Auditors detail strong financial condition of City of Mebane

At the Monday, January 6 Mebane City Council meeting, the City’s Finance Director, Jeanne Tate, provided details on the completion of Mebane’s ninth Comprehensive Annual Financial Report (CAFR). The 2018-19 fiscal year CAFR indicated that revenues for the City of Mebane exceeded the town’s General Fund budget by $708,336. Expenditures were under budget by $2,680,908, with $646,417 carried forward to the new year. The City transferred $1.5 million to Mebane’s Capital Improvements Fund, while adding $1,194,284 to the Fund Balance of the General Fund. Sales tax revenue increased 8.4 percent over the previous fiscal year. 

At the Monday, January 6 Mebane City Council meeting, the City’s Finance Director, Jeanne Tate, provided details on the completion of Mebane’s ninth Comprehensive Annual Financial Report (CAFR). 

“This has been a long time coming. This is the report as of June 30, 2019. Which sounds like a long time ago. Except when you consider that we have been working on it ever since then. When the fiscal year finally ends June 30, we begin working on the Financial Statement,” Tate explained to city leaders. 

Tate indicated that Mebane’s finances are not only examined by an auditing team that prepares the CAFR, but also an additional audit team who comes in to audit those financial statements when they are done. The secondary auditing firm is Stout, Stuart, McGowan, and King of Burlington, who appeared at the City Council meeting to explain some of the numbers and verify Mebane’s strong municipal fiscal standing. 

The 2018-19 fiscal year CAFR indicated that revenues for the City of Mebane exceeded the town’s General Fund budget by $708,336. Expenditures were under budget by $2,680,908, with $646,417 carried forward to the new year. The City transferred $1.5 million to Mebane’s Capital Improvements Fund, while adding $1,194,284 to the Fund Balance of the General Fund. 

“We had a great year,” City Council member Tim Bradley said. 

In terms of Property Taxes, Mebane’s tax base is listed at $2.181 billion. The City had collections of $10,413,402, which marks 5.7 year-over-year growth from the 2017-18 fiscal year. Mebane had a tax collection rate of 99.46 percent, and generated tax collection fees in the amount of $75,131. Sales tax revenue increased 8.4 percent over the previous fiscal year. 

Mebane collected $1,169,399 in Utility Taxes in the 2019-20 fiscal year, along with $198,593 in Incentive-related Tax Sharing, $82,049 in Federal Equitable Sharing, and $351,935 in funding through the North Carolina Department of Transportation’s Powell Bill funding program. The Utility Taxes, Incentive-related Tax Sharing, Federal Equitable Sharing, and Powell Bill funding are all considered Intergovernmental revenue. 

General Fund revenues for Mebane are predominantly produced from property taxes, which generate approximately 55 percent of the town’s income. 18 percent comes from sales taxes, while the remaining 27 percent comes through Intergovernmental revenue, Utility Taxes, Sales and Services, as well as Permits and Fees for construction and various other projects within the city limits.  

“It’s a very nice percentage for property taxes,” Tate said of Mebane’s 55 percent rate, which is relatively low compared to some municipalities around North Carolina. “Mebane is very fortunate to have many other forms of revenue, so that you’re not relying so heavily on property taxes.” 

The assessed property tax base of nearly $2.2 billion within Mebane is an improvement from approximately $1.63 billion in fiscal year 2014-15, and $2.1 billion in fiscal year 2017-18. 

Total expenses for Mebane were $17,671,443 in 2018-19, with the overwhelming majority of those expenditures going to the City’s Police Department ($3,842,488), Public Works ($3,113,624) and Fire Departments ($2,702,299). The Mebane Police Department comprised 19 percent of Mebane’s total expenses, with Public Works comprising 18 percent, and the Mebane Fire Department 15 percent. One other municipal organizations within Mebane received a budget exceeding $1 million in the 2018-19 fiscal year - the Mebane Recreation and Parks Department ($1,445,320 - 10 percent of total expenses).  

Other expenditures exceeding $1 million included the City of Mebane’s debt service payments, which stood at $1,633,031 over the past year, and $1.5 million in transfer out of the General Fund into the Capital Improvements Fund. The $1.6 million in debt service payments was a key benchmark for the town, as it kept Mebane below the 10 percent mark in terms of debt service payments in relation to total expenditures. 

“You want to keep your overall debt service below 10 percent of your expenditures,” Tate explained. “That is a very standard mark. The way we have our debt structured is it reduces the principal each year, so our debt gets less and less each year.” 

The City’s other expenses included $944,234 in Planning/Inspecting/Engineering, and $310,836 in Economic Development expenditures. 

Due to the City’s $1.5 million transfer, the General Fund Capital Improvements Fund saw a net surplus of $1,122,124 in 2018-19. Mebane also received a $250,000 grant from Impact Alamance for a total of $1.75 million in Capital Improvements Fund revenues. Expenses included new radios for the Mebane Police Department ($469,430), new sidewalk construction around town ($151,536), and capital improvement projects including the new Storywalk at the Mebane Arts and Community Center ($4,270) and improvements at Cates Farm Park ($2,640). 

The General Fund Capital Outlay for 2018-19 included just over $3 million for the Mebane Community Park, new Mebane Police Department vehicles ($170,154), a new Fire Brush Truck for the Mebane Fire Department ($88,438), new Car Cameras ($25,100), a new financial system for the City ($23,325), an Amphitheater for the Mebane Community Park ($23,117), mowers for the new Mebane Community Park ($21,789), and a new Smartboard and Copier for the Mebane Police Department ($20,913). 

The Financial Report’s Utility Fund summary indicated that revenues were under expenses by $1,399,552. Total expenses within the Utility Fund were $7.898,596. Water sales to local residents comprised approximately 45 percent of the total revenue for the Utility Fund ($2,914,079), while Sewer Charges comprised 44 percent ($2,839,163).  The City incurred no new debt within the Utility Fund in the last fiscal year. The primary expenditures included $1.54 million in improvements and upgrades at the City’s Wastewater Plant (20 percent of total expenses), $1.4 million in distribution and maintenance (18 percent), and a transfer of $1.65 million to the Capital Improvements Fund. 

The $1.65 million transferred to the Utility Capital Improvements Fund paid for such projects as the new network of sewer and power lines for the Cambridge Park development and other local residential new home communities ($903,084), replacing old meters throughout the city ($495,388), a new Pump Station at the Mebane Community Park ($259,520), WRRF Equipment ($64,307), and water line replacements along Green Street ($58,794). 

Mebane’s various fund balances include just under $9.1 million in the General Fund, and over $6.1 million in the Utility Fund. The Capital Fund has a balance of $1.122 million, while the CDBG (Community Development Block Grant) fund sits at $98,182. The only deficit on the General Fund side is a deficit of $237,310 in the Community Park fund. The total governmental fund balance for the City of Mebane is $10,018,852. The Utility Capital Fund has a balance of $891,488, while the fund for the WRRF Equipment Upgrade Project has a balance of $583,000. Combined with the $6.14 million in fund balance within the Utility Fund, and Mebane has a total fund balance of more than $7.6 million on the Utility Fund side. There is an additional $586,608 set aside in restricted “enterprise” funds in a Utility Capital Reserve fund. 

Stout, Stuart, McGowen, and King, LLP found “No Findings” of irregularities with Mebane’s financial data and reporting in its Internal Control. 

“An audit is the consideration of the system used to capture financial data, consideration of the internal controls, and testing of internal controls,” said Patricia Rhodes, a Certified Public Accountant with the auditing firm, to the City Council and Mayor Ed Hooks. 

Rhodes indicated that the auditing firm was rendering the City of Mebane an Unmodified Opinion, which is the best that can be received by a municipality. 

“We can state that nothing came to our attention during the audit that we were required to report to you as a material weakness or significant deficiency,” Rhodes said. “We can state we had no problems performing our audit, no disagreements with management during the audit.  In looking at this financial information, the City of Mebane is in strong financial position. They continue to have low direct debt, and all of this is due to sound management practices.”