The city of Mebane was given a clean bill of financial health this week when it received the results of the city’s latest financial audit.
Patricia Rhodes of the Stout, Stuart, McGowen & King accounting firm in Burlington delivered a clean, “unmodified opinion” that her firm had identified no material weaknesses or significant deficiencies in auditing the city’s financial statements for the fiscal year that ended June 30, 2019.
Based on the ratio of operating expenses to fund balance within the general fund, the city ended the 2018-19 fiscal year with a solvency ratio of 63.30 percent, which she said was well above the state average of 46 percent. “All of this is due to sound management practices,” Rhodes told the council Monday night.
As a point of comparison, Rhodes said that the towns of Hillsborough and Fuquay-Varina had solvency ratios of 39.27 and 61.60 percent, respectively, at the end of the 2018-19 fiscal year.
Mebane finance director Jeanne Tate presented other highlights of the latest audit to council members this week.
The city added nearly $1.2 million in fund balance (i.e., “rainy-day savings”) to the general fund, which included $646,417 in fund balance that had been carried over from the previous fiscal year, Tate told the council Monday night. The city ended the fiscal year on June 30, 2019 with approximately $13.4 million in fund balance, of which approximately $10 million was unassigned. Available fund balance within the general fund represented 65.5 percent of the city’s operating expenses in 2018-19.
Revenue from property taxes totaled more than $10.4 million, or 55 percent, of all revenue the city collected during the 2018-19 fiscal year, according to figures the finance director presented this week. Revenue from property taxes exceeded what the city had estimated it would receive ($10.2 million) by $257,754 in 2018-19, which Tate attributed to an “increase in growth for Mebane.”
The city’s tax collection rate for the fiscal year totaled 99.46 percent, outpacing the statewide average collection rate of 98.78 percent by about six-tenths of a percentage point.
Total tax base increased by $71.2M in 2018-19
The total assessed value of all property within Mebane’s jurisdiction increased by $71.2 million, from $2.1 billion in 2017-18 to nearly $2.2 billion in 2018-19, which represented an increase in the city’s tax base of 3.7 percent, based on figures Tate presented to the council.
Responding to a question from councilman Everette Greene, Tate said the city no longer has the ability to determine what percentage of the city’s tax base is residential, versus commercial.
“We have how much is industrial, but we don’t have any finer grain that that,” the finance director said, adding that the city had asked both Alamance and Orange counties for a breakdown for years, to no avail. “They don’t have their databases set up to provide that information,” she said. Orange County’s tax department used to disaggregate residential tax levies from taxes on other types of property but has been unable to do so since its databases were updated several years ago, Tate added.
Mebane also had an 8.4 percent increase in sales tax revenue from the 2017-18 fiscal year, which Tate said is “coming in much better” than the state’s sales tax revenues. She attributes much of the growth in the city’s sales tax revenue to continuing strong sales at Tanger Outlets.
On the expense side of the ledger, three largest categories of expenses within the city’s $17.7 million budget were for the police ($3.8 million), public works ($3.1 million), and fire departments ($2.7 million), based on figures Tate presented to the council. The city spent $349,511 on capital expenses for those three departments, which included purchasing five new police cars, a fire brush truck, dash-mounted cameras for police vehicles, along with other equipment, she pointed out this week.
Debt service within the general fund totaled $1.6 million, which represented 9.24 percent of the city’s operating expenses in 2018-19.
Tate said the city’s debt is structured so that debt service payments within the general fund will continue to decrease over the next decade. If Mebane took on no new debt within the general fund, debt service payments would total about $600,000 by 2032, based on figures she presented to the council this week.
Bond issue may be needed to fund wastewater treatment plant upgrade
However, the finance director told the council Monday night that, as Mebane grows, debt service is likely to increase. “We could take on more debt and still not hit that 10 percent mark,” Tate pointed out.
“I guess I’m wondering, at one point it was cheaper to borrow money – is that still the case?” councilman Tim Bradley asked.
“At current interest rates, you are perfectly justified in borrowing money now,” Tate responded. She said that the current interest rates on general obligation bonds are around 2 to 3 percent. “With our park, we felt very good about borrowing money for that.”
Tate noted that the next major capital expense that the city anticipates having to take on is an upgrade of its wastewater treatment plant, the Wastewater Resource Recovery Facility (WRRF) on Corregidor Street. Mebane’s city council approved a transfer of $583,000 from the utility fund last spring to begin design work on the first phase of the upgrade, based on the city’s latest financial statements.
“With the recent debt we took on, we knew we were inching above that 10 percent mark, but knew it was going to fall right back down,” the finance director said. “This is one of the things that bond ratings firms look at.” The city has an “AA” bond rating Standard & Poor’s, according to Mebane’s latest annual financial statement. Stout, Stuart, McGowen & King audited the city’s latest financial statements, in keeping with a state law that requires an independent review. Tate prepared the financial statements with assistance from the Cobb Ezekiel & Loy accounting firm in Graham.