Crestwood aldermen to consider revisions to 2004 budget
Three revisions to the fiscal 2004 budget are scheduled to be presented to the Crestwood Board of Aldermen next week.
Aldermen will consider the revisions when they meet at 7 p.m. Tuesday, Feb. 24, at City Hall, 1 Detjen Drive.
The revisions, if approved, would place total expenditures for fiscal 2004 at $12,913,381 with total revenue of $12,295,331 — a shortfall of $618,050. The revenue shortfall primarily can be attributed to a $582,000 reduction in the amount of revenue projected for merchant licenses.
The Board of Aldermen had adopted a balanced fiscal 2004 operating budget last June.
But during the preparation of an end-of-the-year budget adjustment ordinance designed to close out the city's fiscal 2003 books, city officials discovered that fiscal 2003 general fund expenses were slightly more than anticipated, while revenues, particularly those from merchant licenses, were far less than projected.
The discovery of the discrepancy in merchant license revenue last July triggered an internal investigation into the accounting practices used by former City Administrator Kent Leichliter and former Finance Officer Robert Wuebbels, and the Board of Aldermen hired Brown Smith Wallace to perform a forensic audit of the city's finances for fiscal 2001 and fiscal 2002.
The forensic audit, released Nov. 1, alleged that Leichliter and Wuebbels violated the City Charter, numerous ordinances and their duties as fiduciary officers in their handling of the city's finances. Less than three weeks later, the city filed a lawsuit against Leichliter and Wuebbels alleging they breached their fiduciary duties by manipulating financial records to misrepresent the city's true financial condition to the Board of Aldermen.
Based on the forensic audit, the lawsuit alleges that Wuebbels, with Leichliter's knowledge, "engaged in a complex scheme to manipulate the financial accounts of the city of Crestwood so that the city budget would appear to be in balance and that the city was operating in a positive cash-flow situation, when, in fact, the city was operating in a serious negative cash-flow situation.'' The scheme "devised and perpetrated'' by Wuebbels and Leichliter included fabrication of revenues, improper inter-fund transfers and fraudulent submissions of warrants, the lawsuit alleges.
Brown Smith Wallace later was hired to serve as the city's independent auditing firm for the next five years. Besides conducting an audit of fiscal 2003, Brown Smith Wallace was contracted to restate the city's financial statements for fiscal 2001 and fiscal 2002. Those restated statements were accepted by the Board of Aldermen Jan. 27.
The restated financial statements for fiscal 2001 resulted in a general fund deficit of $204,072 instead of the previously reported positive fund balance of $45,928, while the restated financial statements for fiscal 2002 resulted in a general fund deficit of $973,497 instead of the previously reported positive fund balance of $132,334.
While the proposed fiscal 2004 budget revisions would result in a projected deficit of $618,050, City Administrator Don Greer and Director of Finance Diana Madrid are optimistic that general fund expenses and revenues could balance at the end of the fiscal year. While the general fund is experiencing difficulty, the capital-improvements fund and the parks and stormwater fund are healthy, they said.
Greer and Madrid told the Call that even though sales tax revenue is $250,000 less than projected at this point, total revenues are slightly more than anticipated and expenditures are running about 6 percent less than projected.
"Departments are holding the line on the expenses and the expense report shows that we're 6 percent below where we would normally be or where we would predict ourselves to be and one of the exercises that we went through just recently ... we developed a worst-case scenario for the effect on revenues,'' Greer said. "We believe we've been very conservative in regard to our revenues. Sales tax is not coming in well. Right now through the first eight months (of the fiscal year) we're about a quarter of million dollars behind where we thought we would be in order to make our projections.''
A major factor in determining the financial health of the city will be the amount of sales tax revenue the city receives from the holiday shopping season. The city will receive that sales-tax check on March 10.
Besides receiving sales-tax revenue from the holiday shopping season in March, the city will receive the fiscal 2003 audit from Brown Smith Wallace. Given the restatements of 2001 and 2002, Greer and Madrid anticipate the fiscal 2003 audit will show a negative fund balance in the general fund.
Based on how much sales-tax revenue the city receives in March and the fiscal 2003 audit, Greer said, "We're going to have to react. We have talked about some — in anticipation of what we believe we're going to see — see, it's crystal-ball time, we've talked about some very long-term issues and things and we may need to make some more expense adjustments. We may need to re-evaluate some of that. But I think I said a year ago, if we reduce anything further, we're going to have to reduce services in some fashion. But in talking the other day, I think it's time to take an out-of-the-box approach to some of the issues that the city of Crestwood faces.''
Holding the line on expenses coupled with conservative revenue projections could result in a balanced general fund at the end of the fiscal year, Greer and Madrid said.
Greer said, "I think our general fund revenues will come up. We still believe that we've got a chance of presenting a budget-basis balanced revenues to expenses for fiscal year '04. I'm not saying it's going to be easy ... Every effort is being made to do it and we have the confidence in department heads and staff, who are doing a yeoman's job of holding the line on expenses. Yes, sales tax is down, it is, and I'm very concerned about it. It could change.
"What March 10th could do for us is keep us from getting to the worst-case scenario. It's very evident that sales tax is down. I was just talking with some other city administrators yesterday and sales tax is down, everybody's sales tax is down ... The rest of the revenues have just been very conservatively estimated. So I don't know that we'll pick up the whole difference there, but we'll pick up a portion of it and at this point, even portions are significant.''
Greer continued, "My strong belief would be that given a worst-case scenario we could do another budget adjustment at the end of the year ... and we could borrow money from ourselves because the capital (improvements) fund and the parks and stormwater fund will have money. So we could borrow money from ourselves as long as we pay it back.''
The Board of Aldermen would have to adopt an ordinance approving such borrowing, he said, noting the ordinance also would include "a debt repayment schedule.''
In a Feb. 6 memo, Madrid wrote, "The budget revisions planned for Feb. 24 are designed to make corrections to the original ordinances adopted by the board to reflect items already approved by the board but not included in the budget document, classify expenditures between funds, and identify expenses approved by the board but not carried forward into the ordinances correctly.''
Her memo also noted, "Upon discovery of the fictitious merchants' license revenue in July 2003, the fiscal year 2004 (revenue) projection was decreased by $582,000.''
Under the proposed general fund budget revision, net general fund expenses would total $8,547,557 — $11,394 less than the original budget. Total general fund expenses — including $367,618 due from the capital-improvements fund and $421,103 due from the parks and stormwater fund — would amount to $9,336,278. The money due from the two special tax funds — $788,721 — reduces general fund personnel expenses in the same amount.
Under the proposed capital-improvements fund revisions, expenditures would total $1,993,098 — $6,259 more than the original budget.
Under the proposed parks and stormwater fund revision, expenditures would total $2,372,728 — $6,354 more than the original budget.
In a related matter, the Board of Aldermen voted last week to purchase a used fire truck for $220,000 from the Cottleville Fire Protection District.
Aldermen voted 5-1 Feb. 10 to purchase the 2000 Pierce Dash Rescue/Pumper.
Ward 3 Alderman "Bernie'' Alexander was opposed, citing financial concerns.
Ward 4 Alderman Tom Fagan was absent for the vote and Ward 2 Alderman Tim Trueblood was absent from the meeting.
If purchased new, the cost of the 2000 Pierce Dash Rescue/Pumper would be roughly $370,000. The equipment included on the vehicle could increase the cost to $400,000, Greer noted in a memorandum.
"It is extremely rare to have this age and quality of vehicle on the pre-owned fire vehicle market. Most vehicles are in the 10 to 15 years of age category,'' Greer wrote. "While we would not as a matter (of) practice recommend the purchase of a pre-owned vehicle, the age, quality and cost of the vehicle warrants consideration by the board.''
Under the measure approved by the board, Crestwood will pay Cottleville $50,000 upon delivery of the vehicle. The remaining $170,000 will be paid in two installments — by July 31 and by Dec. 31.
Revenue for the vehicle will come from the capital-improvements fund, according to Greer.