Elk Mound finishes 2022 with $564,000 in general fund balance
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by LeAnn R. Ralph
ELK MOUND — The Village of Elk Mound ended 2022 with $564,000 remaining in the general fund balance.
The fund balance of $564,000 was $119,000 less than the general fund balance at the end of 2022, said Kim Shult of Baker Tilly during her audit report to the Elk Mound Village Board at the March 20 meeting.
Half of the $119,000 that had been in the general fund at the end of 2021 was unspent loan proceeds. Part of the $119,000 also was related to being under budget on revenue for 2021 and also because expenses were over budget in a number of areas, such as capital improvements for replacing a public works vehicle, Shult said.
The percentage of annual expenditures in the general fund is 66 percent, which provides the village with eight months of expenditures in the general fund, she said.
Eight months “is quite adequate.” The recommendation is to have two months of general fund expenditures set aside, but two months is “too lean in my opinion,” Shult said, adding that she believes five or six months should be the minimum.
Debt
State law allows municipalities to borrow up to 5 percent of the municipality’s equalized value.
Elk Mound has $1 million in general obligation debt, of which $658,000 is general debt and $423,000 is debt for the water and sewer utility, Shult said.
In 2021, there was $400,000 in general obligation debt that is no longer a general obligation debt issue because it was a Tax Increment Finance District debt that has been changed to be secured by the TIF district, she said.
Elk Mound used the $400,000 to pay incentives for the Settlers Ridge residential development.
The village is currently at 41 percent of the debt limit, Shult said.
The annual debt service payment in 2022 amounted to $146,000 for principal and interest.The amount of debt service payment was $25,000 more in 2021, but that part of the debt service payment is now being paid for by the TIF increment, she said.
The percentage of debt service payment to non-capital expenditures at the end of 2022 was 14 percent, representing an increase over 2021, Shult said, adding that the recommendation is to have 20 percent or less.
Revenue
In 2022, Elk Mound had $715,000 in revenue from property taxes and intergovernmental sources, Shult said.
Over a five-year period, the village’s revenue has only increased by 10 percent, but that is due to the state-imposed levy limits, she said.
Intergovernmental revenue, which is aid from the state and federal government, has remained flat at $274,000, Shult said.
Expenditures
In 2022, Elk Mound had $845,000 in expenditures, of which 36 percent was general government. 22 percent was public safety and 27 percent was for the department of public works, Shult said.
Between 2018 and 2022, Elk Mound experienced an increase in expenses of 28 percent — or 5 percent each year, she said.
The revenue, at a 2 percent increase per year, is not keeping pace with the 5 percent per year increase in expenditures, Shult said.
The revenue is not keeping pace because of the state’s restriction on levy limits on the revenue side, she said.
Water & sewer
The water and sewer utility had rate increases in late 2021 and 2022, Shult said.
The operating revenue increased by 8.5 percent, but the expenses increased by 10 percent, she said.
The water utility had expenses of $10,750 in general fund expenses $9,000 for capital assets and $42,000 for debt service, resulting in a $24,000 cash reduction, Shult said.
The village should keep applying with the Public Service Commission of Wisconsin for the 3 percent simple water rate increases whenever Elk Mound is eligible, which will increase the revenue by about $5,000, she said.
The village should keep increasing the sewer rate as well, Shult said.
Elk Mound’s sewer utility is deregulated, so the village board can decide on the rate increase without the approval of the PSC.
The utility had $246,000 in unrestricted cash at the end of 2022, which is eight months of operations, and that’s a reasonable amount of cash, Shult said.
The recommended percentage of capital assets and earnings to debt is 50 percent, and Elk Mound’s sewer and water utility is at 54 percent, although the percentage has been decreasing, she said.
Terry Stamm, village trustee, said he had concerns about the utility’s meters, and that because of depreciation, the state Department of Natural Resources will eventually require them to be replaced.
Stamm said he was also concerned about the amount of money the utility must spend on engineering, which must meet DNR requirements.
Because of water utility regulations, increasing the rates by more than 3 percent costs money, Shult said.
“You should do the 3 percent increase every year that you are able to,” she said.
The PSC forced Elk Mound to apply for a sewer rate increase several years ago, Shult noted.
The sewer utility is deregulated, so the village board “should keep an eye on” the capital expenditures, she said.
“Look at the sewer annually and bump it up a little every year. It’s less painful,” Shult said, adding that she is working with another municipality that had not raised the utility rates in 15 years and that the necessary rate increase was quite large.