City has cash when others don’t
Published 12:00 am Wednesday, December 24, 2003
Thomas Moore characterizes the process as "frustrating." Woody Collins calls "very, very frugal." Both say it’s wise.
After the economic spike of the 1990s, cities all over the nation have felt the burden of a recession that has just begun to revert itself. In West Alabama and the Black Belt, that burden weighed heavily on most municipalities.
Carolyn Thomas, city clerk for Marion, said her city lives paycheck-to-paycheck.
The same can be said for cities like Selma, which saw reserves shrink nearly as soon as the economy did.
Then there’s always the exception to the rule.
Last week, Demopolis Mayor Austin Caldwell told City Council members that earnest money had been paid on what will become the new public safety building. After that initial $10,000, the city will pay another $320,000 for the purchase of the old West Alabama Health Services building on Washington Street. And after the purchase, approximately $250,000 will be spent to renovate the building.
In a snap, that’s nearly $600,000 the city will spend. And in a snap, that’s nearly $600,000 the city did not budget to spend this year.
So how can Demopolis afford to spend that kind of money? Unlike other cities, Demopolis does have an ample amount of money in its reserve account. Not including the utility board, the city alone has close to $4 million in reserves &045;&045; more than half of the city’s fiscal year budget.
Take Marion, for instance. The Perry County seat spent most of its reserves complying with an order from the Alabama Department of Environmental Management.
Obviously, Demopolis hasn’t had those sorts of problems. Instead, revenues &045;&045; most of which will be collected in the next 60 days &045;&045; have been placed in certificates of deposit in the three locally owned Demopolis banks.
Is it bad to save?
Obviously, Moore and Thomas describe the city’s reserve as "frustrating" and "very, very frugal" in jest. They know Demopolis has worked to manage money well, and they don’t believe an adequate savings account is a bad thing.
Collins, who serves with Moore on the council’s finance committee, can attest.
Collins should know. He eventually bought that business.
Caldwell doesn’t like much attention when it comes to the successes of the city. He’s quick to point toward the council as being the final decision maker. In this instance, however, it appears Caldwell can’t escape the credit.
Caldwell laughs at the notion of being "too tight." Then again, the laugh is subdued with some sort of truth.
How the city does it
While most West Alabama cities have struggled over the past three years, Demopolis has escaped its own recession because of good planning, creative ideas and sound management.
For instance, when the city collects the majority of its money from December through February, that money goes into interest-yielding accounts. And as the economy soured all across the United States, Federal Reserve Chairman lowered interest rates to stimulate the consumer spending.
While the move may have helped many, it didn’t help cities like Demopolis.
According to Baker, the city lost nearly $90,000 last fiscal year because of the lowered interest rates.
So what did city officials do? They found a way to turn the lower interest rates into a positive.
In March, the city refinanced a bond issue that helped fund Demopolis High School and pave a number of city streets.
Paul Pickard of Frazier-Lanier &045;&045; a finance company in Montgomery &045;&045; says the city will save $500,000 over the life of the bond, which expires in 2015.
There are plenty of other examples of smart business inside the walls of City Hall.
In February, City Clerk Vickie Taylor found that numerous business owners from out of town had not paid their fair share of city business license fees. In all, she pinpointed about 100 businesses in operation that had not paid their taxes at the end of February 2003.
Taylor sent out notices and put in place a progress system that added a 20-percent late fee for taxes not paid at the end of February. For businesses that didn’t pay be the end of March, she added a 30-percent late fee.
Where the money goes
Having an ample reserve doesn’t necessarily mean the city sits on its handful of money. In fact, Collins said Caldwell does a good job of dispersing the money as the year progresses.
In other words, six months’ worth of expenses would equal half of the city’s $7 million budget.
Of all the council members interviewed, Moore was the most financially liberal. He believes there are projects the city can invest in.
According to Moore, some of the council districts in the western portion of Demopolis do not qualify for federal grants. Moore’s district, for instance, can qualify for Community Development Block Grants, which are used for infrastructure improvement.
Though that was just one example, Moore echoes what most council members say about the city’s financial situation.