C.A.F.R., FY 2005-06 - Laserfiche WebLink

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MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Paris, we offer readers of the City of Paris, Texas' financial statements this narrative overview and analysis of the fmancial activities of the City of Paris for the fiscal year ended September 30, 2006. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal as well as the City's financial statements. Management Changes In March 2004, the Paris City Council voted to terminate the manager who had served for over seventeen years. The Council expressed a need for the City to be a leaner and more efficient operation. In November 2004, the Council selected its new city manager who started December 1, 2004. The new manager immediately began to review the [mancial condition of the City. Among the things found by the manager were the following: 1. The tax rate had grown form 47 cents per $100 valuation in 1983-84 to 69.5 cents per $100 valuation in 2003-2004. 2. The number of full time city employees during this same period had risen from 242 in 1983 to 366 in 2004. 3. Between the years 2001 and 2004, the City expenses exceeded City revenues by $4,478,546. 4. At the end of fiscal year 2003-2004, the water and sewer operating fund was overdrawn by $2,397,610 and the insurance trust fund was overdrawn by $688,379 in the City's pooled cash account. 5. The City would have been forced to borrow money for operational purposes had it not been utilizing a pooled cash account which allowed it to continue to function in the short run despite the financial crisis that existed. In mid-February 2005, the city manager gave a presentation to the Council and the public on the financial condition of the City of Paris using the audited financial statements found in the 2003-04 Comprehensive Annual Financial Report. In that presentation, the manager outlined his findings and proposals to improve the City's financial position. The city manager utilized the information gleaned from numerous meetings with department heads and employees to develope a plan to reduce city expenditures while at the same time updating user fee type revenues, which were typically too low in amount. Of the strategies outlined by the manager, he was able to implement the following steps: 1. Reduce costs of solid waste collection, mowing and vegetation trimming, health department operations, and law enforcement services at the public schools. 2 The City workforce was reduced by not filling vacancies, attrition, and transfers. Budgeted positions were reduced to 305 positions paid from local funds. Only six people actually lost their jobs in the workforce reduction, 3. The City closed its 21 year old self insurance pool and joined the Texas Municipal League's Intergovernmental Employees Benefit Pool. This strategic move effectively eliminated a major liability for the City in this area and made future costs more predictable and manageable. At the time of its closure, the self insurance pool was over $1,000,000 in the red. 4. Operating inefficiencies regarding lost and unaccounted for water were reduced. For example, new meters were installed for Lamar County Water Supply System and Campbell Soup Company which are the City's two largest water users. Also, a new water contract was signed with Lamar County Water Supply replacing the antiquated contract signed in 1967. This has led to increased water revenue for the City of Paris. 5 A capital replacement fund was established. 6. A tax rate reduction of 10 cents per $100 valuation was implemented lowering the City's property tax rate to 59.225 cents per $100 valuation. 7. Under the new manager, city-wide revenues exceeded city-wide expenses by $5,401,135 for the two fiscal years 2005 and 2006. The fmancial turnaround can also be easily seen by examining the cash position of the various funds located in the City's pooled cash account. Since legally restricted bond proceeds, trust funds, and other special revenue funds are included in the pooled account, those balances would have to be subtracted out of the pooled cash account to present a realistic picture of the City's cash position. Any umestricted investments would have to be added to the account balance. Umestricted funds were represented by a negative balance at the end of 2004 of approximately ($239,820), but dramatically improved in 2005 to approximately $2,545,851 and to approximately $7,760,410 in 2006. While there remain those in the community who question the reality of a financial crisis of the City in 2004, the numbers are indisputable. 3