance to the Harbor Project. The city general fund reflects the liability to the Gundersen Trust

• The North 2nd Street capital projects fund shows zero assets, and a $157,375 liability.

• The Historic Harbor Renovation capital project fund shows zero assets and a $417,622 liability

• The Airport capital project fund shows a negative balance of ($44,361) and the Main Street capital project fund shows a negative balance of ($80,390). The city council reduced the Main Street deficit by $20,000 at year-end 2015 by transferring unspent general fund monies to the Main Street fund.

The city council also discussed minor suggestions provided by Walker, Giroux & Hahne to improve the city’s accounting practices.

Turning to unfinished business, the council again considered the city’s All Terrain Vehicle (ATV) Ordinance No. 8 and changes which might be necessary in light of St. Louis County’s new policy allowing ATVs on county roads. Dan Broten who represents Tower on the Prospector Trail committee attended Monday’s meeting to update the council on details regarding the need to update the ATV ordinance. Broten explained that he was working with Nick Wognum, Ely, and people from Babbitt to develop suggested changes to the ordinance. All three communities will eventually be connected with ATV trails through the Prospector Trail project, and it would benefit the communities to have similar regulations, according to Broten. The Prospector Trail project has received $950,000 funding, and is working towards completing the necessary environmental impact requirements, Broten said. Deputy-clerk Stephanie Carlson told the council that the county changes to ATV regulations are “so new that the county is still putting it all together.” Broten said that he would come to the July city council meeting with additional information and suggestions for the city to consider.

Clerk Keith informed the city council that she had been in contact with Tim Tomsich over the Vermilion Housing Authority’s offer to sell lands north of the Tower Lakeview housing site. The housing authority has no estimate of the value of the land at this time, but it is contacting local real estate agents to see if a value can be determined, Keith said.

Under new business the city is considering repairs to the Tower Airport. The project’s total cost is expected to be $546,957. The repairs would consist of taxi lane repairs; apron repair and crack sealing. Ninety percent of the funds will come from the federal government and five percent of the funds will come from the State of Minnesota. This leaves the city responsible for $27,348. Clerk Keith suggested the city council approve using $10,000 from the airport fund and $17,348 from the city’s general fund for the project. The city still has about $50,000 in unallocated general funds, according to Keith. Alderman Hiltunen moved to authorize spending $17,348 from the general fund to pay for the balance of the airport repairs. Mayor Josh Carlson supported the motion. “I support it. It boggles my mind. We have 90 percent federal funding and five percent state funding, but it boggles my mind that we can’t find additional support,” Carlson said. The motion was approved with unanimous vote.

The city council approved a resolution notifying St. Louis County of the city’s disapproval of the county’s reclassification of Lot 21, Westerly ½ of Block 3 as non-conservative land. Instead the city prefers that the Main Street lot, located between The Tower News and Vermilion Fuel and Food, retain its commercial zoning status. According to Clerk Keith, Terry Wagoner is trying to regain ownership of the lot which became tax forfeit when Vermilion Fuel and Food was under a contract for deed. The vote on the resolution was unanimous.