News From Terre Haute, Indiana

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January 24, 2013

Sides differ on health of TH finances

Recent audit cites larger deficit than city leaders reported

TERRE HAUTE — The City of Terre Haute’s finances may be in worse shape than city officials have previously acknowledged, according to a state audit of 2011’s financial records.

The audit was posted online (www.in.gov/sboa) this week by the Indiana State Board of Accounts.

The audit found that the city started 2012 with a $6.4 million deficit in its critical general fund. That is $1.9 million more of a deficit than Mayor Duke Bennett and other city officials had cited previously.

Bennett and others have frequently cited a lesser figure to describe how deep in the red the city was at the start of last year. That lesser figure, $4.5 million, is based on a cash-flow accounting method of the city’s books, an independent accountant told the Tribune-Star. The $6.4 million figure, on the other hand, is based on an accrual method of accounting, which basically takes a slightly longer-term view of the city’s books than a cash-flow basis, the accountant said.

Bennett, reached early Wednesday, said he had not yet reviewed the audit, which was posted online Tuesday morning.

Earl Elliott, a Terre Haute certified public accountant with Sackrider & Co, a Terre Haute CPA firm, said the accrual method is a more accurate reflection of the city’s financial situation because it takes upcoming liabilities into account.

However, Scott Walker, a financial consultant for the City of Terre Haute, told the Tribune-Star Wednesday that a third view of the city’s books is actually the most informative. That view considers all city assets and liabilities over a much broader range. By that reckoning, the city enjoyed a $6.4 million increase in net assets in 2011.

“It’s a complete picture of the city,” Walker said of the third view of the city’s books, which is called the “City of Terre Haute statement of activities” in the 2011 audit.

Nevertheless, a former state auditor who examined the 2011 audit for the Tribune-Star, pointed at the $6.4-million deficit in the general fund to start 2012, calling it “unsustainable.” The general fund, which funds most day-to-day city government activities, has “gone backwards” by a total of $8 million in the past two years, the former state auditor said.

According to state figures, the city’s general fund balance has fallen from a surplus of $4.8 million at the conclusion of 2008 to about $1 million at the end of 2009 and then a $500,000 deficit at the end of 2010. That deficit stood at $6.4 million on Dec. 31, 2011, according to the most recent audit.

Leslie Ellis, city controller, told the Tribune-Star Wednesday that the figures for 2012 will be much improved, thanks in part to some transfers of money at the end of the year by the Terre Haute City Council. Those transfers included moving $3.5 million from the city’s “rainy day” fund and $2.2 million as a “payment in lieu of taxes” from the Terre Haute Sanitary District to the general fund.

In her written response to the state audit, which called attention to the multi-million-dollar general fund deficit, Ellis stated that the city should see a positive general fund balance by the end of this year. She also stated the city’s leadership has chosen to avoid making “draconian cuts to our budget, of which public safety is over 70 percent. …” Public safety accounts for 72 percent of the city’s expenses, Ellis said. (See information box).

As has Bennett on several occasions, Ellis also noted the impact of the state’s property tax caps on Vigo County and the city.

According to state audit figures, the city’s general fund received $19.8 million from property taxes in 2008. That figure dropped to $17.9 million in 2009, rose to $18.3 million in 2010 and dropped again to $17.8 million in 2011.

Apart from property taxes, the general fund also receives money from other sources, including state taxes. When all revenue sources are considered, total revenue into the city’s general fund has dropped from $28.1 million in 2008 to $25.6 in 2011, according to the state.

A few Indiana cities of similar size to Terre Haute saw growth in their general fund balances in 2011, according to their state audits, which are also available on the State Board of Accounts website. For example, Kokomo’s general fund grew by nearly $4 million in 2011, reaching a surplus of $8.8 million. In Muncie, the general fund grew in 2011 from $3.8 million to $7.1. In Columbus, the city’s general fund showed growth of about $3 million to a total surplus of $8.8 million.

Anderson saw a decline in its general fund in 2011, according to state figures, starting that year with a general fund balance of $194,000 and ending the year with a balance of $158,000.

Rising and falling

• Key City of Terre Haute expenses and income sources:

Public safety (includes police and fire departments) costs

2008    $21.6 million

2009    $22.5 million

2010    $22.9 million

2011    $23.5 million

Property tax income

2008    $19.8 million

2009    $17.9 million

2010    $18.3 million

2011    $17.8 million

Source: Indiana State Board of Accounts

Reporter Arthur Foulkes can be reached at 812-231-4232 or arthur.foulkes@trib

star.com.

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