SPECIAL COUNCIL PROCEEDINGS

CITY OF ATTICA

FEBRUARY 25, 2003

The Common Council for the City of Attica met in a special meeting the 25th day of February 2003 at the hour of 5 p.m. at city hall. Those present: Mr. Bill Craft, Mrs. Valarie Maus, Mr. Larry Grant, Mr. Curt Phelps, Mrs. Kay Gustus, Mr. Tom O’Connor and Mr. Deon Swift.

The council had a special meeting with Mr. Ron Stinson, Local Government Finance. Mr. Stinson was present to speak with the council concerning the 2003 Budget. Mr. Stinson began the meeting by stating that most councils don’t realize when they adopt a budget they are also adopting levies and rates and by statute, the amount raised by property taxes is limited. If you have a cap that you can raise in property taxes, and if it’s a situation that you need all of that money to fund the budget, your goal is to raise the maximum levy. By law it is a maximum levy; if the council doesn’t want to raise the maximum levy, the city doesn’t have to. But if it were a situation where the city needs it to fund the budget then by all means the city probably would want to raise the maximum levy. That’s what the city did in 2002.

The total property tax is $535,056 plus the Cumulative Capitol Development (CCD) Fund. The normal maximum levy for 2003 was $531,634 and there was an adjustment made for a levy excess (more is collected than anticipated), which was a small amount, as well as an adjustment for financial institution tax (made by law), again a small amount. A miscellaneous change to the CCD Fund can be made. Adding all those numbers together, the working maximum levy (maximum amount Attica could raise in property taxes) for 2002 was $565,592. The city is raising the maximum allowed by law in 2002.

Mr. Stinson compared the 2002 information with 2003 information and presented it to the council:

2002 2003

General $244,084 $215,468

MVH $109,798 $ 24,787

Park $108,294 $121,735

Cemetery $ 68,390 $ 46,697

Total $530,556 $408,687

CCD $ 24,907 $ 8,883

Mr. Stinson said by looking at information with adjustments, the city is under the maximum levy by $173,000. There are the budget forms submitted and had these numbers on them. He said there was a large difference by what was advertised for the general fund and what the council approved.

Mr. Stinson said he and Mrs. Mitchell went over her notes earlier in the day and at the bottom of Budget Form 4-B, the Proposed Tax Rate, she had noted to add $.40 to the tax rate, meaning the General Fund levy should be $556,308 and that is what was advertised. The budget form didn’t have this notation and therefore the state assumed that the $215,468 in the general fund was what the council had approved.

Mr. Stinson said most councils look at the budget, approve it and think they are done and that’s pretty much what they do. If you look at the form that you signed, it says the council is approving Form 4-A and 4-B as submitted. Form 4-B contains the levies and rates and when the budget is signed these are the levies that are approved. In this case, the forms were submitted well under the maximum levy and that is what the council approved when the budget was adopted.

Mr. Stinson informed the council that we are going to submit a request to the Department of Local Government Finance to reconsider this. The one problem you have is once you advertise the budget it’s the county auditor’s responsibility to advertise the rates that you have adopted. The lower amount is what the auditor has advertised. There is a chance that the auditor could reconsider and possibly have to re-advertise the City of Attica’s rates. This could possibly bring it back up to the maximum levy. Mr. Stinson said he couldn’t make any promises, but would submit it and explain what happened. If these steps are taken, then that will allow the council to recover the levy and raise it to the maximum.

Due to the fact there was not the appropriate amount of time between the advertisement of the budget and the adoption, the council will have to go back and appropriate money into every fund. Also, there was some erroneous information in the cash balances due to failure to transfer from the rainy day funds. The transfers were made in appropriations, but not transferred in the cash fund. The council was given current status of funds after transfer. At this point, Mr. Stinson said he would suggest assuming that the request to reconsider is going to be denied and proceed from there. If it reconsidered, the council can go back and look at the extra money at that time. One thing the council can do to help the situation is when preparing the 2004 budget is to appeal for a levy excess. The city would qualify for reallocation of property tax replacement credit. This would allow the city to keep the property tax replacement credit as revenue. Mr. Stinson recommended this proposal if the correction was not allowed.

The CCD Fund will have to be re-established because the approved levy is less than the amount the city is qualified for. Once that rate is reduced, it cannot be brought back up to the maximum level unless going back through the whole establishment process. This will need to be done in 2003 so that it can be included in the 2004 budget.

Mrs. Mitchell asked Mr. Stinson to explain the Rainy Day Fund. He said these fund transfers have not technically been made at this point. Mr. Stinson assumed a resolution had been passed to make the transfer and it should be done. The city can use the Rainy Day Funds to fund the budget in 2003 by additional appropriations. The problem is that these funds have to go through the appropriation process just like the general fund. Contri-buting to the problem is the fact that the Rainy Day Fund is still a part of the cash balance as of June 30, 2002.

After his presentation, Mr. Stinson answered questions from the council, mayor, city attorney and clerk/treasurer. Mr. Phelps asked where the numbers came from—which advertised budget. Mr. Stinson stated that it was the advertised budget used at the September 17 meeting, advertised on August 21 and September 4, 2003. Mr. Phelps stated he didn’t recall if the council saw the levy numbers. Mr. Stinson presented the form and detailed the lines at which the council should be looking. When asked who calculates these figures, Mr. Stinson replied that the clerk-treasurer does.

Mayor Swift asked what funds will change if the state reconsiders the budget and Mr. Stinson said the only place gains will be made at this point is the general fund. Whatever was adopted in other funds is what the city will receive. Mr. Grant asked, “Assuming we don’t get the maximum levy and have to live with this, are we going to run into money problems before we are done? Mr. Stinson recommended the council should not make large expenditures for the time being. Mr. Stinson reminded the council members that during the first half of the year the city is actually working on capital since tax draws aren’t made until June. The biggest concern would be if the problem causes budget delays past June. The timing of advertising and meeting dates is crucial to the process. Mr. Stinson offered to meet with and advise the council when needed.

Mayor Swift and Mr. Grant signed the letter to Ms. Melissa Henson, Director of Budgets of the Department of Local Government Finance confirming that the copy of Form 4-B is the rate and levy as approved by the city council on September 17, 2002. It also included the levy that was advertised. The Form 4-B originally submitted was done in error.

Mr. Grant mentioned two proposed ordinances that needed discussed. The first ordinance was for vehicle parking spaces for new residential construction; the second ordinance addressed fencing requirements within the city. It was agreed among council members these two ordinances should be heard by the Zoning and Planning Commission and then brought back to the council. Mr. Grant, chairman of the committee, said he would schedule a date for the meeting.

Two citizens present addressed the council members. Mrs. Sandy Shonkwiler said, “Two weeks ago Curt was pretty eager to blame Nancy for everything. Listening to this guy tonight, the council asked a lot of questions, which I’m really grateful you did. I really don’t feel like Nancy’s fully to blame. Am I right”? Mr. Phelps replied, “No”. Mrs. Mitchell stated, “You put your trust in me to supply you with the correct numbers. I was at fault. I readily admit I was at fault. However, what frequently happens with councils, they go ahead and sign. It depends on how involved you want to be with the figures and numbers. No one can beat me up any more than I have beat myself up over this. I feel quite badly about it, but if you want to fault someone I suppose we both could be at fault”. Mr. Bill Lister said, “Each council member had read the budget and signed off on it so you are just as much at fault as she is because you didn’t catch some of the things that are supposed to be caught”. Mr. Phelps replied, “The numbers are provided to them by the Clerk’s office and the only way to be more involved is to be in there and help her do it”. Mr. Lister said, “Then some of you should be in there doing it”. Mrs. Mitchell responded, “Not to help me do it but to check what I’ve done”. Mr. Phelps asked, “If the information was really supplied to the council”? Mrs. Mitchell said, “Sure”. Mr. Phelps declared, “The council receives their information from the clerk’s office. The council relies on the clerk’s office to supply the right information. The only way to be more involved would be in theory to step on the clerk’s toes and get involved in the whole budget process”. Mr. Lister asked, “Why was the budget submitted not compared to the previous year’s budget before the council signed it. If you had compared these, red flags should have come up right there”. Mr. Grant replied, “The budget they signed was 10% higher than the year before”.

ADJOURNMENT

There being no further business to come before the council, Mrs. Maus made a motion to adjourn, seconded by Mr. Craft. All ayes.

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Deon H. Swift, II, Mayor

ATTEST:

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Nancy Jo Mitchell, Clerk/Treasurer