By Margaret Friedenauer
In an audit of the Haines Borough, an accountant highlighted the town’s unusually large amount of savings. But the savings don’t mean the borough is ready to spend more or cut taxes.
Juneau-based accountant Max Mertz conducted an annual audit of the borough recently. He presented his audit findings to the assembly at its last meeting.
It costs a certain amount of money to run the borough each month. Mertz says the general recommendation is for towns to keep at least two months’ worth of costs in savings for emergencies. The Haines Borough has about 19 months of spending reserved, or $15 million dollars.
There are two sources that make up that big store of reserves. One is the permanent fund – money from land sales that the borough then re-invests to generate income. That money isn’t readily accessible because it can’t be spent without voter approval. Interest from that fund goes into the general fund, the other source of savings. The assembly can vote to spend that interest on certain things – like it did earlier this year when it chose to use some of the money on the design of a new waste water facility.
But, even if the permanent fund balance is removed from the equation the borough still has nine months’ worth of savings in just the general fund.
Mertz said this doesn’t necessarily mean the borough is wealthy, just cautious.
“Does it make you rich? No. What it does is provide you what I would consider a prudent cushion.”
Jerry Lapp is a former assembly member, mayor and chair of the finance committee. He said it’s no mistake the borough has a bigger cushion than most towns.
“It’s kind of by design,” Lapp said.
Some in the community have suggested the permanent fund and general fund is too large and that the borough should spend more or tax less. Lapp said he prefers the borough keep the cushion for emergencies and maintain expenses and the tax , or mill rate, at the level they’re at.
“If we can just hold the mill rate we have right now and cover expenses then that’s great,” Lapp said. “But to just drop it and start using out of that money, I think that would be the wrong approach. Because we’ve got stuff that’s really in bad shape and if something major happens, we would really be hurting.”
Assembly member Joanne Waterman agrees. While the savings were highlighted in the audit, she says it’s not significant; it just means the borough is prepared for an emergency.
“Is it bad or good? It’s neither. It’s just a fact,” Waterman said. “I think what it allows us to do is if certain types of emergency arose we’d be able to cover them.”
Waterman says it’s not likely, or even possible, the assembly would choose to use the savings for anything but a one-time project or emergency. The assembly is mandated by code to only budget what the borough brings in in revenue. That means the savings could not be spent on an ongoing expense, like adding more borough employees. It can only be used for a one-time expense, like fixing the roof on the sewer treatment plant if it caves in.
Lapp says the savings is the result of fiscal planning and a safeguard for the borough.
“It’s a good thing. That way you’re not shortchanging yourself.”
While Mertz, the auditor, commends the healthy savings, he warned the borough has to consider raising fees for sewer services. That’s because the borough is out of compliance with its sewer debt agreement with the state. Mertz says the only way to fix that is to reduce sewer costs or raise rates. Borough manager Dave Sosa says they’re discussing that recommendation as they prepares for the upcoming budget process.
The compliance with the sewer debt agreement was the most significant finding Mertz said he discovered in a mostly unremarkable audit. He gave the borough kudos for its management of state and federal grants and said the financial statements were clean.