Collaboration in Civic Spheres

Washington State Auditor: Debt Woes In City Of Winlock

by Matt Rosenberg August 17th, 2010

OVERVIEW: Winlock is a city of 1,340 in Lewis County, Washington. It provides a full range of municipal services including police, street maintenance and construction, water, wastewater and sewer systems. Winlock’s 2009 operating budget was $2.4 million. The city has a mayor, five city council members, and nine employees. According to a recent accountability audit by the state, Winlock in 2009 tumbled into a precarious financial position which threatens its ability to pay $10 million in debt incurred for important upgrades to its water and wastewater treatment systems.

KEY LINK: Washington State Auditor, Accountability Audit Report, City of Winlock, WA, 7/19/10

KEY FINDINGS:

  • “The city’s financial condition continues to decline, putting it at risk of not being able to pay its debt obligations.”
  • At year’s end, 2009, the city owed approximately $10.05 million for improvements to its water and wastewater systems. Starting in 2010, the city must pay $550,000 per year to pay off the bond debt for these improvements. But as of 5/31/10, the city’s bond redemption fund had a balance of $7,589. The city’s year end general fun balance declined from $145,704 in 2005 to $33,938 in 2009. The general fund balance was $35,826 as of 5/31/10.
  • “The city did not effectively control its costs and it appears the city’s revenue is insufficient to allow it to pay off the bonds.” The city may need to take out bank loans or find another funding source, which could impose additional costs on rate-payers.

From the accompanying state financial audit of Winlock (p. 16) here is a chart showing the long-term debt obligations. New debt of more than $8 million issued since 2008 for sewer plant improvements constitute the bulk of the $10 million in outstanding debt, which stretches to 2048.

CITY’S RESPONSE TO ACCOUNTABILITY AUDIT FINDINGS:

“…the current economic conditions of not only the City but also the State as a whole…has resulted in a significant decline of the City’s revenue from sales and use tax as well as other state shared revenues. City officials are aware of the decline and of current and future impacts this will have to the general fund in particular…The concern regarding the financial obligation for water and sewer loans is a valid concern. We do not know at this point if the rates are adequate to cover the City’s outstanding debt.

“One of the concerns of increasing the rates even further is that rate-payers will actually move from the area because they cannot afford the utility bills, resulting in possible further inadequacies. The City is taking actions to try to reduce expenditures in all departments. The Department heads have been asked to cut their allocated budgets wherever possible. The City is looking at all areas of spending during this decline until economic conditions improve.”

RELATED: “Lewis County Buzz” community discussion forum on City of Winlock’s financial challenges.

One Response to “Washington State Auditor: Debt Woes In City Of Winlock”

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