On a 3-2 vote, the Menahga City Council decided to tighten its financial belt buckle after the city auditor amended the general fund balance from $393,535 in Dec. 2019 to $96,863 in Dec. 2020.
The council discussed these financial woes at their Tuesday, Oct. 12 meeting.
Council members Art Huebner and Robyn Keranen opposed every resolution calling for cost containment and budget reductions in 2021 and 2022.
The pair also rejected a resolution that all 57 audit adjustments be entered by City Administrator Curt Kreklau and Deputy Clerk Tanya Edwards by Oct. 19 into the city’s accounting software program, called Banyon. City auditor Dean Birkeland is to verify that the adjustments are made correctly to ensure that beginning balances on Jan. 1, 2021 are accurate.
Until these audit entries are completed, said Mayor Liz Olson, the accounts won’t reconcile. Noting that the council has not received any financial reports, including the bank or cash reconciliation reports, during the entire year, Olson made another resolution directing Kreklau and Edwards to provide a Sept. 2021 reconciliation report by the Oct. 25 special meeting.
“We need it. The city can’t conduct business without knowing where we’re at,” Olson said.
The motion passed 3-2, with Huebner and Keranen opposed.
“Did they fix Banyon now or what?” Huebner asked.
“If that’s the case, a person would be calling Banyon to see why it’s not working. That would be your first thing to do,” Olson replied.
For several years, Kreklau has insisted that Banyon has technical glitches.
Council member Durwin Tomperi recommended setting up a user ID in Banyon for Jensine Kurtti, who was recently hired as a temporary administrative support technician. This would allow her read-only access so she can view and print reports, Tomperi said, adding it will also assist Kreklau and Edwards.
Huebner said that was Edwards’ job only.
Kurtti admitted that if city administration is confused by Banyon, she will be as well.
The motion passed 3-2, with Huebner and Keranen opposed.
Tomperi initiated a series of resolutions to reduce expenses for both 2021 and 2022. His motion directed Kreklau and Kurtti to work with all department heads and bring ideas to the budget meetings.
With a proposed levy increase of 42.7 percent, streamlining certain essential services or contracting with public and private vendors are possible ways to reduce costs, he said. “All I’m looking for is thinking out of the box to save our taxpayers’ money.”
The motion passed 4-1, Huebner opposed.
Tomperi further requested a detailed operational analysis from Menahga Police Chief Adam Gunderson for 2020, plus any additional operating costs incurred in 2021. The report is to be presented on Oct. 25. The motion passed 3-2, Huebner and Keranen opposed.
Finally, Tomperi proposed contacting Wadena County Sheriff Michael Carr to see how much it would cost for deputy sheriffs to provide police protection within Menahga during fiscal year 2022. The motion passed 3-2, Huebner and Keranen opposed.
Olson reminded the council that the city auditor had initially projected the general fund balance would be between $400,000 and $700,000. “We are at $96,000, and that should concern everybody at this table,” she said.
The council scheduled two meetings to reduce the 2021 budget. They are from 10 a.m. to noon on Friday, Oct. 22 and Friday, Oct. 29. Meetings to slash the 2022 proposed budget were scheduled from 10 a.m. to noon Friday, Nov. 5 and Friday, Nov. 12. Department heads are expected to attend.
As required by Minnesota law, a public hearing about Northbound Spirits’ two consecutive years of losses will be held Monday, Nov. 29. At question will be whether the city should continue to operate a municipal liquor store.
A motion by Huebner to cease using Banyon failed 2-3, with Olson, Tomperi and council member Dan Warmbold opposed.
Huebner’s motion to give Kreklau a 12.5 percent raise retroactive to June also failed 2-3, as did his motion to give Edwards and administrative secretary Amanda Pachel pay at half of Kreklau’s hourly wage retroactive to June.
2019 bond rating rehash
Huebner passed out copies of an S&P Global credit profile dated Aug. 30, 2019.
Citing the city’s “political instability and staff turnover in recent years” and a “weakened budgetary performance,” S&P Global lowered its ratings on Menahga’s general obligation debts in 2019. The credit rating fell from an “A” to “BBB+.”
“In 2018 and 2017, the city’s general fund finished with deficits equal to 5 percent and 6.4 percent of expenditures, respectively, and we expect similar operating results will likely continue in the near term. The current management does not have insight into what is causing the deteriorating operating performance or how the fiscal 2019 is projected to finish,” the report stated.
Kreklau and Edwards were hired in June 2019.
Huebner neglected to read the paragraph about his and Keranen’s own role in the downgrade, which occurred after they were elected.
“The recent wave of resignations occurred after new council members took office on Jan. 1, 2019. Recent council meeting minutes reflect city council members questioning each other’s actions and leadership styles. This apparent difficulty between council members supports our view that staff turnover may persist.”
S&P Global also considered Menahga’s economy “very weak” in 2019.
The report stated that frequent management turnover and conflict between council members had resulted in “weak management,” along with a lack of long-term financial and capital plans, a debt management policy, an investment policy and a fund balance policy.
On the positive side, S&P Global described Menahga’s budgetary flexibility as “very strong,” with an available fund balance in fiscal year 2018 of 54 percent of operating expenditures, or $552,000.
They also deemed Menahga liquidity in 2019 as “very strong,” with $3.2 million in total governmental cash and investments equal to 2.3 times total governmental fund expenditures and 9.1 times governmental debt service in 2018.
Greenwood Connections also had no issues making its 2019 debt service payments.