On April 3, Vanessa Burke, a partner at the Pun Group, stood before the Cottonwood City Council with her report of the city’s finances. She read from a thorough accounting of the city’s revenues, expenses and liabilities, comparing 2017 and 2016 as part of the city’s periodic auditing, held every three to five years in accordance with the state’s accounting standards. She gave the city a clean bill of health.
In 2017, Cottonwood raised $18,322,795 in taxes and fees, with expenses and services costing $21,093,423. The shortfall was made up with an assortment of grants from federal and state agencies, as in many similar municipalities. A 115 percent ratio of expenses to revenues is well below the average that the Pun Group has determined for similar cities in California, though they have not done a full assessment of Arizona yet.
“When you look at the average in California, you’ll see that it’s much larger than that,” Burke said at the meeting. “You’re looking in the 124, 125, 135 percent range.”
Members of the council celebrated the good news found in the city’s audit, and celebrated the Pun Group’s audit itself. “I think it was a more thorough audit than we’ve had in years past,” Mayor Tim Elinski said. “They certainly wanted to drag a fine-tooth comb over our finances and I was very impressed. We really came out very clean.”
Despite the positive report, not everything about maintaining a good financial situation will be easy going forward. The biggest challenge facing the town in the near future, according to the auditors, will be pension liabilities. The pension fund for city employees is currently funded at 67.06 percent, having, like many pension funds all over the state and the country, taken a beaten during the Great Recession without yet recovering.
“Right now our biggest concern that we’ve got, of course, is the pension,” Deputy City Manager Rudy Rodriguez said. “Over the last probably three years, we’re now contributing over twice as much as we used to. And obviously our revenues haven’t doubled. So we’re basically trying to get council to allow us to find resources so that we can continue to pay down that liability as well as our maintenance and operations.
“If we have to come up with money, we have to trim somewhere else,” Rodriguez said. “However, with that being said, the city has always managed to find a way to take care of its obligations.”
Elinski said he hopes that it doesn’t come to that, though he accepts the necessity of the city paying its debts if it can’t get some relief.
“There is little that we can do alone to fix that problem,” Elinski said. “It’s really a statewide, and honestly a nationwide issue. But it’s hurting us and many other rural communities in Arizona. It’s a big hole in our budget. And it would take statewide legislation to correct it and relieve some of the strain on smaller communities like ours. Until then, we have to buckle down and pay that liability off. It’s something that we’re not responsible for creating, but we’re responsible for paying.”
The auditors’ report identified two accounting deficiencies in examining the city’s accounting and bookkeeping, an improvement on the previous audit. Rodriguez and budget manager Kirsten Lennon attribute the errors to a somewhat short-staffed finance division, and said they hope to hire an additional accounting specialist in the coming months if City Council can find room in the budget for a new hire.
The first budget work session with City Council will be Tuesday, April 24.
Jon Hecht can be reached at 634-8551, or email jhecht@larsonnewspapers.com
