Cadott Village Board; Audit shows areas for improvement

Nick Goeman, Baker Tilly, went through the Village of Cadott’s 2022 audit, during a Cadott Village Board meeting June 19. Some areas he flagged for the board to address, include the General Fund fund balance and ensuring the sewer rates cover the utility’s operating costs. Photo by Julia Wolf

By Julia Wolf

The 2022 audit and financial statement, showed areas where the Village of Cadott is in need of improvements. The reports were shared out at a regular Cadott Village Board meeting June 19.

Nick Goeman, Baker Tilly, says they issued an unmodified opinion of the financial statements again this year, which is the highest level of assurance that they can provide on financial statements.

“It basically says that we believe the financial statements are materially stated correctly,” said Goeman. However, Goeman says the analysis of the General Fund shows the fund is sitting in a pretty tough spot. Goeman says the unassigned fund balance has been negative or zero for the past five years, maybe longer, but 2022 was the first year, that the total fund balance in the General Fund was negative.

“Which is not a spot that you want to be in,” said Goeman.

The recommended minimum fund balance is two months of General Fund operating expenditures.

He says there are a number of ways to start to turn that around, but it comes down to increasing revenues or decreasing expenditures.

“That’s an obvious thing to say, but very difficult to do,” said Goeman, who suggested keeping a close eye on the budget to actual results, identifying overruns sooner and trying to correct those, or find places to cut back.

He says he knows some things are out of the village’s control, such as if it is a bad year for snow and there are extra snow removal costs. Goeman says he talked to clerk April Bruhn about it recently, and knows she is looking into different options for cost savings or extra revenues.

“I’ll tell you, me and April both were taken off guard here in these last two, three weeks,” said village president Randy Kuehni, especially since he and Bruhn are new to the job.

Goeman says the village’s General Fund revenues increased by 5.7 percent in 2022, compared to 2021, with a large portion of that non-recurring. In that same time, the expenditures increased over 13 percent.

“This is where the fund balance deficit in the General Fund came to be,” said Goeman.

Going line by line, Goeman says almost all the categories increased, but there were no huge increases in any individual department, causing a cumulative effect.

The percentage of the village’s debt limit in use has steadily decreased since 2019, with debt paid off more than any new debt issued.

When it comes to the village’s current debt service payments, Goeman says they are in pretty good shape.

The water utility is in the process of going through a rate case, as the rate of return for the utility in 2022, was negative 3.81 percent. The water rate case will also help the General Fund, because the public fire protection charges will shift to customers, instead of being paid by the General Fund, as in the past.

“It’s definitely a step in the right direction,” said Goeman.

He says the electric utility seems to be pretty good.

The sewer utility had a negative cash balance at the end of 2022, and the water utility advanced the money to the sewer utility to get it back to zero, for financial statement purposes. Goeman says they do not want to do that on a long-term basis. He says the sewer fluctuated around zero for the past few years, and suggested the village look into their sewer rates.

“When you’re looking at sewer rates, you want to make sure that you’re covering your operating costs,” said Goeman.

Bruhn asked about a small, flat increase each year, like some other municipalities do. Goeman says they won’t know the impact the increases would have without a study.

Brian Reilly and Josh Low, Ehlers, talked about financial information, in the same vein as the audit. While the sewer utility was on their mind, Reilly encouraged the village to pursue a rate study for the sewer utility, before having any meaningful discussions on the sewer rates, because, otherwise, they could be way off.

Discussion on a sewer rate increase, which was slated later on the agenda, was tabled until after the board receives more information at the next meeting.

Ehlers is helping the village refinance general obligation debt to electric revenue debt, to free up some of the village’s general obligation borrowing capacity. Reilly says they need to demonstrate to buyers, on paper, that the village is generating enough revenue to pay all their bills and meet their debt service, with some left over.

Reilly says everyone looks at the municipality as a total credit, including the state of the General Fund.

“We want to be able to tell potential buyers of your bonds, in some narrative detail, here’s how this happened and here’s what we’re going to do about it,” said Reilly.

Reilly says they need to come to an understanding of what they can do to get some cash back on the balance sheet and that they put the bond sale on hold, for a month or so, until they have that narrative.

The options will be on the next agenda for further discussion and to determine what the board is comfortable with.

In the business portion of the meeting, the board awarded the Brown Street project to Haas Sons, for $77,012.

“And they’re going to be doing some ditching and stuff there, too?” asked Kuehni.

Brian Chapman, Cedar Corp., confirmed ditching will happen down the entire east side and some culverts will be added.

The State Hwy. 27 utilities bids came in higher than initially expected. Chapman says they received two bids. One from Pember Companies, for $490,346, and one from A-1 Excavating, for $530,530.

The board previously expected the project to come in at the $275,000 range.

“The reason why that budget changed so significantly, was we went from open-cutting the water main in the roadway, to directionally boring the water main,” said Chapman.

He says the decision to switch was made, because of traffic issues on the state highway. They are required to keep two, 12-foot lanes open during construction and Chapman says they did not feel they could do that, while having space for the construction equipment.

“Why wouldn’t that have been discussed or obvious to begin with?” asked Les Liptak, board member, adding it feels like they were blindsided.

Chapman says the preliminary proposal presented to the board a number of months ago, was based on preliminary data, with no survey, so they did not know the exact widths of the street out there. He says the decision to change the plan came after the survey.

Kuehni noted that the project is in the Tax Increment Financing (TIF) district, but the village needs to come up with the money first. Goeman says TIF No. 5 does have just under $200,000 of cash sitting in it, which was borrowed for a previous project that fell through. He says that money can be used for this project and is a start.

“If we want that business to come in, it’s gotta get done,” said Kuehni.

With that, the board awarded the State Hwy. 27 utilities project to Pember Companies.

There was no agreement reached on the Schofield property at 801 N. Main Street, concerning an ordinance on the preservation of topography. The matter will go to the legal system for a resolution.

Members also approved amending the street permit for Rick’s Halfway, to temporarily close Main Street to allow for ATV parking, from Saturday, Aug. 12, to Saturday, Aug. 19, after the date for the ATV ride was misspoken at a previous meeting.

During committee reports, board member Nicole Whipp-Sime reported the library board looked into other sites along Main Street, but still preferred the location near the elementary school. Sime also says the library board would like clear answers from the village board, on if they support a new library building.

“I thought we were pretty clear on that,” said Kuehni. “We don’t have any problems about a new building. It’s just the site.”

There was also a utility meeting to try to find solutions to problems with the village’s SCADA system, which keeps sending alarms. Matt Gindt, public works, says the situation was better over the weekend, but is still not fixed.

“It’s going off right now,” said Gindt. Gindt says they did some rewiring to try to fix the problem, but it didn’t seem to help. He says multiple organizations are continuing to work on the issue.

The next Cadott Village Board meeting will be Wednesday, July 5, because of the July 4 holiday.

As a notice to the public, the Cadott Village office will be closed from 11:30 a.m. until 1:30 p.m., Friday, June 30.