The Vermillion City Council gave approval July 15 to the city’s comprehensive annual financial report prepared by Finance Officer Mike Carlson for the fiscal year from Jan. 1 through Dec. 31 of 2018.
The report is loaded with various financial statements, including statements of revenues, expenditures and changes in fund balances, and other financial data that cover everything from property taxes, capital assets, long-term debt and leases, to deficit fund equity, risk management, retirement plan and tax abatements.
Besides hard numbers in a variety of financial statements, the report also provides a snapshot of how the city did in 2018 in such areas as unemployment, the value of building permits, long-term financial planning and major initiatives related to infrastructure and quality of life.
The report was audited by Williams & Company, a certified public accounting firm located in LeMars, Iowa.
The company states, in a letter included with the report, that it has audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund and the aggregate remaining fund information for the City of Vermillion for the year ending Dec. 31, 2018.
Independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the city of Vermillion’s financial statements for the year ended Dec. 31, 2018 are fairly presented in conformity with GAAP (Generally Accepted Accounting Principles
• The assets and deferred outflows of resources of the City exceeded liabilities and deferred inflows at Dec. 31, 2018 by $86,050,495 (net position). Of this amount, $22,595,490 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors.
• The net position of the City increased by $3,049,294 as a result of the current year’s operations. The net position of governmental activities increased by $799,646 or 1.96 percent and the net position of city government’s business-type activities also increased by $2,249,648 or 5.33 percent.
• Total revenues from all sources increased in 2018 by $909,565 to $26,558,488. In 2018, charges for services increased $942,265, operating grants and contributions decreased $3,141, capital grants & contributions decreased $571,402, property taxes increased $147,195, sales tax increased $109,273, other general revenues increased by $285,375.
• Total cost of all programs was $23,509,194 for 2018. This is an increase of $2,486,511 or 11.83 percent over 2017.
• The City's long-term debt/capital leases decreased $1,404,372 from 2017 due to repayment of existing bond issues, and issuance of $381,646 for State Revolving Loan for wastewater Prentis Street lift station and $10,000 Solid Waste Management Program loan for a curbside recycling trailer.
Fund Financial Statements
• At Dec. 31, 2018, the City's governmental funds reported combined ending fund balances of $9,932,009, an increase of $523,917 in comparison to the prior year. Of this balance $1,827,995 is unassigned fund balance, $331,628 is assigned fund balance, $4,681,839 is committed fund balance, $2,817,803 is restricted fund balance and $272,744 is non-spendable fund balance.
• The City's seven enterprise funds ended the year with net position of $44,164,809, an increase of $2,198,963 in comparison to the prior year. Net cash flows for operations were $5,582,997 while net cash used by capital and financing activities was $4,752.658.
For the year ended Dec. 31, 2018, the assigned general fund balance was $331,628 and the unassigned general fund balance was $2,333,814, a decrease of $104,262 in comparison to the prior year. Combined, these fund balances represent 40.3 percent of the final 2018 General Fund expenditures.
According to the report, governmental activities increased the City's net position by, $799,646, thereby accounting for 26.22 percent of the total growth in the net position of the City of Vermillion. Elements of this increase are as follows:
• Charges for goods & services increased $162,134 in 2018. This change is made up general government decrease $8,133 of which the major factor is a decrease in the cable TV franchise fee of $9,435. Public Safety increased $11,315, which is made up of an increase storm drainage fee of $12,470 and a decrease in parking tickets of $2,869. Public Works increased $14,947, which is attributable to an increase in state highway and bridge and county motor vehicle fees of $14,993, an increase in airport fuel sales of $4,727 and a decrease in street cut fees of $3,295.
Health and Welfare increased $140,970 attributed to increase ambulance revenues of $72,151 and building permit sales of $67,306. Culture & Recreation increased $3,035 attributed to the swimming pool admissions down $6,988 concession revenues up $6,601 and recreation fees/parks capital fees increasing $4,025.
• Operating Grants and contributions decreased $6,184 in 2018. For 2018, general government increased $2,890 attributed to increase in bank franchise fees, public safety operating grants decreased
$8,277, which is attributed to reduced one time operating grants and increase in contribution for Clay County for E911 operations increased $7,457, public works decreased as there were no operating grants in 2018, health and welfare operating grants decreased in EMS grants for 2018 and culture and recreation increased $2,070 made up of library grants of $33,856, park and recreation grants of $24,096 and $5,126 for mosquito control.
• Capital grants and contributions decreased by $369,875in 2018. For 2018 capital grants and contributions consist of public safety fire department security improvements of $27,363 and police radio of $7,000, public works of $356,994, state transportation improvement funds, $8,019 for airport improvements, public payments for special assessment improvements of $15,700 and health and welfare county ambulance grant of $169,932.
• Property taxes increased by $147,195 or 6.35 percent during the year. This increase is from growth or new property added to the tax rolls plus increase allowed by the State as the limit on property tax increased 1 percent for 2018.
• Sales Taxes increased by $140,314 or 3.84 percent. This would include the first penny sales tax used for general fund and the second penny sales tax used for capital projects. As the South Dakota Department of Revenue collects the sales tax on behalf of the city, information as to the individual area of the increase/decrease is not available.
• Sales taxes for special revenues decreased $31,041 or 8.7 percent. The special sales tax is referred to as BBB sales tax used for advertising and promotion of the city.
• General Government expenses increased by $164,476 or 12.47 percent. The net effect of the pension adjustment increased expenses $42,289 in 2018 compared to a decrease of $80,562 in 2017. General government wages and benefits were up as the assistant position was filled for the full year of 2018. Finance Office operating expenses were up in 2018 for the bi annual election and additional publication. Municipal garage operating expenses were up for increase in equipment repairs. Total general government depreciation increased $7,346 in 2018.
• Public Safety expenses increased by $668,165 or 27.07 percent. The net effect of the pension adjustment increased expenses $173,148 compared to a decrease of $327.766 in 2017. The 911 fund wages increased $30,930 for the addition of a dispatch position during the year, Fire Department had increase in equipment repairs and public safety depreciation increased $37,711 over 2017.
• Public works expenses increased $153,974 or 7.94 percent. The net effect of the pension adjustment increased expenses $29,036 compared to decreased expenses of $51, 364 in 2017. Snow removal expenses were up in personnel of $18,324 and operating expenses for fuel and equipment by $24,994 due to increase snow and ice. Airport repairs and maintenance expenses were down $32,126 as the runways were seal coated in 2017. Depreciation expense increased $26,449 over 2017.
• Health and Welfare expenses decreased $135,417 or 24.11 percent. The net effect of the pension adjustment increased expenses $24,453 compared to decreased expenses of $29,777 in 2017. Ambulance expenses were up $87,944 due to adding three full time paramedics during the year.
• Culture and Recreation expenses increased $403,483 or 25.64 percent. The net effect of the pension adjustment increased expenses $38,877 compared to a decreased expenses $73,648 in 2017. The first full year of the new swimming pool expenses were up $15,685 with the majority in personnel as it was for a full season. Parks operating expenses increased as 2018 was the first year operating a concession stand at baseball and softball fields thus increase for cost of goods. Recreation saw an increase wages as the position was vacant part of last year and additional operating expenses. National Guard Armory had an increase in operating expenses for $4,824 for building repairs. Mosquito control supplies increased $11,159 due to more control needed for wet spring and summer. Depreciation expense increased $136,087, mostly attributed to the full year of depreciation on the new pool assets.
• Conservation and Development expenses increased $94,994 from the City's continued support of various programs. The City continued to support numerous organizations but during 2018 with increased funding from General Fund and Second Penny Sales tax for economic development reinvestment.
Business-type activities increased the City of Vermillion’s net position by $2,249,648, accounting for 73.78 percent of the total growth in the government’s net position. Key elements of this increase are as follows:
• Charges for services increased by 5.15 percent or $780,131. The Electric Fund charges for services increased 7.75 percent or $562,069. Electric kWh sales increased 5.36 percent during 2018, which is attributed to colder fall and winter weather. The Electric Fund received reimbursements from the Southwest Power Pool through Missouri River Energy Services for transmission assets in April 2017and for the full year of 2018 increased $316,522. This was the sixth year of seasonal electric charges. Water Fund charges for services decreased 1.82 percent or $34,450. Water sales decreased 2.37 percent over 2017 attributed to wet summer weather. Wastewater Fund revenues increased by $62,184 or 3.17 percent. The Liquor Fund sales decreased 1.02 percent or $16,456 over 2017. The Joint Powers-Landfill revenue increased $206,036 over 2017. The landfill revenues increased $206,036 from an increase in volume of materials received, with contaminated soil revenues increasing $17,370. The sale of recycling materials revenues portion of the Joint Powers decreased $108,186 due to a decrease in market price of materials being sold. The Golf Fund revenues decreased $1,414 which is attributed to decreased play with a cool late spring. An increase in the Curbside Recycling program revenues of $2,162 resulted from a full year of the $.50 per month rate increase and with increased volume of materials collected with the lower market prices reducing revenue sharing.
• Operating grants and contributions and capital grants and contributions decreased $198,484 in 2018. During 2018, $203,428 of Community Development Block Grant funds were drawn down for construction progress made on the Prentis Street wastewater lift station replacement project, land valued at $22,500 was received for the northeast substation, developer provided water main extensions of $28,707 and a Water Basin grant of $3,043 was received and a state grant of $10,000 was received to assist with the purchase of a replacement curbside trailer.
Sales Tax Revenues Up Slightly
An introductory statement in the report by City Finance Officer Mike Carlson notes that the city’s economy, as reflected in sales tax collections, saw an increase in 2018. The economy in Vermillion as reflected in the total sales tax collections saw an increase in 2018. The total City sales tax revenues increased $76,619 or 1.92 percent over 2017.
This includes the first cent used for general fund, the second penny sales tax used for capital projects increasing $98,047 while the BBB sales tax used for advertising and promotion of the City decreased $21,428 or -6.07 percent over 2017. As the South Dakota Department of Revenue collects the sales tax on behalf of the City information as to the individual areas of the increase or decrease are not available.
For the first three months of 2019 total City sales tax revenue increased 12.62 percent over 2018. The sales tax receipts will be monitored and the budget will be reviewed in August 2019 to determine if adjustments are needed.
Carlson’s report notes that the unemployment rate for the city decreased “comparing December 2017 at 3.6 percent to December 2018 at 3 percent as well as the state unemployment rate having a slight decrease comparing December 2017 at 3.4 percent to December 2018 at 3.3 percent.”
The unemployment rate for the City of Vermillion saw a high in June 2018 of 3.5 percent but decreased at the end of the year to 3 percent. The state unemployment rate was as high as 3.9 percent early in 2018, but decreased to 2.6 percent in July of last year. At the end of 2018, it had climbed to 3.3 percent.
“Low unemployment is good for continued economic growth within our community and surrounding areas,” Carlson states. “However, it does pose a challenge for new or expanding businesses to find a large enough pool of qualified candidates for open positions.”