EDINBURG, RGV – When Edinburg Mayor Richard Garcia gives his 2017 State of the City address at the Carmike IMAX Theater today he will be able to paint a rosy picture of Edinburg’s financial situation.
Edinburg taxpayers know this because at a recent city council meeting, accountants with the independent auditor firm Carr, Riggs & Ingram, LLC, said as much.
Ruben Moreno, a partner with Carr, Riggs and Ingram, LLC, and Aaron Ríos, a manager with Carr, Riggs and Ingram, LLC, presented the “Comprehensive Annual Financial Report” to Mayor Pro Tem J.R. Betancourt, himself a CPA, who was representing the mayor and fellow city councilmembers at the public session. The report covers the year ending September 30, 2016.
Moreno and Rios delivered an Unmodified Opinion, the best rating possible, following its examination of three aspects of the city’s financial operations: (1) internal controls; (2) statements, records, and accounting transactions; and (3) compliance with statutory and budgetary requirements.
Rios started his presentation by pointing out that financial statements are the responsibility of the management of the City of Edinburg, Texas. “That means that the numbers that are there (in the audit report) come from the City. They don’t come from us. It is our responsibility to audit those numbers and render an opinion on those numbers and whether the financials are stated fairly. In our opinion, the financial statements do present fairly, in all material respects, the financial position of the City of Edinburg, Texas. So, you receive what is known as an un-modified opinion, which is the highest opinion you can get.”
Rios said General Revenue Fund in 2016 stood at $47.5 million, compared to $44.1 million in 2015. He said 44 percent of the general revenue comes from property taxes and 41 percent comes from sales and franchise taxes.
“The cause of that increased amount was mostly that property tax revenue did go up, even though the property tax rate of 63.5 cents per $100 assessed valuation remained,” Rios said. “The overall valuations of properties increased, so that led to an about a nine percent increase in property tax revenue. Local sales tax revenue also increased by about 3.5 percent.”
The General Fund includes most basic city services such as police, fire, streets, parks, library, human services, health, animal care, and code enforcement.
Rios said expenditures in 2016 stood at $48.7 million, compared to $45 million in 2015. He said the deficit was covered by budget transfers from other funds, most notably from the Solid Waste Management Enterprise Fund. During the year $1.7 million was used for land purchases, Rios said.
The Water and Sewer Fund had operating revenues of $18.2 million in 2016, compared to around $16 million in 2015. Rios said this fund balance fluctuates based on water consumption, which in turn is based on the weather. Operating expenses for this fund were about the same, Rios said. A positive $6.7 million net change came about in part because FEMA money came in for work that had already been done.
The Solid Waste Management Enterprise Fund had operating revenues of $18 million in 2016, compared to $16.9 million in 2015. Operating expenditures were up by about six percent, largely due to an increased in professional services. There were operating transfers of about $3.8 million, with $3 million going to the General Fund to cover its $1.2 million deficit, Rios explained.
After Rios had finished his presentation, Council member Betancourt asked him to repeat what he thought were two key points: the city’s reserves are higher than state requirements and that the audit gave an un-modified opinion.
In an interview with the Rio Grande Guardian after the meeting, Betancourt explained why the financial picture for Edinburg is rosy.
“We have our reserve funds at 33 percent when normally the state requires municipalities to have it at 25 percent. We also have no findings, which is great. It means we are not in jeopardy with any type of agencies, state, local, IRS, nothing like that,” Betancourt said. “If you have less than 25 percent, they (the State of Texas) will often send over receivers to take over the city’s finances.”
Betancourt said he hopes Edinburg residents see and hear about the new audit so they can be reassured how well the city is doing, how much money it has and how the infrastructure projects are performing.
“You saw we have $3 million in capital improvements. That means all the people building sub-divisions, the arena, the soccer stadium, all those great things are happening, restaurants are popping up everywhere. The city has probably not been as fiscally strong as it has been in the past ten, 15, years. Obviously, the economy is doing well here in the Valley.”
Betancourt said he was also pleased that his city had over $200 million in construction permits last year. He predicted these would rise. “This morning I went to get breakfast at one of the local gas stations and you saw all the construction workers in line. Every gas station is like that. That is a great thing to see in the City of Edinburg. Everybody is working, everywhere you go there is construction, new construction, it is a great time to be a council member.”
In his interview, Betancourt also discussed the importance of the city’s audit when going to the bond market.
“For bond ratings, when you go up there, the first thing they ask for is your financials and your audit reports for the past three years, to make sure there are no findings, to make sure you are not undercapitalized, that you are not underfunded in any way and that you have money to meet all your debt requirements. That is huge. It is just like any local businessman trying to get a bank loan, you need to make sure you have the reserves to do all the things you want to do,” Betancourt said.
At a recent city council meeting, there was a degree of tension inside city hall, with two camps feuding. Some residents used the public comment period to bash city council members. “Stop embarrassing the city,” was one of the statements made. Another was, “Do the right thing, we are all watching.”
Asked if the new audit would reassure residents that the city is being well rung, Betancourt said: “I think a lot of time, the public isn’t fully aware. All the things they read, on Facebook or different media, they are not fully informed. The audit looks like a huge dictionary and people do not want to deal with it. If you just take the highlights from it or have someone explain it to you, the city has never been better. It is doing extremely well. We have a great Triple A rating and we have great credit. We have a bunch of money in our reserves. You see how our waste management fund did outstanding, they made over $6 million. Unfortunately, we have to use over half of that to fund the other departments we have, but it continues to do well. The water also. It is great, the city is booming.”
Editor’s Note: For many years, the City of Edinburg used Long Chilton, LLP, as its auditors. In effect, it still does because Long Chilton merged with nationally recognized Carr, Riggs & Ingram, LLC. Carr, Riggs & Ingram is the 22nd largest accounting firm in the United States.