Editor’s note: Roswell Daily Record staff recently conducted an in-depth interview with City Manager Joe Neeb and Finance Director Monica Garcia, asking more than 30 questions — many submitted by the public — about the city’s budgeting process. Today’s story is the second of two articles resulting from the interview. The first appeared in the Sunday, Aug. 19 RDR.
Neeb and Garcia met with RDR staff for two hours to discuss the fiscal year 2018-2019 (FY 19) budget, along with a number of related financial matters — including the public’s perception of the city’s finances, challenges when it comes to communicating with citizens and where Roswell residents can find information on city finances.
Financial trouble and distrust
City Manager Joe Neeb said the city is trying to make things better, when it comes to citizens who have a hard time trusting the city when it comes to financial matters. He said this distrust is not coming from anyone’s actions — but he thinks citizens and some councilors alike sometimes think city finances work like a checkbook, or a business account.
“We have so many different guidelines as to what money we have coming in and what it can be used for,” Neeb said. “It’s part art, part science — that’s what the problem with governmental finance is.”
Neeb said citizens questioning the city’s integrity should pay attention to how money is spent and where it is being moved. He said they would find the city’s actions are not creating huge fluctuations, and the process is something they can trust.
“Our job as stewards of the funding and of the projects and everything is to try and make it easier for everybody to understand — and I think we work hard at trying to take all of this technical knowledge and break it down to a layman level so everybody can understand that,” Neeb said.
Neeb said distrust develops over time and the challenge the city faces is that citizens think if the money is not spent on their priorities, then it is being spent incorrectly.
To maintain transparency, Neeb said the city prepares a budget to explain what the city will spend, and an annual report offers information to justify where the dollars go. Neeb said he hopes the annual report and budget match, so a public perception of untrustworthiness isn’t created.
During election season, a candidate alleged that the city was in dire financial straights — and many citizens say that message has lingered.
“We’re not going bankrupt,” Neeb said. “We will not go bankrupt ever. We’re a long ways away from that. What is actually happening though is that we are tightening up. Our expenditures are getting closer to the amount of revenue that we have. And so, we’re not having as much savings or funding. That is a very tight line that we walk with that … every year we are required to have a balanced budget — once we’ve determined what our revenue is, we have to cut expenses to match up to the revenue.”
Neeb said the perception that the city is in a difficult situation comes from the public seeing the city spend more cash on hand to cover services. Neeb said that at this time the expenses are exceeding revenues and the council is facing the challenge of balancing that out.
Neeb said he thinks the suggestion of bankruptcy or financial trouble was just politics.
“We are tight,” Neeb said. “We are frugal. We watch our revenue and expenditures closely. If our revenue estimates are not being met, then we are going to reduce expenses to cover that.”
When asked about the state of the city’s finances during a committee meeting, Neeb said certain projects could not be funded — but the city’s funds were rated as 10 out of 10. A citizen wanted clarification.
“I appreciate that question and I knew it would happen as soon as I said that,” Neeb said. “When you look at our overall financial picture, when you look at our challenges here, we’re financially stable — but we have hard decisions to make every year. We can’t afford to do every project that is out there and for one reason or another, there are certain projects that do not happen.”
Neeb said this goes back to the city’s priority-based budget.
“Even like this year, we have a balanced budget,” Neeb said. “Our revenue and expenses budget together. We don’t have enough money to do every project out there. It has to be prioritized and we have to focus on what we are spending our money on.”
When asked if city officials would tell the public if the city was in financial trouble, Neeb said the city would share it — and that it is not information kept secret from the citizens. In the case of a financial emergency, Neeb said a conversation would be necessary since services would have to be reduced and citizens could opt-in to keep services going.
“We would have the conversation and I’ll guarantee you that this city council would be the first ones to tell the public — if we didn’t,” Neeb said.
If the city was actually in financial trouble, Garcia said people would see services impacted and personnel layoffs occurring.
“We were able to fund everything we needed this year, so I wouldn’t say we are in financial trouble,” Garcia said.
Though communication between citizens and the city is a struggle, Neeb said the city council’s willingness to be open is apparent in the regular public forums.
“The strength of Roswell is its people,” Neeb said. “The more we involve our people then the stronger we are. When we have a disconnect between our citizenry, our staff or our city council — then we’re not going to function as well. Every day we have tough decisions on exactly what we’re going to put our money to.”
“If we were financially in bad shape, we would get bad audits,” Neeb continued. “We’d get a lot of other issues and we’re not seeing those issues, so it really becomes a prioritization of how much money we do have coming in.”
Garcia said for cities an annual financial audit of the previous year is required by the state. The city also has a lodgers’ tax audit, whereby a vendor benefiting from lodgers’ tax is chosen at random and an audit is performed.
Garcia said the city chooses an auditor from a list that the state provides and receives two professional quotes for the audit, which is estimated to cost $60,000. The city has worked with Pattillo, Brown & Hill, L.L.P. from Albuquerque for three years. Garcia said the agreement lasts for three years and then the city will test the market again.
Citizens can see the presented and approved audit on the finance page of the city’s website (http://roswell-nm.gov/Archive.aspx?AMID=39).
Neeb said the audits have been “very clean.” Garcia added that more than 13 issues were identified in the audit the year before she began working for the city, five years ago. Garcia said there have been no more than three issues a year since then.
This fiscal year, the city had $34,000,000 in encumbrance funds. Neeb said these funds are encumbered to protect a project or activity. If a project is not completed, the funds are carried over to the following fiscal year to be reallocated to necessary projects.
Neeb said every city encumbers funds in this way. He said this year the finance department was very aware of closing projects and purchase orders that were more than a few years old.
Neeb said generally encumbered funds stay within the originating fund, unless council takes action to re-appropriate them or there are requirements to move them.
Garcia said the largest encumbrances involved the recreation center, around $17,000,000. Garcia said a substantial amount of funding is encumbered from wastewater and the water department projects every year.
Understanding for citizens
For citizens who want to examine the city’s finances, Garcia said revenue and expenditure reports are posted on the city’s website monthly.
After agreeing that citizens should be concerned about finances, Neeb and Garcia said it can be a challenge to understand the reports if a citizen does not have a background in finances, but they are both willing to explain issues for anyone in question. Neeb also said citizens should contact their city councilors if they have questions.
Neeb said communicating with the residents can be difficult because not all citizens are on social media, subscribe to the newspaper, or even have internet access. Despite these challenges, Neeb said the city will continue to provide needed information.
When asked about her background in governmental finances, Garcia said she has her associate’s degrees in finance and applied science. Garcia was born and raised in Roswell.
Garcia said she has been in accounting since her early twenties and worked in the finance departments of the Roswell Regional Hospital (for five years) and Kymera before joining the city five years ago.
She joined the city as finance director and said she did plenty of research on governmental accounting and finances to be fully informed. She attends training annually to keep up with current governmental finance procedures.
Neeb said that Garcia is leading a team of professional finance staff. He said he offers his master’s degree in business administration and brings other experience to the table. Garcia said her department is comprised of 10 people.
“We’re actually a pretty small department for servicing the whole city,” she said. “Essentially everything comes through us.”
On the broader level, Neeb said adjustments require the council’s approval and departments are allowed to move funds within departments. If a question is outside the council’s scope, Neeb said the state will decide on approval or denial.
Neeb said the budget is a living document and a snapshot of the city’s needs and what it wants to see happen.
City/RISD reporter Alison Penn can be reached at 575-622-7710, ext. 205, or at email@example.com.