Unless you’re passionate about numbers, statistics, line items, surpluses, deficits and more, analyzing a Comprehensive Annual Financial Report can cause eyes to glaze over quickly. Fire up the espresso machine! City fiscal watchdog John Marshall Lee has arguably spent more time than anyone else on the planet reviewing Bridgeport government financials as a civilian taxpayer. It’s a test of endurance. He asks a fundamental question to the 20-member City Council that has budget authority: Have you read it? From General Lee:
Council President McCarthy, City Clerk Hudson, Council members and taxpayers and voters of the City of Bridgeport, greetings on this bitter cold night. February 2015 may become historic because both the first meeting and its makeup meeting have been canceled due to weather issues. Notably it is likely that this month will also show the body reduced temporarily by resignations of two members for cumulative reasons that bring no positive credit to the City. I want to address the CAFR that I have reviewed page by page. I found many errors not deserving annual award certificates.
THE REPORT IS LATE ONCE AGAIN! On February 6, 2015 the external audit signed off by Blum Shapiro was made available to the public at the City Clerk office and appeared on the Finance Department web site finally. The audit is signed December 27, 2014 (and includes a letter of the same date from Anne Kelly-Lenz, Finance Director) but the report did not get to the public in “published” form within six months of the close of the June 30, 2014 fiscal year as State law requires.
HAVE YOU READ IT? Is the report on your desk tonight? Or have you otherwise received it? More importantly have you taken time to review it in any fashion? If the answer is no, I sympathize with you because you are busy people, and your leadership removed research staff 19 months ago, and you have done nothing to recover that capacity though you have funds in your Legislative budget to do so. Are you so stuck that you will do nothing about it? Let’s assume one or more of you have read it. If the CT Post or Channel 12 were to question you about it, what might you respond? What would your sound bite be? It’s an election year.
As a public watchdog my methodology places last year’s CAFR of 2013 next to the CAFR of 2014 and “compare and contrast.” Nothing fancy.
First the auditor explained a “restatement” of the 2013 asset reporting was required to reduce City assets stated by over $5 Million due to credit claimed for ‘bond issuance costs’ thus reducing City net asset position on July 1, 2014 to $198,352,597. (Page 68, Note 16)
Much report narrative duplicates a previous year. One such instance is inappropriate in the extreme. The Finance Director reports on page iii, “The City’s taxable base remains steady with the October 1, 2012 with a Net Taxable Grand List at $7 billion.” Troubling because this report should have indicated October 1, 2013 and the real taxable base value on that date.
• Certain City officials have seen the results of a property valuation study paid by taxpayers completed in 2013. They know that the City’s taxable base has not remained steady. It has decreased unevenly in the City and tax burdens are currently unfair. Perhaps the thinking is if you can avoid saying so in an official document in early 2015, what’s a year among friends?
• On page 48-49 under Note 10, Commitments and Contingencies, a full page is used to report the Wheelabrator property tax case. The essence of this case that has hung around for about seven years is that the City valued the land and buildings as high as $445 Million producing an assessment of $310 Million but the fair market value by the City was reduced to $314 Million with a 70% assessment of $219 Million. (See page 101.) The Net Grand List, our tax base will take or has taken a hit of $130 Million because the City insisted but did not have the expert facts. Do you call that “steady?” What taxpayer addition makes up for a valuation loss of $130 Million?
• And this court case has averaged $150,000 per year of City legal expense. What is our purpose in this instance for continuing? Is this an example of quality treatment of a “largest taxpayer” that is a private company, in a competitive industry, and has an environmental mission in a “green city?”
There is much more to this report than time allows. Required Pension reporting has increased by more than 9 pages. Pension Plan A assets of about $120 Million are what remain today of the $350 Million borrowed in 2000. For 15 years past and 15 into the future we spend $30 Million in our Police and Fire operating budgets annually to reduce the balance of the Pension Obligation Bond currently at $274 Million. Benefit payments of almost $31 Million per year are paid to 799 beneficiaries. But the City is only 40% funded and that is more than worrisome. Why then are we raising the rate of return ASSUMED on Plan A to 8% from 7.27% while reducing both Plan B plan ASSUMPTIONS from 4.94% to 4.92%?
(If you don’t blink, and no one calls you on it, it’s because the City can reduce the stated liabilities by $15 Million for a year until reality hits.) What City employee ordered that move? We are not masters of financial markets. That has already been proven in Bridgeport.
The last report page, 113, in Table 19 indicates that the City has lost, re-classified, or cares for 18 fewer recreation areas between 2013 and 2014. That may or may not be bad news, but footnotes are important when there are changes, especially reversals. But if I as a watchdog move from the 2014 CAFR to City purchase orders in the last quarter of 2014 that are accessible in the City Clerk office another story appears. We see that the City has committed over $8.7 Million of funds to playgrounds, ball fields, etc. purchased from two vendor organizations outside Connecticut. Where is the City Council approval included in each of these activities? Appropriating funds? Tracking purchasing ordinances? Monitoring City expenditures? Where are the watchdogs when you expect them? Do you need to hear from the public more than you have? Do you think they want education dollars or playground dollars? I’ll send the Mayor, the Finance Director, and the Council notes on the errors, mistakes and failures in report review. Hold a public meeting. Listen to the City experts. Listen to the people. Time will tell.
JOHN MARSHALL LEE 203-159-9642 February 17, 2015
Mistakes, errors, overstatements, inconsistencies, and failure to proof the document …
• Page iii–Where is October 1, 2013 comment, not 2012?
• Page viii–Multiple delays in projects, ‘job opportunities’?? Corvus timetable?
• Page ix–Cost saving initiatives through ‘charter revision’? Charter failed!
• Page ix–Watermark is an abatement property? Why is there no listing of all such properties, payments from them and year when they will rejoin the rest of us?
• Page x–City’s website fails to keep public informed … monthly financial reports, info on capital budget, incomplete info on Boards and Commissions, along with info on meeting, agenda, minutes, etc. Ignoring School Building Committee?
• Page 13 Capital assets overstated for 2014 due to failure to use Vision Solutions report from 2013–phony overstatements of real values
• Page 14–Expense chart (already posted on page 11) reappears under Capital Assets? Proofreading?
• Page 34–Use of Miscellaneous expenses category not a Line Item as chart calls for. How many departments count for expenditures exceeding appropriation by 40 times? Without Final June monthly financial report, how would public learn?
• Page 47 and 48 report on Tax Anticipation Notes separately. Were TANS issued for $50 Million on November 18 and November 19, 2014? Or just once?
• Page 56–Does Pension A high yield fund expect the ROR to be 47.00%?
• Page 60–Repeats calculation error from 2013 CAFR – July Fire B (28,689)?
• Page 62–OPEB employee reported as of July 1, 2012 and not July 1, 2013?
• Page 73-–Library Variance? Explain page 12 comment regarding 1 mil rate increase voter-approved. Isn’t voter approval a gold seal?
• Page 93–2013 column errors in investments (page 80) and total not same as 2012
• Page 94–Chart has major line and label discontinuity errors (See Education Exp)
• Page 97–2012 Total General fund exceed by over $25 Million
• Page 101–CRRA value assessed vs page 48 $81 million decrease?
• Page 103-4 Same Ratios chart with slightly different format on subsequent pages
• Page 106 CORRECTED 2013 CAFR Legal Debt Margin wrong from 2009-13
• Page 108 2014 Per Capita Income–miscalculated or sourced from where?