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Cokato receives positive audit report, with some warnings
July 18, 2011

Fund balance projected to continue to erode

By Jennifer Kotila
Staff Writer

COKATO, MN – The Cokato City Council was given a clean bill of health during its annual audit report last Monday, but was also given several recommendations for the future.

Paul Harvego of Conway, Deuth, & Schmiesing presented the audit to the council, saying, overall, the city’s funds are fairly good, and there were no findings of noncompliance.

However, the city was given several warnings by Harvego. First, the city’s general fund balance has been slowly declining since 2006, when the state started cutting local government aid (LGA), Harvego said.

Right now, the city’s general fund balance leaves the city with about four months cash-on-hand, Harvego said, whereas in 2006, the city had more than six months cash-on-hand.

“I would like to see the fund balance not drop too much more – even though (the lack of) LGA is likely to lower the general fund even more,” Harvego said.

Harvego also noted the need to raise the fund balance in both the water and sewer funds.

The city did begin raising water rates in 2006 to bring the fund to a healthier state, but Harvego said he still considered the available cash as being too low.

Another warning for the council was that more than $464,000 of its deposits had insufficient collateral, meaning if the bank holding the securities failed, the city would lose that amount, Harvego said.

Also, Harvego warned the council about the city’s bid process. All bids being accepted which are expected to be more than $100,000 should be sealed, noted Harvego.

If any bids for smaller items are accepted by word-of-mouth, it should still be documented somewhere so there is a paper trail for where the money went and what it is for, Harvego said.

He noted that this usually happened if a contractor found something more that needed to be fixed while completing a job.

The city had also used the state bid program, but it was not eligible to because it is not a member.

If the city is planning to use the state bid program in the future, it should become a member to be in compliance with state statute, Harvego said.

Finally, the city should have a conflict of interest policy to protect its council members and staff, Harvego warned.

Council Member Butch Amundsen noted he thought the council had directed staff to create a policy.

City staff had been directed to do so, but the council had then decided the city did not need its own policy, because the state policy covered everything, explained City Administrator Don Levens.

Because Harvego strongly recommended the city have its own policy, Levens was directed to bring one back for the council’s approval at a future meeting.

Erosion of Cokato’s fund balance

The council heard the a review of the city’s financial management plan from the city’s financial advisor, Shelly Eldridge, of Ehlers and Associates.

The city’s expenditures have been higher than its revenues in the last few years, Eldridge explained.

“Without a growth in tax base, the fund balance is projected to continue to erode,” Eldridge said.

The state auditor recommends that the city’s fund balance should be between 35 to 50 percent, Eldridge noted.

The fund balance at the end of this fiscal year is estimated to be about 33 percent, with a slight bump to nearly 36 percent in 2012 projected due to one-time revenues.

After 2012, the financial management plan predicts the fund balance will continue to erode by more than 1 percent each year, according to the budget.

In order to fix the fund balance, Eldridge gave the council a couple of options.

It could either decide it could run the city on less than a 4 percent budget increase, or it could raise the levy to build up the fund balance.

“Take a look at what can be taken out or tweaked a little bit, give the recommendations to Don (Levens), and he’ll get back to me,” Eldridge said.

She also addressed Harvego’s warning about the water and sewer funds, saying if capital needs were coming out of those funds, they should be built up.

The council could have Ehlers and Associates do a utility analysis, which could be incorporated into the budget to get those funds where they need to be, Eldridge said.

The analysis would look at where the utility rates are now, and what the options are to get the fund to where the council wants it to be.

Eldridge also recommended the city get a bond rating if it is planning any major expenditures in the next five years.

A bond rating would help the city get the best possible interest rates on any bonds required to complete major projects.

City decides to delay buying a new payloader

Although the city had decided to table the discussion of buying a new payloader until August, Mayor Gordy Erickson said he thought a decision should be made about it now.

He also noted the council should discuss buying a new payloader in conjunction with discussing the city engineer’s recommendations for the sanitary sewer problems.

“I don’t know where we are going to find the money to buy a payloader and do what Eric’s (Lembke, of Bonestroo) recommending,” Erickson said.

A couple of the council members said they have had constituents approach them who are not in favor of the city purchasing a new payloader.

The only positive feedback Erickson said he received was from someone in another town who said the city should purchase a payloader because delaying it only made things worse.

Several people who knew the situation the city was in were still in favor of buying a new payloader, said Council Member Ken Bakke.

Council Member Carl Harju said that although he had heard both positive and negative feedback from people, after hearing Eldridge’s presentation, he no longer thought it would be a good idea to purchase a new payloader at this time.

Harju suggested delaying the purchase to next year.

“And then we’ll do the same thing next year. We’ll keep delaying this for how long?” Bakke asked.

A motion to delay the purchase of a new payloader, and revisit the issue in January passed 4-to-1 vote, with Erickson, Amundsen, Harju, and Council Member Jesse Bunker for it, and Bakke against.

Sump pump testing, ordinance discussed

Lembke has proposed that Cokato test the sanitary sewer system for any inflow and infiltration (I and I) using a smoke test.

Inflow is due to direct sanitary sewer connections such as downspouts, foundation drains, sump pumps, and holes in manhole covers.

Infiltration is water that leaks into the sanitary sewer system through leaks in the pipe underground.

During a smoke test, a two- or three-person crew use a high-capacity blower to blow smoke into the sanitary sewer line to test for leaks. Anywhere smoke exits the line, there is potential for stormwater to enter the sanitary sewer system.

During discussion, Amundsen noted he had seen more and more sump pumps being properly piped out from homes.

Although the city had a problem with a sanitary sewer pond overflowing, it has gone down quite a bit already, Amundsen said.

The city had to report the spill to the Minnesota Pollution Control Agency, but nothing has come of that yet, and it can’t do anything because the state is shut down, Amundsen said.

He suggested to keep educating people about improper connections to the sanitary sewer system at this time.

Harju agreed, saying as long as educating the residents was working, testing could be put off for now.

In the meantime, the city is working on an ordinance about improper connections to the sanitary sewer.

The council directed staff to have an ordinance drafted by September so it could figure out the logistics of fixing the I and I issues in the sanitary sewer system.

Fire department news

The council approved Cokato Fire Department’s plans for a 5k run Sunday, Sept. 11 to commemorate the anniversary of 9/11.

The run will take place within the city limits, will not cross Highway 12, and is still in the process of being planned.

The council also approved declaring the department’s 1981 Ford pumper truck as surplus equipment, and accepting bids for resale, to be decided at the September council meeting.

Museum news

The council approved the quarterly report from Cokato Museum as submitted by director Mike Worcester.

Plans are underway for the 62nd annual Cokato Corn Carnival, and the museum and Akerlund Studio will be open extended hours during the carnival, and closed the following Saturday.

The museum will also be hosting an antique fire truck show the afternoon and evening of Wednesday, Aug, 10.

Also, two grant-funded projects from last summer that were carried over to this summer are moving forward.

The Smith Lake townsite and cemetery marker should be in place by mid-August, and the museum is working with the granting agency and artist to complete the restoration of the museum’s exterior mural in a timely manner.

For the museum’s part-time staff opening, there were 27 applicants, six of whom were interviewed Wednesday, and several more of whom will be interviewed this week by Cokato Historical Society member Bob Gasch, Erickson, Harju, and Worcester.

Odds and ends

In other business, the council:

• approved the renewal of the law enforcement contract with Wright County for 2012 at a rate of $59.75 per hour, and 2013 at rate of $60.50 per hour.

• approved Cokato’s economic development authority (EDA) placing a billboard along Highway 55 between Buffalo and Rockford promoting Cokato as the “Best Place to Raise Kids in MN,” as long as the cost fits within the EDA’s budget.

At the time of the council meeting, the EDA had not received the cost of a billboard along Highway 55, or a time a billboard would be available.

The council also approved the EDA purchasing table tents to place at restaurants advertising Cokato as the best place to raise kids and listing the reasons why.

• approved nearly $10,000 worth of curb and gutter repair throughout Cokato, including adding an approach to the north side of Peterson Park, and replacing sidewalks near Holt Motors, the former hardware store, and on Millard Avenue.

• transferred $36,300 from the sewer fund to the capital equipment fund to bring it out of deficit.

• rescheduled August’s council meeting from the second Monday, Aug. 8, to the third Monday, Aug. 15 because of the Corn Carnival.

• was reminded that the National Night Out celebration takes place Tuesday, Aug. 2.

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