2014 Annual Report

Finance Department

The finance department is responsible for preparing and maintaining the operating and capital budgets, cash management and investments, purchasing, payroll and income tax collections. The finance department consists of two offices, income tax and accounting. In 2014, Montgomery’s operating budget totaled $15.1 million. In addition to the operating budget, the City’s finance department administers a capital budget, with a four-year cash forecast. In 2014, the finance department continued its participation in the City’s performance measurement process.  This effort involves the tracking and collection of performance measurement data, which will ultimately be used by the department and the City to benchmark against finance departments in other municipalities.

Revenue and Expenditures

The charts titled “Where the Money Comes From” and “Where the Money Goes” provide a snapshot of how resources are collected and programmed for expenditures. In 2014, the finance department was responsible for the collection of approximately $8.4 million in income tax revenues and $5.0 million in property tax revenues.  In addition, the department is responsible for managing an investment portfolio of more than $20 million, which generated investment income of approximately $353,613. As with most municipalities, public safety, property protection and emergency services are the foremost governmental functions. General government and public works, including solid waste and recycling, account for over 20% of the remaining expenditures.

 

   
 

The finance department prepares quarterly and annual reports including the Comprehensive Annual Financial Report (CAFR).  In 2014, for the nineteenth consecutive year, the City was awarded the Government Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting for the City’s 2013 CAFR.  Moody’s Investor Services continues to recognize the City’s creditworthiness by assigning an Aaa credit rating to our debt.  Montgomery is one of only 16 communities in the State of Ohio to be rated in this category.

Income Tax Revenue

As depicted in the graph to the right, income tax collections rose dramatically in 2008 from 2007, as a result of construction activity with one of the City’s major employers; however, in 2009, income tax revenues decreased 10% from the amount collected in 2008.  Income tax revenues have been increasing each year since the 2009 downturn; in 2014 revenues exceeded collections from 2008 by 8.3%. For purposes of balancing operations with capital investments and related debt service, income tax revenues are distributed into three funds according to the following allocation:  76% to the General Fund; 20% to the Capital Improvement Fund; and 4% to the Debt Retirement Fund.

  

 Total Revenues and Expenditures

The line chart titled “Total Revenues and Expenditures including General Fund 2005-2014″ provides a historical perspective of the City’s ability to program and budget services, capital improvements and related debt service within the resources provided through the annual budget process.

 

 

Sound Financial Policies

In order to maintain a sound fiscal environment, City Council has adopted an array of financial policies: Investment Policy The graph titled “Investment Income” reflects revenues which range from $568,358 in 2005 to $353,613 in 2014.  City Council adopted an investment policy which applies to cash management and investment activities of the City of Montgomery.  The policy is reviewed periodically and updates are adopted by City Council.  The primary objective of the City’s investment activities is the preservation of capital and liquidity, maximizing investment income and conforming to State laws governing the investment of public funds.

 

  Fund Balance Policy

The fund balance is a key measure of the City’s overall financial health.  City Council adopted a policy requiring maintenance of a six to twelve-month reserve of operating expenditures for both the General Fund and Fire/EMS Levy fund, a minimum cash balance of $1,000,000 in the Capital Improvement Fund and one year of debt service payments in the General Bond Retirement Fund. The graph titled “General Fund Balance – Budget and Actual” depicts that actual year-end fund balances have exceeded budget estimates.

 

  Debt

On December 31, 2014, the City had $17,095,399 of bonded debt; of this amount $2,800,000 is general obligation debt, $13,265,000 is special obligation debt and $1,030,399 is special assessment debt. In May of 2013, the City issued $13,265,000 of special obligation bonds to finance public improvements which consist of constructing a roadway and public garage at the commercial/residential development known as the Vintage Club.  The repayment of the bonds is secured by payments in lieu of taxes generated within the tax increment financing district which encompasses the entire Vintage Club development.  The development includes a high-end housing development, two medical office buildings consisting of 100,000 square feet occupied by the Christ Hospital Health Network and plans for future commercial development in the northern section. The $2,800,000 general obligation debt was issued as a one-year note for real estate acquisition of the former Ford dealership at the Gateway Redevelopment Area and will be paid off in June 2015. As a result, the City’s outstanding debt per capita increased from $845 in 2005 to $1,174 in 2014.  The chart below depicts the total outstanding debt for the City over the last ten years.

Financial Activity and Position Statements

Readers of the City of Montgomery’s Financial Activity Statement and Financial Position Statement should keep in mind that both statements are presented in conformance with Generally Accepted  Accounting Principles or (GAAP) basis.  The amounts shown employ the same method of accounting and are summarized from the audited  financial statements within each respective  Comprehensive Annual Financial Report. The following is  a summary of the financial activity and financial position of the City: Financial Activity Statement For the years ending December 31 (in thousands)

SOURCES OF REVENUES20142013
Property Taxes$5,032$5,109
Income Taxes$8,439$7,564
Other Local Taxes$8$1,651
Intergovernment Revenues$1,733$1,285
Charges for Services$1,910$1,337
Investment Earnings$354$66
All Other Revenues$225$509
TOTAL SOURCES$17,701$17,421
USES AND EXPENSES
Security of Persons and Property$5,525$5,527
Parks and Recreation$1,207$1,323
Community Environment$683$661
Public Works$2,528$2,457
General Government$4,535$4,798
Interest and Fiscal Charges$646$421
TOTAL USES$15,124$15,187
TOTAL SOURCES OVER USES$2,577$2,234

The Financial Activity Statement, known in accounting terms as the “Income Statement”, provides a summary of the sources (revenues) and services (expenditures/expenses) of the City. Financial Position Statement For the years ending December 31 (in thousands)

FINANCIAL BENEFITS20142013
Cash$11,390$13,539
Investments$23,484$27,697
Receivables$9,319$9,155
Property and Equipment$55,034$44,999
Other Benefits$58$44
TOTAL FINANCIAL BENEFITS$17,701$17,421
FINANCIAL DETRIMENTS
Amounts Owed to Vendors$176$184
Amounts Owed to Employees$412$384
Accrued Interest $61$51
Long-Term Debt$14,482$15,571
Other Liabilities$8,791$6,455
TOTAL USES$23,922$22,645
TOTAL BENEFITS OVER DETRIMENT$75,363$72,789

The Financial Position Statement, known in accounting terms as the “Balance Sheet”, reports the benefits (assets) available to provide services while detriments (liabilities) are the amounts for which the City must pay in the future. Benefits over Detriments represents the difference between the financial assets and liabilities of the City providing the net worth of Montgomery.