Fairhope man questions Finance Committee

By Mary Hood
Fairhope Courier Intern
Posted 6/30/07

FAIRHOPE — The Finance Committee meeting held Monday before the City Council meeting seemed to be an eye opener.

Dick Kwapil, of the Service Corps of Retired Engineers business counseling, and two colleagues presented a 26-page report, with no …

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Fairhope man questions Finance Committee

Posted

FAIRHOPE — The Finance Committee meeting held Monday before the City Council meeting seemed to be an eye opener.

Dick Kwapil, of the Service Corps of Retired Engineers business counseling, and two colleagues presented a 26-page report, with no agenda, he said, but to pose some questions.

Kwapil said he reviewed city finances from 1996 to now with the city’s reliance on utilities as his main focus.

His report showed how much utility bills have increased in the past 10 years. From 1996 to 1999, utility costs were raised 1.66 percent; from 2001 to 2002 they rose 3.86 percent; and from 2003 to 2006 they went up 9.46 percent, he said.

Kwapil showed calculations based on past “City Sketches” magazines and his own utility bills.

A prediction of the future indicated if utility rates keep climbing, paying $1.2 million a month for utilities by the year 2100 will be common. Though this prediction may not materialize, he contended that the city relies too heavily on utilities for revenue.

Kwapil said he took the utility profits and added in sanitation and recycling profits before they were transferred into the general fund for 2006. The percentage of revenue came to 18.6.

Councilwoman Debbie Quinn said she understood his emphasis on city government’s reliance on utilities for its major revenue.

“We really do need to think about that,” Quinn said, of rethinking that reliance. “I think the general premise, he was probably right on. We keep upping utilities to pay everything.”

Rose Fogarty, financial reporting manager for the city, said the utility revenue goes into the city’s upkeep.

“When our citizens pay their utility bills, every penny of profit goes right back into the things we love about Fairhope,” Fogarty said. “And that was the whole purpose of the city of Fairhope going into the utility business.”

Kwapil said that relying on revenue from utilities isn’t the only option. He came up with a proposal for the city to help ease away from utility revenue.

He said he believes that establishing a sales tax could save citizens money.

“To balance the general fund, let us impose a 2 percent sales tax and reduce utility billings,” Kwapil said. “If the sales tax brings in $4 million, we will reduce utilities by $4 million. We, in effect, could be saving the people of Fairhope $1 million.”

Fairhope residents would not pay 100 percent of the sales tax, he said. Those living in Daphne, Point Clear and other areas would pay 25 percent. Fairhope residents would pay three quarters of the sales tax, but enjoy 100 percent of the utility reduction, he said.

Councilman Cecil Christen-berry said this should be looked at as a viable option. He said he thinks it wouldn’t make too much difference with vendors and consumers.

“Most people don’t know we don’t have a sales tax,” Christenberry said. “It’s assumed we do.”

Quinn said having a sales tax might not be the solution.

“I don’t know if his premise to move towards a sales tax is the right idea,” Quinn said.

“The problem is if you lower utility fees and put on a sales tax and have a major problem with utilities, you have to be able to fund utilities with utility money.”

She said if this is to be considered as an option, the public should be involved in the decision-making process.

“That’s not just a financial decision, that’s also a political decision as well,” Quinn said.

Another question Kwapil presented dealt with the transparency within city government when it comes to its finances. In his report, he said the “City Sketches” magazine is inadequate.

The Fairhope report, as published each year in ‘Sketches,’ he said, is non-revealing.

For the various departments and functions there are brief descriptions of operations, but not relating to prior or future year plans,” he said in his report.

Transparency in government has been advocated by several council members on previous issues.

“I think transparency is what we should strive for every day and I think the city of Fairhope has been very slow in transparency,” Quinn said.

Fogarty said one issue with Kwapil’s presentation was the lack of some information in his report.

He indicated there was no money in the natural disasters fund in 2006. Fogarty said there was $3 million in the rainy day fund, and noted she even passed along this information to Kwapil. She said she didn’t understand why he didn’t choose to use it.

Kwapil said he used the information that was readily available to him as a citizen.

Although he was given the information when he requested it, he still wanted to use the numbers from the “City Sketches” and the numbers indicated no money in the account, he said.

Kwapil said Fogarty gave several excuses as to why information could be misinterpreted, missing or chosen not to be presented. Fogarty told him that the rules of publishing information change annually and thus it’s hard to compare “Sketches” from year to year.

“If I remembered from my (certified public accountant) days, the auditor’s opinion stated that the report be consistently presented,” Kwapil said. “If there was a change in a rule, you either had to present both ways or explain the change in a footnote.”

Christenberry said there shouldn’t be excuses for not being able to understand the finances. One excuse that was used several times during the presentation is that business accounting, which Kwapil said he is well-versed in, is different from governmental accounting.

“When we’re told that governmental accounting is different from business accounting, I know that’s true and the government changes from year to year how things are reported, but I don’t know that to be an excuse,” Christenberry said.

Several improvements can be made on “City Sketches” to better inform the citizens, Quinn said, instead of making people pay to get the information.

“If you want anything from the city you have to pay for it,” Quinn said. “I can understand some of that; Some of that we can put it on Web sites, we can fax it to you, we can get the “City Sketches” to be more in-depth, we can send out a letter about utilities.

“I’m positive we could be more transparent.”

Fogarty emphasized the availability of financial reports in the Fairhope Public Library and said her door is always open.

“We don’t know exactly what it is they need unless they ask for it,” Fogarty said. “The staff is very responsive to any request or open to suggestion.”

The past two finance meetings and the upcoming meeting — to be held July 9 at 4 p.m — were scheduled to better inform the council on finances.

Quinn said there is no city utility board, so council members are doing their jobs as well as working with utilities.

“We need to be better at the utility side,” Quinn said, adding that there isn’t enough discussion about utilities during council meetings.

Generally, Kwapil said, no one knows what is going on with the finances.

“My approach to this thing is that we need clarification of the position of the city finances,” Kwapil said. “The average stockholder — that’s what I consider myself — needs some information. Nobody knows what’s going on. I’m serious. Nobody knows.”

Kwapil said he hopes to discover additional information by reviewing more reports.

“This is just a citizen doing something,” Kwapil said. “The point is that essentially the citizens have no reports; The council has reports that they don’t understand. I think there has to be some rectification and moderation here.”

Christenberry said he hopes for more clarification of the finances, and for the reports to be easier to understand.

“It looks better for our city, our staff, our council, our mayor for it be easier to understand,” Christenberry said. “The easier it is to understand, the less rumors, the less questions, the less innuendo.”

He said he thinks the council is on the right track to getting more understanding and thus bringing more transparency to the government.

“I think we’ve kind of opened up a little bit, and I expect at the next meeting we’re going to open up a little more,” Christenberry said. “I think we’re making progress.”

Fogarty said she believes the finance meetings are helpful and admires the council’s desire to learn.

“They are very conscientious and that’s why we try to provide more information in different ways of providing the information,” Fogarty said.