In My Opinion……..

I have had the honor to serve on the Fernley City Council since March of 2008.  Like many of you reading this letter, I have been in almost a state of panic with concern for how our city was going to financially survive the Water Treatment Plant Bond payments.  This subject has cast a dark cloud over our city government.  It has taken over two years to finally uncover the real facts and I wanted to share them with anyone who follows my website as soon as I could.  Government should always be as transparent as possible, for some reason bureaucrats often seem to want to conceal as much as possible, that is why there has been such a breakdown in trust in recent years between our government and the people they are supposed to serve.

The City Council just learned the truth about our cash reserves from our Finance Department.  I was wrong in my last report, we don’t have $12 Million, we have almost $21 Million!  These funds were deposited from 2002 through 2008, they were accumulated mainly by deposits made of surpluses from our General Fund, Water Fund and Sewer Fund.  Plus, they have earned millions of dollars of interest during those years.

However, these funds should not be squandered or spent carelessly, as we will have to replace infrastructure as it ages in the future.  We need to run a tight ship and balance our General Fund Budget.  Our staff has presented a Tentative Budget that accomplishes that, but of course it needs further examination and discussion.  We need to look at ways of reorganizing our staff to gain optimum efficiency, without cutting services to our citizens any more than we have to.

It is completely unnecessary to cripple our Community Development Department in a lame knee-jerk attempt to divert General Fund money into paying Water Treatment Plant Bond debt service.  That would have severe consequences and we would be cutting our nose off to spite our face, since that is the one department that can generate and facilitate necessary development for this community.  That means jobs for our citizens and future revenue for our city.  That is precisely where our cash reserves came from in the first place, as there would have been no water or sewer fund surpluses without community development.

I just don’t understand why some of my counterparts on the City Council feel that we should just cut and gut everything, just because other surrounding jurisdictions are being forced into taking extreme measures, they obviously spoke before they had the facts that we now have.  Or, could it be that because we are all suffering from this bad economy, a new kind of political correctness has emerged that makes it popular to run down our city government?

So, we have $21 Million in discretionary funds that we can use for almost any purpose, such as funded depreciation to repair our infrastructure in the future.  But we can also use it as our rainy day fund to get us through these tough economic times.  Because of this, these funds are now being used as an interest reserve account, which has become necessary since development has been put on hold.  But that too will pass as we begin to develop in the future.  How far in the future?  No one knows for sure, but we are already seeing some signs of life in the development community. 

So here is the $21 Million question.  How long do we have before this city will have to make bonds payments out of it’s General Fund Revenues, which would cause us to raise water rates?  Nobody wants that to occur, since we are already paying through the nose. 

The shortage in this fiscal year was over $3.5 Million, with budget cuts in the Water Enterprise Fund, that our staff has worked into the 2010-2011 Tentative Budget, they have reduced that shortage to about $2.3 Million.  It is my opinion, that even at a moderate interest rate of 5%, that our cash reserve fund could generate over $1 Million dollars a year in interest earnings, that alone would generate about 43% of the bond payment in itself.  This would mean that about $1.5 Million of the current principal would need to be paid per year, plus that year’s earned interest.  Of course, the principal would gradually be reduced, which would mean less interest earned in future years.  So, by my rough estimation we would expend approximately one-half of our cash reserves in about 5 years. 

However, the above numbers assume that our revenues will stay at current levels and gradually rise to meet annual inflation costs of doing city business and making the payroll, which is reasonable even with the 3% property tax cap.  It also assumes that development remains static without any recovery to speak of, which is very conservative.  On the bright side, the City of Fernley also owns other assets that may generate enough revenue to make a major difference, like the possibility of leasing some of our water rights.

There is also the possibility of a low-interest government backed line of credit, that we’ll be able to tap in the future, which could simply have an affect of deferring the Water Treatment Plant Bond payments, which will easily be paid for when development resumes.  But, I guess you would have to believe in Fernley’s future, as I do, to favor this approach.  Future growth truly is the only long-term solution to pay for the Water Treatment Plant, so to those who believe Fernley will never recover, I suppose you should pack your belongings and head somewhere else.  As for me, I’m staying right here.   

I’m sure I will be attacked for having my head in the sand by the gloom and doom crowd, as they seem to have some sort of political agenda to carry out.  But these are the facts, the way that I see them.  I am not an accountant, but I am a businessman and I have dealt with a lot of budgets over the years.  If this city were a business, it would be found to have adequate revenues to survive with some appropriate belt-tightening and that is exactly what we have been doing.  The City of Fernley has cash reserve and asset ratios that would make most banks and private businesses very envious, especially in today’s economy.

In conclusion:  With all that is going on with the national economy, health care, state budget, education and our federal government’s enormous debt problems; The City of Fernley should be the least of your worries.  In fact, if I were in the market to buy a business and the City of Fernley was a business that was for sale, I WOULD BUY IT!