Freed Maxick

The Batavia City Council, back in the public eye after a five-week break, is expected to hear a review of the Batavia Muckdogs’ summer baseball season from owner Robbie Nichols and an audit presentation for the 2020-21 fiscal year by Kathryn Barrett, director at Freed Maxick CPAs, P.C.

Those two items, along with City Manager Rachael Tabelski’s recommended transfers of unassigned funds to restricted reserve funds, highlight the agenda of Council’s Special Conference Meeting, which is set for 7 p.m. at the City Hall Council Board Room.

A Business Meeting, featuring five resolutions to be voted upon, will follow. One of those resolutions is to approve the modified and restated sales tax allocation agreement with Genesee County – action that paves the way for the county to distribute sales tax revenue on an annual basis to its towns and villages for the next 38 years.

Muckdogs Make Winning Debut

The Batavia club enjoyed a successful first season in the Perfect Game Collegiate Baseball League after the city and CAN-USA Sports LLC, owned by Nichols and his wife, Nellie, came to a lease agreement over the winter to operate a team here – ultimately deciding to keep the popular nickname, Muckdogs.

The team posted a 22-19 record, finishing one game back of Geneva for a playoff berth in the league’s Western Division, but beyond that, fans flocked to Dwyer Stadium in large numbers. The Nichols and their players also supported numerous community events and causes.

In an interview with The Batavian at the end of July, Nichols said fans will see an even better team in 2022, stating that this year’s players will go back to their schools and tell the best players on their teams that “you want to go to Batavia."

“I think the team is really going to improve next year," he said.

Audit: City at ‘Healthy, Stable Position’

Barrett will present the key findings of the accounting firm’s audit of the city, which, per the document’s financial highlights section, continued to maintain a healthy and stable financial position for the fiscal year ending March 31, 2021.

“The city continues to maintain a positive unassigned fund balance. Despite the challenges such as a slow property tax base growth and state mandates (i.e. the property tax cap), the city continues to diligently commit one-time surplus funds to fund balance reserves for future capital investments,” the report reads.

Achievements over the past year, per the report, include:

-- Strong assigned and unassigned fund balances in the general fund and strong balances in the water and sewer funds, along with “healthy” operations in general, water and sewer funds;

-- Committing surplus to reserve funds for one-time equipment purchases and infrastructure and facility improvements;

-- Implementation of fiscal policies such as a fund balance policy, investment policy, revised purchasing manual and monthly financial monitoring.

Tabelski: Move $761,000 to Reserve Funds

The city manager, in a memo to the city’s Audit Advisory Committee dated Aug. 25, writes that after the 2021 fiscal year, the city is in “a good position to increase the percentage of unassigned fund balance … to 15 percent of current year general fund expenses.”

She recommends transferring $711,000 in general fund balance to reserve funds and another $50,000 in the workers’ compensation fund to that fund’s reserves.  Even with these transfers, she said there will be about $2,527,600 left in unassigned fund balance.

Tabelski noted that the city’s capital plan calls for “multiple” expenditures over the next two to five years, including public works equipment, sidewalk replacement and facility improvements – “without negatively affecting the city’s financial position or tax rate.”

The recommended transfers are as follows:

• Police Reserve, $50,000, primarily to replace patrol and detective vehicles on an annual basis, with two vehicles to be replaced next year.
• DPW Equipment Reserve, $100,000, raising the fund to $437,225, with the goal to replace three dump trucks/plows, six sedans, four pickup trucks with plows and a one-ton dump truck by the end of 2025.
• Facilities Reserve, $136,000, considering work on multiple proposed projects, such as the new police station, improvements at the fire station, Bureau of Maintenance, City Centre and other buildings.
• Compensated Absences, $75,000, noting the city’s liability in this area is $1.94 million, with nearly $200,000 due within a year, and also that three pending retirements will affect the general fund by nearly $100,000.
• Parking Lot, $100,000, with an eye on repaving, by 2025, lots on Williams Street, Court Street Plaza and Bureau of Maintenance
• Health Care Fund Reserve, $250,000, to build back funds spent over the last two years. As of March 31, the fund had $10,155.47 in restricted reserves and $13,863.08 in assigned fund balance.
• Workers’ Compensation Fund Reserve, $50,000, with the goal of reaching $1 million in the fund’s restricted reserve. As of March 31, the WC fund had $580,424.34 of restricted reserves and $485,111.13 in assigned fund balance.

Genesee County came out much better than expected in terms of its financial health in 2020, according to the certified public accountant who conducted the municipality's yearly audit.

“You fared fairly well. You had budgeted a deficit, and you actually came out better than you had anticipated,” said Kathryn Barrett, director at Freed Maxick CPAs, P.C., as she and colleague Nicole Ryan summarized their report earlier this month for the Genesee County Legislature.

Barrett said the county took in about $5.3 million less than budgeted in 2020 (its fiscal year is January through December), but spent about $8.5 million less than budgeted.

“So, budget to budget, you did much better, and that helped build that positive fund balance,” she noted, adding that the audit uncovered no deficiencies or material items.

The county’s net position of primary governmental activities increased by $4.2 million from 2019 -- to $149.5 million, and its net position on business type activities increased by $2.9 million, she reported.

She said the audit looked at two sets of financial statements -- government-wide or “a picture of what you look like as an entity rather than a fund by fund basis” and fund basis or “how you look at yourself and manage your operations on a day by day basis.”

Genesee, at year's end, had a deficit of $19.8 million in the Tobacco Asset Securitization Corporation (which handles tobacco settlement funds), which is consistent with prior years, Barrett reported. The county, however, had positive balances in the self-insurance ($3.1 million, up $810,000); Workers’ Compensation ($1.8 million, up $1.2 million); and water ($3.9 million, up $1.4 million) funds.

Barrett said the county’s participation in the New York State Retirement System this year has had a significant impact on government-wide operations. She said the plan is underfunded, but some of that has to do with the fact that the plan was measured on March 31, right at the beginning of the COVID-19 pandemic.

“That increased the net liability on the government-wide financial statements by about $5.4 million – it almost doubled from what it was last year,” she said. “So, that can go up and down in any particular year because of the assets that are invested in the open market and how they are performing at any particular point in time.”

Noting that the retirement system is funded at high levels – 96.3 percent in 2019 and 86.4 percent last year, she said it was a “temporary blip” and the county could see “a complete turnaround next year …”

Looking at the fund basis figures, the overall fund balance increased by $1.3 million in the general fund to a total fund balance of $44.4 million. She said the county used about $10 million of its capital reserve, but also set money aside for 2021 to offset any revenue loss, and also appropriated money for sales tax, Medicaid and jail debt service.

On the revenue side, revenues decreased by $1.6 million or 1.5 percent, again better than anticipated, while expenditures decreased by just less than $500,000 or .5 percent.

She said the county is considered a low-risk auditee, based in part on spending $2.2 million less in federal funding from 2020 to 2019.

For 2020, the county’s primary government invested $7.3 million in governmental activities capital assets, including $2.1 million in construction work in process, $280,000 in buildings and improvements, $3.7 million in infrastructure and $1.2 million in equipment, machinery and other capital assets.

The county tax rate was $10.11 per $1,000 of assessed value in 2020, up 7 cents per $1,000 of assessed value from the 2019 county tax rate.

Ryan commented on the management report section of the audit, stating, “We didn’t have any findings from the single audit and usually those are the most lengthy findings that we would have.”

She also said she found no significant issues.

One operational matter involving cybersecurity was identified, Ryan said.

“Our risk advisory services provide a little more of an in-depth look from the cybersecurity perspective, from that IT (Information Technology) perspective,” she said.

Barrett said Freed Maxick’s advisory group would be available to assist the county in addressing this issue.

“They’ve helped other clients in this area identify weaknesses and help them remediate and put together a plan of remediation,” she offered.

Calling it a “straightforward” audit, a certified public accountant with the Freed Maxick firm in Batavia reported that the Batavia Development Corp. experienced a 16-percent increase in its net position from March 31, 2020 to the same date this year.

At Thursday’s monthly BDC meeting at the City Centre Council Chambers, Nicole Ryan reviewed financial statements from fiscal years 2020 and 2021, giving the agency’s board a comparative look at its activity.

She said that since there was no new activity for Creek Park Batavia LLC, a BDC entity, her presentation focused on the BDC.

The BDC’s net position increased from $172,469 as of March 31, 2020, to $199,931 as of March 31, 2021 (about a 16-percent jump), while the operating revenues increased by about $5,000 from 2020 (from $114,964 to $119,769) and expenditures decreased about $3,000 (from $95,136 to $92,307).

“So, overall, year to year, there wasn’t a large change in the activity – as expected based on the type of year that was had …,” Ryan said. “There wasn’t an abundant amount of information that we had to go over; there was minimal grant activity that took place this year, compared to previous years. Overall, it was very straightforward and a rather quick audit. Very painless.”

Ryan found that the agency’s cash flow increase of only $31,358 from the prior year “again was due to the minimal grant activity that took place.”

Receivables for 2021 totaled $125,750 with $81,428 as part of the financial close of the Ellicott Station and $44,322 as part of the Building Improvement Fund, which will be reimbursed through New York State Homes and Community Renewal.

All told, Ryan said the audit identified no material weaknesses or significant deficiencies, “so I don’t have any exhibits for any type of filings that would have been communicated during the process.”

Andrew Maguire, BDC director of economic development, said that in April the agency was awarded a New York Main Street Grant of $417,000 for the Theater 56 project. That transaction will be reflected in the 2021-22 fiscal year financial statement, he noted.

Although the City of Batavia’s general fund ended with a deficit for the 2019-20 fiscal year, the municipality is in good shape when it comes to fund balances – not only for the general fund, but for the water and sewer funds as well.

That is the assessment of Laura Landers, certified public accountant with Freed Maxick, who conducted an audit of the city’s basic financial statements for the year ending March 31, 2020 along with a management report for the same time period.

On Monday night, Landers gave her final audit report to City Council at the governing body’s Conference Meeting at the City Centre Council Board Room. She will be retiring at the end of this year, with auditing of the city’s finances being turned over to Kathryn Barrett, a CPA in Freed Maxick’s governmental practice unit.

The 2019-20 audit, dated Sept. 16, came on the heels of Landers’ meeting with the City’s Audit Advisory Committee and Interim City Manager Rachael Tabelski in August.

Landers reported revenues of $16,747,439 and expenditures of $17,528,340 for fiscal year 2019-20, leaving a deficit of revenues over expenditures of $780,901. This deficit decreased fund balances in the general fund to a total of $7,893,502.

The city ended the 2019-20 year with an unassigned fund balance of $1,863,699, exclusive of restrictions and assignments, Landers said.

Cash on Hand for Unexpected Expenses

“So, that’s the amount that Council can utilize for whatever purposes they choose to utilize it for (such as utilizing) it to appropriate in next year’s budget process or for any particular unanticipated expenditures that might arise,” she advised, adding that the city’s actual revenues were slightly under budget and expenditures came in under budget by about $1.4 million.

This bodes well for the city, she said, as “management continues to monitor expenditures in particularly this year as the city moves forward through the current environment and is doing analysis regarding cash flows, routinely, to make sure there is sufficient cash for operations for the city to move through this pandemic.”

Landers also provided charts showing revenues and expenditures from 2011-2020 – data that revealed that income exceeded spending in all of those years except 2015, 2017 and 2020.

“During the current year, the city utilized reserves to fund equipment purchases, sidewalk improvements, health care claims and information technology improvements in the amount of approximately $1 million, and funded reserves in the amount of about $114,000,” she said. “The city has continued to fund reserves in an effort to stabilize tax rates, provide for replacement of equipment and infrastructure, thereby reducing reliance on issuing debt and provide for payment of future liabilities.”

She reported that Tabelski did not assign any money to fund reserves from the fund balance for the 2019-20 fiscal year, reasoning that management and the Audit Advisory Committee “thought that it was prudent, given the uncertainty … to just keep that unassigned fund balance there in case the City Council needs to utilize it for whatever purpose,” such as unanticipated expenditures.

Breaking Down the Fund Balances

Landers broke down the city’s fund balances at the end of the fiscal year. The total general fund balance of $7,893,502 showed assigned and unassigned funds in the amount of $2,315,855 and restricted, non-spendable and committed funds in the amount of $5,777,647.

She said restricted funds included $777,000 for insurance, $3.6 million for capital projects, $273,000 for employee benefits and accrued liability, $332,000 for retirement benefits, $36,000 for Dwyer Stadium and $303,000 for third-party restrictions on money that has come into the city.

“There’s a little over $1,000 that is restricted for debt service – money left over from bond proceeds that wasn’t spent for projects that needs to be utilized to pay down the debt service,” she noted.

The committed fund balance at year’s end had $214,000, which are monies committed to the city’s master plan, Habitat for Humanity architect plans, Ellicott Trail, Creek Park and (the discontinued) Vibrant Batavia.

Landers said no money has been assigned to reserves, but $259,000 has been set aside to help balance the 2020-21 budget. She mentioned that the fund balance of $1,863,999 does comply with the city’s internal fund balance policy in place as of March 31, 2020.

'Strong Cash & Cash Equivalents'

As far as the deficit is concerned, Landers said it was a result of the city “recognizing the City Centre as an asset of the city, a disability retirement settlement and several high-value health insurance claims, which increased the amount that is transferred from the general fund to the self-insurance fund of the city.”

“Overall though, the balance sheet in the city represents strong cash and cash equivalents and also strong fund balances, especially in the restricted areas and the unassigned areas,” she reported.

The audit also reviewed the city’s water and sewer funds, which received high marks for “good cash balances and strong net positions in both the restricted and unrestricted net positions,” Landers said.

Her report revealed a $1.3 million operating surplus of the water fund – before subtracting $516,000 in operating and nonoperating revenues and expenses, and the operating subsidy to the general fund. Landers said this indicates that current rates continue at sufficient levels to support operations.

She said the net cash position of the water fund increased by a little over $1 million.

“Part of that increase relates to the bond anticipation note that was issued in the current year, but this resulted in cash at the end of the year a little over $3.8 million, which does not include the cash that’s restricted for capital projects,” she said. “The $3.8 million is unrestricted cash in the water fund at the end of the year.”

Landers said the sewer fund showed an operating surplus of about $74,000 before operating revenue and expenses and an operating subsidy to the general fund which totaled around $141,000.

“The net cash position of the sewer fund decreased about $319,000, however the cash balance at the end of the year – cash restricted for capital projects -- was a little over $5 million," she indicated. “Still, healthy cash position and healthy net position in the sewer fund, and the sewer fund restricted of about $3.9 million and unrestricted of about $6.7 million.”

No 'Falloff' in Water, Sewer Activity

Landers said the city hasn’t seen a falloff in operating revenues for sewer or water or late payments, concerns that Tabelski had in light of COVID-19.

“Rachael said that they haven’t seen any of that so I would expect that the position – the cash position, net position of the water and sewer funds will continue to be strong going into 2021,” she said.

On the city management report, Landers said that no significant deficiencies or material weaknesses were found.

Summarizing, Landers said the city’s major funds “are still in a good position” and credited management for monitoring cash flows, controlling expenditures and utilizing reserves.

She also advised City Council to capitalize on low interest rates being extended by financial institutions.

“If there is something that you could issue debt for, that just gives you another tool in your toolbox as the Council to go to as far as a funding source,” she said.

The Town of Batavia has the financial strength and stability to weather the inevitable loss of income brought on by the COVID-19 pandemic, according to the certified public accountant assigned to review the municipality’s books.

Reporting during a Town Board work session on Wednesday, Laura L. Landers, MPA, CPA, director of government services practice for Freed Maxick, said that the Town has “adequate assets … to absorb” a blow to its balance sheet.

“Management believes that tax revenues will be lower in 2020 than anticipated in the adopted 2020 budget,” she said, “but they’ve also assessed the financial condition and the potential impact on revenues, and it has been determined that the town has adequate assets of fund balances to absorb this potential decrease in revenues.”

The work session was conducted via the Zoom videoconferencing service.

Landers said that the Town, at the close of 2019, had unrestricted net funds of $9.8 million and a general fund balance of $6.6 million, with $5.4 million of that in the unassigned category.

Favorable percentages realized

“That unassigned equates to about 138 percent of expenditures versus the prior year when it was 140 percent, and total fund balance of a little over $6.6 million is 171 percent of expenditures versus 164 percent in the prior year,” she said.

She also noted that the Town has set aside a bit more than $1 million to balance the 2020 budget, a prudent move in light of the prospect that sales tax revenues will decrease.

“Unlike years past, I don’t see (sales tax increasing) in 2020. And even in 2019, where the general fund ended up with an excess of revenues over expenditures of about $983,000, I don’t see that’s going to happen (in 2020),” she said. “There may be some surplus; we’re going to have to wait and see where sales tax comes in.”

Landers also predicted that New York State would withhold most or all of the Video Lottery Terminal funds generated by Batavia Downs Gaming. In 2019, the Town received $160,000 from the VLTs.

Other pertinent financial figures:

-- On the revenue side, sales tax came in about $492,000 over budget in 2019, an increase of about $140,000 from 2018.

-- The Town received about $302,000 from state sources -- Revenue sharing, $29,000; VLT, $160,000; CHIPS (highway improvement grant), $58,000; and records management grant, $55,000 for records management grant.

-- General fund reserves are $130,000, with $56,000 for park improvement and $73,000 for economic development.

-- General fund revenues were $4.8 million and expenditures were $2.9 million, prior to the transfer of $942,000 to the highway/townwide fund.

-- The highway/townwide fund had a surplus of $129,000 in 2019 compared to $335,000 in 2018, and the highway/townwide capital reserve fund balance was close to $760,000.

Landers said that both the water and sewer funds ended 2019 with more revenues than expenditures, with water at $725,000 and sewer at $386,000. The unreserved fund balance for the water fund was at $1.7 million and for the sewer fund was at $2.1 million.

Tapping into fund balances is possible

“Overall, the Town as it stands at 12/31/19 has good fund balances and has built up its fund balances, but I see that – depending upon economic recovery – some of those fund balances are going to be utilized in 2020 because of the decrease that I see in state funding … and sales tax,” Landers said, adding that the financial statement referenced the impact of the coronavirus.

She said a single audit was conducted since the Town spent more than $750,000 (actually $1 million) in federal funds for highway planning and construction.

“The result of that audit we did not note any significant or material weaknesses in the internal control over financial reporting or compliance, or on compliance related to the federal programs that were tested,” she said.

On a separate management report, Landers said she found “one minor control deficiency” connected to utilities reporting, but no significant deficiencies or material weaknesses related to the operation of the Town or as a result of any audit procedures that were conducted.

First quarter investment review

Town Supervisor Gregory Post followed Landers’ presentation by reviewing the Town’s 2020 first quarter investment report prepared by the three+one investment consulting firm of Pittsford.

Per the report, the Town had an average of $9.8 million invested into certificates of deposits, ending the period at $10.8 million. This is up from the last period average invested of $9.1 million.

In the past 12 months, the Town has earned $176,625 in interest, with $29,674 being earned in the first three months of 2020. A key factor in the amount of interest earned is the Town’s policy of locking in CD rates for various periods of time, the report indicated.

The Town received five-star ratings from three+one in terms of percent of funds invested, liquidity proficiency and effective interest rates earned.

It fell just short of five stars in cash flow optimization, with a recommendation to use more electronic payments, and in investment policy, with a recommendation to update the list of allowable investments, including using pooled investment services.

'Well-positioned’ going forward

Post said he is encouraged by the Town’s financial standing.

“You can see that we’ve grown our cash position substantially in the last couple of quarters, and are well-positioned to meet the pandemic crisis financial concerns,” he said.

“That return on investment, coupled with not spending money appropriated for the design and construction management of the Town Hall expansion, should keep us in pretty good fiscal shape throughout this year and well into next year – even with as much as a 35 percent loss in sales tax revenue and no anticipated increase in property taxes.”

Post also addressed the “repopulating” of Town Hall, saying that the plan is “to bring back one or two staff members at a time as needed to get everybody in the building and inspection departments in as they need to be.”

He said health department officials have indicated they will be monitoring businesses and agencies in two-week intervals to watch for any medical problems that might arise.

A “conservative approach” to budgeting and spending enabled the City of Batavia to maintain a strong financial position for the 2017-18 fiscal year, according to the accountant who presented the municipality’s audit report at Monday night’s City Council meeting.

“The City has taken a conservative approach, especially with sales tax (projections) and a conservative approach to watching costs and monitoring those costs,” said Laura Landers, CPA, of Freed Maxick. “This has led to the excess (surplus) that we see in operations.”

Landers reported that the City’s general fund showed $16,014,615 in revenues versus $15,731,077 in expenditures for a surplus of $283,538 for the fiscal year that ended on March 31.

“Over the past 10 years, (when looking at) actual revenues versus budgeted revenues, the City has fared well,” she said. “And actual expenditures have been less than budgeted expenditures (as well).”

She noted that sales tax and VLT (Video Lottery Terminal) money from Batavia Downs Gaming “increased slightly” in 2017-18, with a spike in gas prices helping to boost sales tax revenue.

Landers said the City has $4.5 million in restricted funds – earmarked for insurance, capital projects, employee benefits, retirement, Dwyer Stadium – and $1.7 million in unassigned funds.

“Council can utilize the unassigned funds for unanticipated expenditures or to balance next year’s budget,” she explained. “It is a tool that you can use during the budget process. ‘Do we have projects?’ So, you don’t have to dip into reserves.”

The report also revealed $339,450 in “committed funds” for use on the City’s Master Plan, Ellicott Trail Project, Creek Park and (now dormant) Vibrant Batavia.

All told, the total fund balance for 2017-18 was at $7,388, 913.

Landers also reported that the water fund showed total assets of $10.2 million, with an $880,000 surplus – “which means that rates are at levels which have supported operations” – and that the sewer fund has $32.1 million in assets, including $8.8 million in cash.

Concluding, she said that, once again, the firm "did not note any material weaknesses or significant deficiencies in the operations of the City to report to City Council as a result of our audit procedures."

As part of the GLOW Corporate Challenge last month, organizers put together a T-shirt design contest and this year, based on volunteer votes, Freed Maxick came up with the winning design. The prize was a $500 donation to the charity of their choice, and staff chose the UMMC Foundation and the Justice for Children Foundation.

Photo: Sam Schafer, Carmela Piazza, Liz Renz, Lori Aratari, Steve Tufts, Jason Armbrewster, Kim Mills (who also had the fastest women's time), Olivia Engel and Tim Moag. Aratari is with UMMC, Ambrewster with Justice for Children, Tufts and Piazza are with Merrill Lynch representing GLOW Cup, and the others are with Freed Maxick. Each charity received $250 and the balance of the proceeds from the event benefit the YMCA.