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Preparing for Year-End

By Daniel A. Hedden, CPA, Partner, December 13, 2018

It is hard to believe that 2018 is almost over!   With the rolling of the calendar comes the need to close out the accounting year, prepare for annual reports and prepare for a strong start to the upcoming year.   There are some things to consider now to make the year-end process easier and ease your workload in 2019. Below is a year-end checklist to consider.  In addition, please consult the year-end duties set forth in the State Board of Accounts bulletins.   

  1. Cash and fund balances
    1. Confirm all balance requirements are being met and take action to eliminate any negative fund balances.   If the statutory process is followed correctly, a temporary loan now between funds can alleviate an audit comment later.
    2. Reconcile all cash and fund balances to bank accounts and ensure all reconciling items are processed.   (That oddball receipt from last February has to be dealt with)!
  2. Budget to Actual Expenditures
    1. Compare budget to actual spending and investigate if any appropriated accounts are overspent or will be by the end of the year.   Many budget adjustments can be handled by the fiscal officer, others will need more formal approval.   Forecasting through year-end saves you time during the annual report season.
    2. Time permitting, compare your forecasted 2018 actual spending to your 2019 budget.   You may find economies or challenges in individual line items.  For example, if your 2019 budget for gasoline is $1,000 and in 2018, you are on track to spend $1,500 --- you might have an issue.
  3. Transaction analysis
    1. A thorough analysis of your detailed transactions' completeness, accuracy, reasonableness and consistency will benefit your government.  For example, if you record eleven monthly utility bills to your utility expense line and one monthly utility bill to your miscellaneous account, now is the time to process the correction.
  4. Encumbering Appropriations
    1. Review unpaid purchase orders and contracts from 2018 and determine if appropriations need to be encumbered.  Remember, all appropriations expire on December 31, 2018 and are replaced with the new appropriations on January 1, 2019.   The only exception is properly executed encumbrances.
  5. Identify Stale Outstanding Checks
    1. The State Board of Accounts provides guidance on how to cancel old checks, but for year-end planning purposes, this is a good time to review HOW to do that in your individual accounting systems.   Reading the manual today saves you a scramble drill next year.
  6. Address Dormant Funds and Accounts
    1. Unused accounts and funds clutter up reporting.   This is a good time to consider those issues and brush up on the processes to make accounts inactive within your accounting system and to officially declare funds dormant.
  7. Transfers In and Out
    1. Transfers in = transfers out.  No exceptions.   Check them now or at the last minute on March 1st.   Your choice.

This is a brief list to help you get started.   Please remember to refer to the help guides from your accounting systems and State Board of Accounts bulletins to finish 2018 and get off to a good start in 2019.

If you have any questions or need assistance with the above, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Annual Financial Reports - Financial Management Reports

By Eric Walsh, CPA, Partner, December 13, 2018

As the end of the year approaches it’s important to keep in mind the reporting requirements that municipalities will face in the New Year. On the top of that list is the Annual Financial Report (AFR) that must be submitted on Gateway by March 1st. The AFR requires that municipalities report cash and investment balances, receipt and expenditure detail for each fund, capital asset balances as well as a variety of other information. This reporting requirement can be time consuming for clerk-treasurers and financial staff.

With clerk-treasurers focused on the AFR, where does that leave the utilities? As utilities are not required to be budgeted via the State mandated process, the financial management of utilities may go overlooked as management is focused on State deadlines and tax supported funds. To help fill this void, Umbaugh assists many utilities with Financial Management Reports (FMR) that aid in the financial management of utilities.

The FMR starts with the historical financial information of the utility to inform management on how revenues, expenses and cash balances have been trending over the last few years. From that information we work with management to build a budget to help track spending through the current year and look for opportunities to reduce costs. Along with the budget, we work closely with utility management to develop a multi-year capital plan for the utility. Once the capital projects plan is developed, we project the budget out three to five years and layer in the multi-year capital plan to develop a long-term financial forecast. Finally, with all the financial information in place we prepare a narrative summary of the report. The narrative summary is beneficial for decision makers who don’t see the day-to-day utility numbers and are looking for a summary overview of the utility’s financial health.

FMRs are great tools to help utility personnel, councils and clerk-treasurers answer key management questions and communicate with the public. Questions such as:  how are we doing compared to budget; are we overspending; are our fund balances sufficient; can we afford equipment and facility upgrades; do we need to increase rates? Without FMRs, municipalities often have no framework for answering these key management questions for their utilities. As we approach the New Year, and are focused on AFRs as well as other state required reporting deadlines, you are encouraged not to forget about your utilities.

If you need any help with your Annual Financial Report or are interested in learning more about Financial Management Reports for utilities, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Outsourced Financial Management:  Part 2 in a Series

By Daniel A. Hedden, CPA, Partner, November 29, 2018

As we noted in our previous article, outsourcing a municipality’s financial management functions allows management to focus on the municipality’s goals, growth and overall management of day-to-day operations.  We also discussed how outsourcing can help entities with staffing issues.

In this article, we discuss how outsourcing can help with compliance, ensuring there are checks and balances on critical systems and training:

  • Fraud detection and prevention: Government agencies are major targets for internal and external fraud schemes.  Some of the more significant government frauds involve small, local government entities, which often have limited separation of duties, opportunities for risk reducing oversight and scarce resources.  Strategic outsourcing can strengthen internal controls and increase transparency and accountability in financial operations.
  • Process improvement
    • Often, municipal leaders are too busy running their governments to keep regular track of industry best practices. When you outsource accounting functions such as cash management, reconciliations, accounts receivable, accounts payable and internal controls to a third party, that company is charged with keeping abreast of these changes.
    • Outsourced providers ensure timeliness and accuracy, resulting in reduced monthly cycle times.
    • The processes and procedures the outsourced company implements may result in better benchmark and baseline financial processes to help meet regulatory requirements.
  • Improved Compliance. Strategic outsourcing may mitigate risks associated with compliance related matters for up-to-date evaluation and implementation plans for any changes or amendments from regulatory agencies, including the State Board of Accounts (SBOA), Governmental Accounting Standards Board (GASB) and/or the U.S. Securities and Exchange Commission (SEC). Regulatory compliance will improve as a result.
  • Access to Expertise. Employees benefit from increased training and access to experienced professionals to help with day-to-day operations, recurring questions and individual growth.

For more information or if you have questions, please contact us at .(JavaScript must be enabled to view this email address)

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

School Fiscal Indicators:  What to Know

By Brock J. Bowsher, Manager, November 29, 2018

On January 1, 2019, fiscal indicators will be publicly available for all Indiana school corporations for the first time. 

The Distressed Units Appeal Board (DUAB) committee, in accordance with Indiana Code, established the following fiscal indicators that will be available on the DUAB website beginning January 1, 2019:

  • Average Daily Membership (ADM)
  • December 31 Year-End Fund Balances
  • Annual Deficit/Surplus
  • December 31 Year-End Fund Balances as Percent of Expenditures
  • Tuition Support per ADM as compared to General Fund Expenditures per ADM
  • Annual Revenue by Type
  • Operating Referendum Revenue as Percent of Total Revenue
  • General Fund Salaries and Benefits as Percent of General Fund Expenditures

Upcoming DUAB Dates and Activities:

January 1, 2019                             Release report of fiscal indicators for all school corporations

June 1, 2019                                  Release report of school corporations possibly in need of a Corrective Action Plan

After June 1, 2019                         Assess June 1 report completed by DUAB Executive Director

After DUAB Assessment                 Determines which school corporations are to develop a Corrective Action Plan

School corporations that are required to prepare a Corrective Action Plan may remain in the Corrective Action Plan process for as long as necessary until financial concerns are resolved to the satisfaction of DUAB. 

The DUAB committee will review and update the fiscal indicators annually and regularly determine whether additional school corporations may qualify for a Corrective Action Plan.  School corporations should closely monitor and develop an understanding of what is influencing these fiscal indicators at a local level.  The fiscal indicators can be used as an opportunity to help promote community understanding and engagement.  If you would like additional information about fiscal indicators or long-term planning, please contact us at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

2018 Bond Market Update

By Tim Sutton, Director of Bond Pricing, November 15, 2018

2018 has been an interesting year in the Municipal Bond market.  It has been the first year since 2013 that we have seen yields rise gradually, yet steadily, as the year has progressed.  The year started off with a new federal tax plan and lower corporate tax rates.  The lower corporate tax rates caused many institutional municipal bond buyers to re-think their tax-exempt strategy and focus more on taxable investments, thus reducing demand for Municipal bonds.  Issuers losing the ability to do advanced refundings has taken quite a bit of supply away from the market.  Reduced supply and reduced demand has allowed the Municipal bond market to function orderly in a rising interest rate environment.

What have Municipal interest rates done this year?  Put simply, they have gone up. Based on the MMD index (Index is owned and managed by Thomson Reuters), 2 Year is up 51 basis points (bp), 5 Year up 62bp, 10 year is up 75bp, 20 year is up 79bp and 30 year is up 83bp.  While rates have gone up significantly this year, 20-year Municipal bonds are still being sold with overall borrowing costs less than 4%.  While we are off our lows, the good news for Issuers with upcoming financings is rates are still historically pretty low.

Where are interest rates heading?  The Federal Open Market Committee (“FOMC”) has made it clear that they will continue to raise interest rates, absent an unexpected blip in the economy.  We have already seen three rate hikes in 2018 and a fourth hike coming most likely at the December FOMC meeting.  The notes from the September meeting also point to possibly three rate hikes in 2019.  Interest rates are heading higher.

If you have any questions, or if we may be of assistance, please contact us at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Life After Budget Adoption…What’s Next?

By Paige E. Sansone, CPA, Partner, November 15, 2018

After budgets are adopted and submitted in Gateway, the Department of Local Government Finance (“DLGF”) will review and issue a Notice of Final Budget Recommendation (more commonly referred to as the 1782 Notice).  Taxing units have ten calendar days to review the Notice and request budget revisions in writing to the DLGF.

Reviewing the 1782 Notice

When your taxing unit receives its 1782 Notice, carefully review the documents.  If there are discrepancies between the adopted budget and the 1782 Notice, attempt to determine why the revisions were made.  Reasons for revision by the DLGF may include:

  • budget reductions due to insufficient funding,
  • decreased tax rates due to higher certified assessed values,
  • revised miscellaneous revenues to reflect certified state distributed revenues; and
  • reductions of property tax levies to keep the levies within the maximum allowable by law.

In some cases, the DLGF may deny or modify budgets and levies.  The most common reasons for budget and/or levy denial/modification are:

  • the Notice to Taxpayers was not posted in Gateway by the deadline (10 days prior to the public hearing)
  • there were fewer than 10 days between the public hearing and adoption meetings, or
  • budget adoption occurred after the November 1 deadline

There may also be new changes for the upcoming budget year that taxing units will want to make sure are included in the budget, if applicable, such as:

  • a maximum levy increase due to an annexation or requested through an appeal process; and
  • a new debt service levy for a recently issued bond or lease.

Fortunately, the 1782 Notice provides a window of opportunity to request changes and provide DLGF with necessary documentation to ensure the final budget certification reflects the best interests of your taxing unit.

If you have any questions about budgeting, financial planning, or if we can assist in reviewing or analyzing your unit’s 1782 Notice, please contact us at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Finance Future Utility Projects with System Development Changes

By Doug L. Baldessari, CPA, Partner, November 06, 2018

Is your utility charging System Development Charges (“SDCs”) to new users connecting to the system?  SDCs, sometimes referred to as availability fees or capacity charges, have been used by sewer and water utilities for many years to provide a source of funding for future capacity-related improvement projects.  New customers pay the SDC when they connect to the utility system. The funds are then held in a separate account to reduce the amount of debt needed for upcoming improvement projects. This scenario allows “growth to pay for growth.” Many times, utilities are faced with the need to expand treatment facilities because of a growing customer base. An SDC paid by new development provides funding for the expansion with minimal impact to existing customers.

Generally, there are three different methods of calculating an SDC. The appropriate method for your utility is fact-specific and depends upon the utility’s goals and the status and timing of planning for future improvements.  It takes time for SDC revenues to build up to fund future improvements, so the earlier you get them enacted the more effective. 

Utilities have lots of needs and in many cases limited revenues to pay for increasing costs to run a utility.  Implementing SDCs as an additional funding use with your utility source for capital projects is one way to limit the burden on ratepayers

If you have any questions, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Outsourced Financial Management:  Part 1 in a Series

By Daniel A. Hedden, CPA, Partner, November 01, 2018

Because tax revenues never go far enough, local governments are always looking for ways to save money while still providing needed services.

One strategy to consider is outsourcing the financial management functions to a qualified, independent third party. Hiring an outside provider gives management more time to focus on the municipality’s goals, strategy and overall management of day-to-day operations. 

The practice, which is becoming more common across many industries, generally aligns around complex, compliance related duties that require a high level of specialization or coordination. Outside advisors who work with municipalities can be more proficient in financial accounting, reporting and advisory needs such as financing, capital planning and budget management. These advisors enhance the knowledge and skills of management and staff as they work with them.

There are many benefits to outsourcing, but an important reason for using an outside service provider lies in personnel. When people who retire or leave for other reasons are not replaced, their institutional knowledge leaves with them. In addition, other employees need to pick up the slack, taking time away from other important tasks.

When a new individual is hired, it takes time to get them up to speed. Having an outside advisor to confer with shortens the learning curve and aids in continuity. As an added benefit, the municipality does not have to provide employee-related benefits such as paid time off, health insurance or retirement benefits.

Employees who are still on the governmental unit's payroll also benefit. The outside company’s knowledge is available for ongoing help with day-to-day operations and recurring questions, promoting their individual growth and professional development.

There are many other benefits to outsourcing, which we’ll go into in our next article in this series.

For more information or if you have questions, please contact us at .(JavaScript must be enabled to view this email address)

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Understanding Assessed Valuation Q & A:  Part 1 in a Series

By Belvia B. Gray, CIPMA, Partner, November 01, 2018

This article is part of a series to provide information relating to the components of assessed valuation, property classifications and how to analyze a unit’s tax base.

What are the components of Assessed Valuation?

  • Gross Assessed Value represents the total value of a property before any deductions or exemptions are applied. This value represents the market value of a property (i.e. how much you could sell the property for).
  • Different deductions and exemptions are available depending on the type of property. Typically the deductions available for homestead properties include the Homestead Deduction, the Supplemental Homestead Deduction and the Mortgage Deduction. Other types of property may have deductions for TIF or Tax-Exempt status. Deductions reduce the amount of assessed value upon which taxes are paid.
  • Net Assessed Value represents the assessed value upon which taxes are paid after deductions and exemptions are applied. Property taxes are paid per $100 of net assessed valuation.

What are the different types of property classifications?

  • Agricultural
  • Business, Commercial, Industrial
  • Residential (including Mobile Homes)
  • Utilities
  • Tax-Exempt

The County Assessor’s office distinguishes properties by the property classifications listed above. It is possible for one parcel to have different types of property (i.e. homestead property and agricultural land). Calculations for the Circuit Breaker Tax Caps (1%, 2% and 3%) are based upon these property classifications. The Tax Caps for different types of properties are in the table below:

 
A future Vision article will provide more information on how you can take this information to understand more about your tax base and the implications on Tax Cap losses, and the effect of legislative changes on assessed valuation.

If you have any questions, or we may be of assistance, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Tom Traciak Appointed to Michigan Statewide Drinking Water Advisory Council

By Umbaugh Announcements, October 25, 2018

Umbaugh’s Tom Traciak was recently appointed to the Michigan Statewide Drinking Water Advisory Council.

Established by the recently revised Lead and Copper Rule and appointed by Michigan Department of Environmental Quality (DEQ) Director C. Heidi Grether, the Council is charged with developing lead public awareness campaign materials and advising the DEQ on efforts to educate the public about lead in drinking water.  The Council will meet quarterly.

Mr. Traciak has worked in accounting, budgeting and finance in both the public and private sectors since 1981.  He has served over 350 local units of government throughout Michigan with capital financings since 1988.  His work has included bond issues, lease purchase financing, grant funding, tax increment finance, rate studies, asset management plans, and intergovernmental agreements including utility authorities.  He has particular expertise in working with governments experiencing difficult revenue support situations, with a concentration in water and sewer utilities.

Traciak is a graduate of the University of Michigan and earned his master’s degree in public policy and administration from Michigan State University.  He is a registered municipal advisor with the U.S. Securities and Exchange Commission.

Congratulations Tom for exemplifying two of Umbaugh’s core values of leadership and collaboration.  Please join us in recognizing .(JavaScript must be enabled to view this email address) on his appointment.

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Small Municipality Financial Guidance

By Eric Walsh, CPA, Partner, October 18, 2018

Municipalities, both large and small, deal with a laundry list of financial issues and task each day and Umbaugh has a long history of guiding our clients through those issues.  While no two municipalities are the same, we have found smaller municipalities to have unique needs.  These range from small, or even single, staff size to smaller budgets for triaging and financial software.  Often we are called upon to assist these clients with financial tracking and reporting, both State required and locally driven at the Council level.  Below are examples of service these types of clients have found valuable.

Budgets

With the annual budget process comes critical deadlines and too often shrinking levies.  We provide a wide array of budget services from the Form 1 to final submission.  Often municipal staff is adept at preparing the budget and request our assistance in analyzing the long-term viability of the spending plan.  Solutions include multi-year cash flow projections and meetings with department heads and the Council to explain the anticipated impact on the City or Town’s bottom line.

Annual Financial Report

Information on cash and investment balances, revenue and expenditure information, capital assets, accounts payable and receivable, debt and lease reporting, grants and pension information are all part of the annual report.  Bank reconciliations also need uploaded to Gateway.  Many clients utilize us to assist with completing this process.  Timely reporting has taken on an even more important role with the recent monthly Gateway filing requirements. (Click here for article on Gateway requirements).

Utility Financial Health

Often Council members and community members seek simplified reports regarding the financial strength of their utilities.  Questions such as are we in compliance with our bond ordinance, or are rates and charges at the correct level, or can we afford planned capital projects often come up.  To help answer these questions we have designed utilities financial reporting tools tailored to individual utilities.

Internal Reports

Some municipalities utilize ledger books or Excel for tracking financial data.  Often times these reporting tools become cumbersome the more information is input.  We have assisted several clients in streamlining their internal processes and system to make monthly and annual reports easier to produce.

If we can help you solve a problem, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Reduce Rate Impact by Paying Off Bonds

By Doug L. Baldessari, CPA, Partner, October 18, 2018

Utilities in the Midwest and across the country are facing ever increasing pressure on utility rates. The rate pressure is the result of a variety of factors, including long-term control plan implementation, asset management replacements, operating increases and declining usage because of water conservation. These mandates and other increases in requirements are pushing the affordability limits of water and sewer utility rates. What can be done to help?

When facing necessary utility rate increases, reducing your fixed bond payments by paying off the bonds may be a valid consideration.

Assuming you have been diligently setting aside revenues and saving cash, one option might be to redeem or pay off your bonds early. However, most municipal bonds have standard call provisions which will not allow for the bonds to be paid off until they have been outstanding for a certain period of time. There also may be some redemption premium.

When considering this option, an important consideration is the need to keep adequate cash balances. Most bond documents have cash balance requirements for outstanding bonds and there should be adequate funds set aside for unforeseen capital expenditures and contingencies.

Many things must be considered before you payoff bonds, so you should ask your municipal advisor to provide you with the information needed to make this decision.

If you need assistance, please don’t hesitate to contact us at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Heidi Amspaugh Elected Vice President of NAMA

By Umbaugh Announcements, Principal, October 11, 2018

Umbaugh’s own Heidi Amspaugh was elected Vice President of the National Association of Municipal Advisors (NAMA) during its Annual Conference in Providence, Rhode Island recently.  The Vice President advances onto President a year from now.  She has served on the NAMA Board for six years. 

Heidi is a Principal at Umbaugh and has been with the firm for twelve years.   She has been involved in many areas of the firm’s practice, including economic development, tax increment finance, structuring incentive packages for industrial/commercial prospects, and the financial planning associated with the issuance of bonds for communities around the State.

She is a municipal advisor registered with the U.S. Securities and Exchange Commission.  Heidi also serves as Treasurer for the Indiana Economic Development Association.

Umbaugh pairs the ethics, structure, quality control and business discipline of a CPA firm with the skills and knowledge of a municipal financial advisor.  Umbaugh advises cities, towns, townships, counties, agencies, utilities, schools, libraries, hospitals, special districts and airports regarding financing, long-range planning, tax and utility rates, budgets, debt management, revenue forecasts, economic development and financial management.

Congratulations Heidi for exemplifying one of Umbaugh’s core value of leadership.  Please join us in recognizing .(JavaScript must be enabled to view this email address) on her achievement.

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Road Funding Analysis

By Andy Campbell, CPA, Manager, October 09, 2018

Communities in Michigan are facing tough questions regarding their infrastructure.  Many have completed, or are in the process of completing, a Stormwater, Asset Management and Wastewater (SAW) Grant financial plan and asset inventory pertaining to their sewer system.  They may have also completed a Water Asset Management Plan (WAMP) pertaining to their water system.  These processes have been very informative for community leaders and administration regarding the upcoming needs of the sewer and water systems.  Many of these communities have taken necessary steps to adjust rates on their systems to account for the upcoming capital needs.  After addressing their enterprise funds, administration and council/board members are now coming to an oft-asked question in Michigan…“What about our roads?”

Without user rates or a dedicated revenue stream (in most cases), what are the options to fund this type of infrastructure? While projected increases in Act 51 monies from the State are on the way for many communities, the overwhelming conclusion among all sizes of communities is that this is not enough. Even supplemental and upcoming budget appropriations from the State are not addressing the major needs of most communities. What can communities do to fund their road network? A road funding analysis is a good place to start. 

What is a road funding analysis?  Most communities are aware of sewer and water rate studies and the need to perform these, whether internal or through a hired consultant.  However, many are not aware that a similar type of analysis can be performed for their roads as well.  It is often a more involved discussion than sewer and water, and in today’s environment, it is just as important.  There are many options when it comes to road financing.  Some of the most used range from special assessments, to increasing operating millage under Headlee, to voting a charter amendment (extra-voted millage), or voting bonds.  The options are numerous and sometimes confusing.  There is no “one-size-fits-all” solution for communities.  Thus, having an individualized holistic discussion can be the first step.

Umbaugh can assist in leading this discussion with administration and/or the governing board.  Through this discussion, we identify the many variables pertaining to road finance and empower the decision makers to take action in addressing their needs.

If we can be of assistance to your community, please contact us at .(JavaScript must be enabled to view this email address).

 

Tax-Exempt Municipal Bond Rates

                                                                     January 4, 2018      April 5, 2018      July 5, 2018     October 4, 2018

11-Bond GO 20-Year Index (1)                            2.94                         3.40                   3.34                   3.71

20-Bond GO 20-Year Index (1)                            3.44                         3.90                   3.86                   4.24

                                                                     January-March     April-June    July-September    October-December
                                                                             2018                 2018                 2018                       2018           

USDA Rural Utilities-Market                                 3.50                 3.875                  3.875                     4.00

USDA Rural Utilities - Intermediate                      2.75                 3.125                  3.125                     3.25

USDA Rural Utilities - Poverty                              2.125               2.375                  2.375                      2.375

State Revolving Fund - CWRF/DWRF 
(20 years)                                                             2.00                 2.00                    2.00                        2.00

State Revolving Fund - CWRF/DWRF
(30 years)                                                             2.25                 2.25                    2.25                        2.25

(1) General Obligation (GO) bonds maturing in 20 years are used in compiling these indexes.  The 11-Bond GO Index has an average equivalent to Moody’s Aa1 and S&P’s AA+, while the 20-Bond GO Index is equivalent to Moody’s Aa2 and S&P’s AA. 

* For informational purposes only and not a recommendation.  Umbaugh not responsible for errors in reporting rates.  Rates subject to change.

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Is the Federal Reserve Behind?

By Jeffrey D. Coil, Fixed Income Portfolio Manager, October 04, 2018

The Federal Reserve voted unanimously to raise their benchmark fed-funds rate to a range between 2-2.25%.   But what does this really mean, is the Fed slowing growth and the prospect of future inflation?   In our estimation, the answer is almost certainly “NO.”  There are too many structural forces at work for inflation to slow near term, below are the highlights:

  • Per Goldman Sachs, the budget deficit will increase from a current $825B to $1,250B in 2021, a shocking yet inflationary expansion of fiscal policy.
  • Consumers are not feeling the squeeze of higher interest rates.  Mortgage rates have risen only slightly and at 4.65%, this 30-year rate will not curtail prospective buyers. 
  • Five year auto loans rates are lower than in 2011 and credit card companies are easing credit and offering zero percent financing, as overall consumer rates have been kept in check by competition and technological innovation. 
  • The unemployment rate is currently 3.9%, contributing to solid demand for workers. That strong demand for labor has led to an impressive 3% year-over-year (YOY) wage increase.
  • Full year GDP growth is estimated at over 3%, inflation is running at the top of the Fed’s range, corporate profits are booming and stock markets are at all time highs.

The above factors all point to prospects of higher inflation, which is a difficult animal to tame when it begins to accelerate.  The markets expect stability around overall prices within an economy and when that does not occur, volatility in markets can ensue.  Risks are increasing that the Fed is behind the curve and may have to accelerate rate hikes faster than the market is anticipating.

If we may be of assistance, or you have any questions, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Why are State-Distributed Highway Revenues Decreasing?

By Paige E. Sansone, CPA, Partner, September 20, 2018

While in the midst of budget season, you may have noticed that the State’s estimates of the Motor Vehicle Highway distributions for the last half of 2018 and 2019 are lower than the estimates provided last year. One explanation may be House Bill 1290 passed earlier this year.  This piece of legislation changed the distribution formula of Motor Vehicle Highway revenue to local units of government. 

Before the legislative change, approximately 40% of revenue deposited in the State’s Motor Vehicle Highway Account (“MVHA”) and 45% of revenue deposited to the Highway, Road and Street Fund were distributed to local units.  The new legislation changed the distribution to local units to 38% from MVHA and 37% from Highway, Road and Street. Since 2018 budget certifications for the Motor Vehicle Highway Fund were based on higher estimates, you may need to make budget adjustments, as necessary, for 2018. 

If you have any questions about budgeting options or need assistance, please contact us at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

New Funding Options for County Correctional and Rehabilitation Facilities

By Jason G. Semler, CPA, Partner, August 16, 2018

For most communities, a big part of the budget process is prioritizing where the money should go. Sadly, the funds available usually run out before the needs.

This year, legislation was amended that provides some help for counties funding expenses related to correctional and rehabilitation facilities. Under the legislation, county fiscal bodies are permitted to adopt an ordinance to impose (within the local income tax expenditure rate) a tax rate to assist with funding expenses related to correctional facilities and rehabilitation facilities in the county. The tax rate, which must be in increments of one-hundredth of one percent (0.01%) and may not exceed two-tenths of one percent (0.2%), may not be in effect for more than twenty (20) years.  In addition, the revenue generated by such a tax rate (1) must be distributed directly to the county before the remainder of the expenditure rate revenue is distributed; and (2) shall be maintained in a separate dedicated county fund and used by the county only for paying for correctional facilities and rehabilitation facilities expenses in the county. 

There are advantages and disadvantages to adopting this new legislation.  It is important to carefully evaluate the option and determine if it is best for your county. 

If you have any questions or need assistance with evaluating if this is the best option for you, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

New Asset Management Plan Requirements

By Doug L. Baldessari, CPA, Partner, August 09, 2018

Utilities in Indiana and across the nation are faced with an impending infrastructure crisis. Many are already presented with the need to replace hundreds of millions of dollars of infrastructure assets, and more will follow in the decades to come. What solutions are there for utilities to properly plan for and fund future infrastructure replacements and improvements?

Indiana’s State Revolving Fund (SRF) Loan Program has a proposed solution. Nearly 400 Indiana communities have utilized SRF’s low-interest financing since 1991 to improve wastewater and drinking water infrastructure. While utilities are familiar with SRF loans, going forward there are new requirements to the Asset Management Program (AMP). To secure necessary project funding, utilities should be prepared to update existing documentation regarding their AMPs.

New AMP Requirements Effective July 1, 2018

Indiana’s General Assembly passed the new AMP requirements and going forward any utility that plans to finance infrastructure improvement projects through SRF will need to meet new requirements. These requirements include:

  • Documentation demonstrating that the participant has the financial, managerial, technical and legal capability of operating and maintaining its water or wastewater system.
  • Certification proving that the participant has an AMP prior to completion of the project. Minimum necessary AMP elements include:
    • A system map
    • Inventory and assessment of system assets
    • Development of an infrastructure inspection, repair, and maintenance plan (including a plan for funding)
    • Analysis of customer rates needed to support the AMP
  • Audited financial statements prior to SRF loan closing date and every two years during loan repayment.
    • One-year grace period between July 1, 2018 and June 30, 2019 wherein SRF will accept a review, examination, or audit if it was performed by an independent public accountant within three years of the SRF loan closing date.  

Additional guidance and related documents can be found on SRF’s Loan web page.

Based on our extensive experience assisting utilities across Indiana and the Midwest with AMPs, Umbaugh played a key role assisting SRF in the development of this new guidance. Specifically, Umbaugh helped define the financial guidance for AMPs used in SRF loans. Under the new financial requirements, utilities are required to have a long-term funding strategy for the necessary water and sewer system capital plans as well as current audits.

Water and Sewer infrastructure represents a very large investment in public assets.  AMPs are a valuable management tool whether a utility finances its project through SRF or other sources.  A well prepared AMP helps drive long-term project success and sustainability.  It is always a good idea to engage a registered Municipal Advisor as MAs are uniquely qualified to help determine how to most effectively pay for AMP identified project improvements as mostly commonly debt issuances (bonds) will be part of the funding solution.

If we can be of assistance, please contact us at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Umbaugh Recognized

By Umbaugh Announcements, August 06, 2018

Our greatest reward at Umbaugh is doing good work for our clients, knowing we are contributing to solving issues critical to you and improving the lives of those in your communities. It’s also nice to be recognized by our peers in business, and that’s what happened.

Inside Public Accounting (IPA) Magazine recently announced the rankings of the nation’s largest public accounting firms.  Umbaugh’s ranking has moved up six places on its list of top 200 CPA firms in the nation.  In addition, Umbaugh has again earned recognition as one of the “Fastest Growing Firms” in the top 200 firms list.

Umbaugh is the most active firm of Municipal Advisors (MAs) in the nation that practices as a CPA firm and Umbaugh is the only top 200 CPA firm whose primary focus is on municipal advisory services.  We believe this unique combination sets us apart.  It allows our firm to pair the ethics, structure, quality control and business discipline of a CPA firm with the skills and knowledge of a municipal financial advisor, all of which ultimately helps us serve our clients better.

In today’s complex legal and regulatory environment, we say “thank you” to our clients for the trust placed in us.  We remain committed to developing new products and services to better meet the increasingly complex needs of our diverse clients.

Umbaugh serves its clients with a staff of over 120 in four offices in Indiana, Michigan and Ohio.

If we may be of assistance, please contact us at .(JavaScript must be enabled to view this email address).

www.umbaugh.com

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Congratulations John Seever!

By Umbaugh Announcements, July 26, 2018

Umbaugh Partner John Seever was elected to serve at three year term as the Indiana Director to the American Water Works Association’s (“AWWA”) Board of Directors.  The AWWA has over 52,000 members in North America and is the oldest and largest organization representing the water industry in the U.S.  The AWWA Board of Directors establishes policies for the overall management and direction of water affairs.  He has also been selected to serve on AWWA’s National Finance Committee.  John has been active in Indiana Section AWWA for many years, previously serving as Chair of the Indiana Section. 

John is the first CPA to serve as Director from Indiana and the first registered Municipal Advisor to serve on the AWWA Board of Directors. “Thank you to my Partners and colleagues at Umbaugh, without whose support of AWWA my service would not be possible.  I look forward to bringing forward the needs of Umbaugh’s clients on a national platform in critical areas such as project funding, capital asset planning and rate affordability,” said John. 

Congratulations John for exemplifying Umbaugh’s core values of leadership and our deep commitment to the industries  and  associations that serve our clients.  Please join us in congratulating .(JavaScript must be enabled to view this email address) and wishing him success.

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

The Benefits of CAFRs

By Daniel A. Hedden, CPA, Partner, July 26, 2018

What is a CAFR and what are the benefits of preparing one?  A CAFR is a Comprehensive Annual Financial Report.  Preparing a CAFR allows the unit of government to participate in the GFoA’s Certificate of Achievement for Excellence in Financial Reporting program joining over 4,200 other government (about 4% of all governments in America). This program is most beneficial to entities that already, or soon will be, required to report financial statements in accordance with Generally Accepted Accounting Principles in order to issue debt, have a continuing disclosure requirement for audited financial statements and/or receive an audit each year.  

A CAFR has three main sections: introductory, financial and statistical. 

The Introductory Section includes letters of transmittal that give management the opportunity to discuss what the entity has done and plans that will have an effect on the future.  This subjective dialogue is an important feature that is not available in a traditional audit of basic financial statements.

The Financial Section includes the Independent Auditor’s Report, Management Discussion and Analysis (MD&A), Basic Financial Statements, Required Supplementary Information and other Supplementary Information.  The MD & A is another opportunity to discuss performance but it is more restrictive than a transmittal letter and must contain specified required information. A benefit of the financial section of the CAFR is the opportunity for management to present expanded fund level financial statements and increased information on budgetary performance beyond what is required in a basic financial statement audit.  

Lastly, the Statistical Section gives context about financial trends, revenue capacity, debt capacity, demographic and economic information and operating information.   This allows readers of the financial statements to assess economic condition over time.

If you have questions about your community and the potential benefits of this program, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Annexation and the Upcoming Census:  What You Need to Know!

By Deen C. Rogers, CPA, Partner, July 12, 2018

Unbeknownst to many, state law prohibits an annexation ordinance from becoming effective during the year preceding a federal decennial census.  In other words, cities and towns are not allowed to make an annexation effective in 2019.  This includes whether the annexation is municipally-initiated, voluntary, or super-voluntary.  What does this mean for Indiana municipalities seeking to annex in the upcoming 6-18 months? 

For starters, this law applies to 2019, allowing time for super-voluntary annexations to take place and become effective before the end of 2018.  Super voluntary annexations require 100% of landowners within the annexation area to sign an annexation petition and can be accomplished within a condensed timeframe.  As of the date of publication of this article, it is likely too late to get through a municipally-initiated or voluntary annexation and still make the ordinance effective prior to 2019.

Moreover, the rules do not prohibit annexation research, work or execution of the annexation ordinance during the year before a census.  It simply disallows the annexation ordinance from taking effect during the year.  Annexation work including, but not limited to,  engineering studies, written fiscal plans, public outreach meetings and legal filings can all be conducted in 2019.  However, the earliest any annexation that is completed in 2019 can become effective would be January 1, 2020.

Umbaugh has prepared over 100 annexation fiscal plans for over 50 communities around the State of Indiana.  For any questions regarding annexation assistance, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Property Tax Debt:  Planning for Operating Balance Change

By Lindsay Simonetto, CIPMA, Manager, July 12, 2018

Are you looking to closely monitor your debt service levy and/or tax rate?  An important part of doing so is monitoring the debt service cash balance (line 11 on Form 4-B).

In 2014, legislation was introduced by the State Legislature that limited the amount of cash balance local units of government could carry in debt service funds.  Prior to 2014, units could levy enough to cover not only their total payments for the upcoming budget year, but also enough to end that budget year with an additional six months of funds.  In other words, debt essentially carried a 50% operating balance. 

Maximum allowable debt service operating balances are calculated on a per debt basis. Debt originally issued before July 1, 2014 can still carry the 50% operating balance.  For debt issued after June 30, 2014, the allowable operating balance is 15% of the next budget year’s payments.  Over time, this change results in debt service cash balance declines as debt with a 50% operating balance gets replaced by debt with a 15% operating balance.

Why does this matter?  If the decline in operating balance is unforeseen or not properly managed, you may be faced with an unexpected dip in the debt service levy and tax rate one year, followed by a spike the following year.  In addition, school corporations eligible for the protected taxes waiver should pay close attention to the operating balance to help evaluate and plan for future use of the waiver

If you would like additional information on debt service fund planning or budgeting assistance, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

New SBOA Reporting Requirements

By Jeffrey P. Rowe, CPA, Partner, June 28, 2018

On June 12, 2018 the State Board of Accounts announced new reporting requirement for all governmental units.  The objective of the reporting requirement is to provide a more efficient and cost effective audit process by doing more monitoring, planning and audit work prior to coming on site. The new requirements, some of which are already required annually, are summarized as follows:

Required Monthly

  • Bank Reconcilements
  • Copy of Approved Board Minutes
  • Funds Ledger detailing receipts and disbursements by Fund

Required Annually

  • Year-end Bank Statements
  • Year-end Outstanding Check List
  • Year-end Investment Statement
  • Detail of Receipts and Disbursements for the Year
  • Salary Ordinance
  • Employee Earnings Records
  • Annual Vendor History Report

The new requirements will be effective for local units, with the exception of schools and counties, beginning July 2018 and July files will be required to be uploaded into Gateway no later than September 15, 2018.  Going forward the documents must be uploaded no later than the 15th of the second month following the month they are for.  Failure to upload the documents when they are due or in a timely manner may cause delays in completing the audit.

For more information regarding the reporting requirements or if you would like our assistance in handling the reporting requirements for you, please feel free to contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Municipal Securities Reclassified in New Senate Banking Bill

By Susan Borries Reed, Director of Disclosure Strategy and Services, June 28, 2018

On May 24, 2018 President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act, the largest banking bill since Dodd Frank. Also known as the Senate Banking Bill, it rolled back many provisions of Dodd-Frank and relaxed some regulations covering fiduciary responsibilities.

Issuers of municipal securities, including cities, towns, counties, schools, libraries, and others should take note, as the Senate Banking Bill also amended an important provision governing the treatment of municipal securities.

Dodd-Frank Rolled Back, But Look Closer

The Senate Banking Bill contained myriad updates to Dodd-Frank, such as consumer access to credit, relaxed rules for investors, and varied levels of deregulation for smaller financial institutions, among many other changes. However, a new classification of municipal bonds is arguably the most important piece of the amended legislation that concerns issuers of municipal securities.

For years, advocates of municipal securities have said the original rules were too restrictive and discouraged investment from larger banks, despite municipal bonds’ historically safe investment profile. Nevertheless, in the original regulations, municipal securities were left out of Liquidity Coverage Ratios (LCRs) – liquid assets that banks are required to keep on hand to safeguard against a future economic crisis – because they weren’t considered “high quality liquid assets.”

As part of the new Senate Banking Bill, municipal bonds are now considered high quality liquid assets.

What Does This Mean?

For financial institutions, this means that they have another option to satisfy LCR requirements.

For issuers, giving banks access to that much more in available investments may increase the attractiveness of municipal securities  to larger banks, and municipal debt interest rates could also decrease.

Why the change now? Congress determined that the characteristics of municipal securities are consistent with criteria previously established for high quality liquid assets like mortgage-backed securities. These characteristics include limited price volatility, high trading volumes, and deep and stable funding markets. Some issuers were hoping for a higher classification to match sovereign debt, but overall the consensus is positive for the new rule. 

Another important update contained in the Senate Banking Bill is that the $50 billion threshold for financial institutions has been increased to $250 billion. Lifting the ceiling threshold is meant to help smaller, local lending institutions better compete by lowering compliance costs.

Although the Senate Banking Bill may be divisive depending on political views, this is one change that should be welcome news to cities, towns, counties, schools, libraries, and other entities that issue municipal bonds. For questions on municipal securities, long-term financing, or municipal financial planning, contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

2019 School Budget Planning:  A Transitionary Time

By Brock J. Bowsher, Manager, June 14, 2018

It’s that time again. School corporations across Indiana need to start developing 2019 school budgets.

Budget preparation can be a laborious and time-consuming process, but adding to the already complicated process for 2019 are the fund changes effective January 1, 2019. School boards will adopt 2019 budgets with two new funds: Education Fund and Operations Fund.  School budgets will no longer prepare general, capital projects, transportation, bus replacement (in addition to, if applicable:  historical society, racial balance and art association, public playground) funds budgets.  The Education Fund is to be used exclusively to pay expenses allocated to student instruction and learning. The Operations Fund will be used to track non-academic and non-debt expenses.  School corporations will continue to use existing debt funds to prepare 2019 budgets.  

One of the first steps school boards will take is to pass resolutions establishing the new Education and Operations Funds effective January 1, 2019.  Resolutions establishing these two new funds should be done no later than December 2018. 

As for specific 2019 budget preparation, budget forms are available through Gateway at http://gateway.in.gov.  Slight revisions to the 2019 Budget Forms 2 and 4B reflect the transition to the new budgeted funds:

  • Budget Form 2 and the Current Year Financial Worksheet must be completed as if the Education and Operations Funds were in place for the second half of 2018.
  • Budget Form 2 also includes a new line item called “Other Revenue.” That line should reflect the amount school corporations intend to transfer from the Education Fund to the Operations Fund or vice versa. 
  • Form 4B includes an additional line item (Line 1a) labeled “School Transfer Out”, which  should be used to report the amount school corporations intend to transfer from the Education Fund to the Operations Fund or vice versa. 

School corporations will find that starting with a clearly defined budget plan for 2019 to prepare for the fund changes will lead to a smoother transition. If you would like additional information regarding these changes, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Do You Have a Financial Roadmap to the Future?

By Paige E. Sansone, CPA, Partner, May 31, 2018

Many governmental units across Indiana, large and small, are facing financial challenges due to rising costs, declining revenues, lack of economic growth, and property tax losses due to Circuit Breaker Tax Credits and other legislative changes. All of these factors are changing the way we budget. Taking a short-term “fill-in-the-forms” approach to budgeting is no longer sufficient to the need. There is a greater urgency to extend planning horizons beyond one year and develop long-term cash flow projections to identify potential budget deficits and cash flow shortages before they occur.

Developing a three to five year comprehensive financial plan can provide your community with a financial road map to the future. The plan can be used as a tool to map out priorities and estimate the impact of increasing costs, changing revenue streams, and legislative mandates. It can define your government’s financial position, predict receipts and disbursements, and identify potential funding gaps or investment opportunities. A comprehensive financial plan can provide the framework for developing financing plans for capital projects and better manage debt obligations.

If you have any questions about developing comprehensive long-term financial plans or need assistance, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Utility Legislative Update

By Scott A. Miller, CPA, Partner, May 30, 2018

The Dust Has Settled on an Extended 2018 Legislative Session that Saw Several Significant Utility Bills Enacted

There was a lot of drama surrounding the special legislative session called by the Governor to finish business undone at the end of the regular session. Utility-related issues were not impacted, however, since the legislature wrapped up its work on Indiana’s "wet" utility infrastructure prior to the March deadline.

Using a methodical approach towards understanding the needs of utilities, the legislature issued two new laws that could significantly impact the industry.

The first, Public Law 126 (formerly Senate Enrolled Act 362) includes three main components:

  1. New water and wastewater utility companies that are created after June 30, 2018 will be subject to the jurisdiction of the Indiana Utility Regulatory Commission (IURC) for approval of rates and charges, financing, rules and annual reporting requirements for at least the first 10 years of existence as a legal entity even if they are otherwise able to opt out of IURC jurisdiction. These provisions would not affect municipalities, regional districts or conservancy districts.
  2. Participation in the State Revolving Fund (SRF) loan program will now require documentation that demonstrates the utility has the financial, managerial, technical and legal capability of operating and maintaining its water or wastewater treatment, distribution and collection systems. Additionally, documentation that demonstrates that the utility has or is in the process of developing an asset management plan will be required. SRF is in the process of developing guidance regarding the technical and financial components of an asset management plan.
  3. Permits issued or amended for newly constructed, newly acquired or expanded water or wastewater treatment plants will require documentation certifying the completion of a life cycle cost-benefit analysis, a capital asset management plan and a cyber security plan. The statute describes some of the additional components that each of these items must contain including user rate analyses. These studies must be updated every five years while the facilities continue operation. Importantly, these rules do not apply to renewals of permits for existing plants provided there is not expansion of capacity.

The second new law, Public Law 196 (formerly House Enrolled Act 1267), establishes a Water Infrastructure Task Force that is charged with examining recommended standards and best practices for the maintenance and life cycle management of drinking water systems, wastewater management systems and storm water management systems.

As part of this examination, the task force is to analyze whether individual systems are achieving the recommended standards, assess the adequacy of funding sources, evaluate the impact of regionalization on system performance and ratepayer value and assess the impact on economic development in Indiana of an improved system of water infrastructure.

The task force is also directed to (1) create an empirical decision-making tool to assist policymakers in prioritizing funding for water infrastructure projects and (2) develop a long-term plan for addressing drinking water, wastewater and storm water management needs in Indiana.

The task force must act quickly. A report on recommendations from the task force is due no later than December 1, 2018.

If you would like additional information regarding capital asset management plans, rate studies or other long-term financial planning tools, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Special Session Brings New Requirements for Redevelopment Commissions

By Matt Eckerle, Principal, May 29, 2018

The May 14th special session of the Indiana General Assembly saw passage of HEA 1242 in both chambers, and the bill was subsequently signed into law by Governor Holcomb. Included in this law are new requirements affecting redevelopment commissions.

Effective July 1st, all redevelopment commissions will be required to hold an annual meeting during which it must present certain financial information for the governing bodies of the taxing units that overlap with the boundaries of established Tax Increment Finance (TIF) allocation areas. The requirement, which mandates long-term planning for TIFs and direct engagement with other taxing authorities, encourages increased communication between redevelopment commissions and its other taxing units.

Although specific guidance from the state regarding timing and content requirements is not yet available, the bill outlines items that a redevelopment commission must address in its meeting with overlapping units. The commission’s meeting must address the following items:

  • its budget for tax increment revenues
  • the long-term plan for each TIF area
  • the impact of each TIF area on overlapping taxing units.

Additionally, the new law states that the governing body of an overlapping taxing unit may request that a member of the redevelopment commission appear at a public meeting of that body.

This new law affects all redevelopment commissions in the State. Direct engagement with overlapping taxing units and the development of strategic financial plans for TIF areas, while always a best practice, now have greatly increased importance to redevelopment commissions.

Your community’s overall financial planning process can make use of the information developed to meet these new requirements. Moreover, the redevelopment commission will have access to additional information as it makes its annual assessed value pass-through determination each spring.

Please note: This article references the special session version of HEA 1242, which addresses State and Local Administration. Bill details can be found by clicking here.

Umbaugh will assist your community with the development of TIF strategic financial plans, budgets and impact analyses so you are compliant with the new requirements. Please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Utilizing TIF to Support Education in Your Community

By Matt Eckerle, Principal, May 17, 2018

Tax Increment Financing (TIF) is traditionally viewed as a resource for funding infrastructure, downtown redevelopment or incentives to promote economic development in a community. TIF funds are not generally viewed as a possible source for funding educational programs or projects, but that is changing.  Communities across Indiana are finding opportunities to partner with their local school corporations and educational institutions to allocate TIF funds in support of educational programs and capital projects.

Some redevelopment commissions have begun to utilize a state law that allows for up to 15% of TIF revenues generated in an allocation area to be used for programs that provide job training and re-training for residents of the community. Eligible organizations include local school corporations, nonprofit organizations whose primary purpose includes job training and re-training, and institutions of higher education that offer these types of programs, such as Ivy Tech Community College of Indiana.

Many redevelopment commissions also are exploring opportunities to collaborate with local school corporations on capital projects. Such projects may be eligible for TIF funding as long as they are (1) located in or directly benefit the area and (2) included in the area’s economic development plan.

Examples of successful TIF-Education partnerships in Indiana include:

  • The Whitley County Redevelopment Commission is contributing $7.5 million to the Whitley Consolidated School Corporation over a three-year period to a new high school project.
  • The Gibson County Redevelopment Commission contributed $600,000 to Ivy Tech to fund a local welding program.
  • The Town of Plainfield is utilizing TIF funds to make debt payments on the school transportation center bonds.
  • The City of Lebanon used TIF to fund a multi-use training room at Lebanon High School.

Another tool available to redevelopment commissions is the pass-through of incremental assessed value for the benefit of overlapping taxing districts, including school corporations. Redevelopment commissions typically use the time leading up to the June 15th TIF excess incremental assessed value notification deadline to evaluate opportunities for such pass-through determinations.

Along with monitoring and carrying out the economic devlopment plan(s) for your community, exploring partnership opportunities with local education providers and other taxing units should be part of your annual analysis of your community’s TIF areas. Engagement with these units can be a part of a larger economic development strategy in your community.

Umbaugh can assist you with evaluating potential opportunities to utilize your TIF dollars to support local education efforts or collaborate with other taxing units.  If you have questions or need assistance with the analysis of your community’s TIF area or areas, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Cities and Towns Face Changes to Transportation Funding Distributions and Reporting Requirements

By Eric Walsh, CPA, Partner, May 17, 2018

In April 2017, Indiana legislature passed HB 1002, a sweeping bill covering transportation infrastructure funding. Among the bill’s many provisions, of note were changes related to State motor vehicle highway distributions and how local governmental entities are permitted to use their distributions.

HB 1002 calls for an incremental increase in the amounts distributed from the motor vehicle highway account to state and local units to 60 percent for state units and 40 percent for local units after June 30, 2022. This reflects an increase from the current 53 percent and 47 percent for state and local units, respectively. 

In addition, cities counties, and towns are no longer permitted to use their allotted distributions for painting of structures and objects or law enforcement. Rather, local governmental units must use at least 50 percent of their distributions on construction, reconstruction and maintenance of roadways. The last word in this description is notable because additional legislation passed just this year changed maintenance to preservation.

The legislation also called for changes to the Annual Operations Report (“AOR”) for Highway and Street Departments for cities and towns with a population of 20,000 or more. The AOR population threshold also was lowered from 20,000 to 15,000. This will result in a handful of cities and towns in the 15,000 – 20,000 population range filing an AOR for the first time in early 2019. As for the 50 percent use restriction, it will be tested at audit (for now) and could eventually become an annual test.

Updates are still being made to the AOR and the prescribed forms issued by the Indiana State Board of Accounts (SBOA) last year. There will be more to follow on these new reporting requirements as the information becomes available.

For questions on how transportation funding can be used at the local level or how new reporting requirements may affect cities or towns, please .(JavaScript must be enabled to view this email address) the professionals at Umbaugh.

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

In the World of Circuit Breakers, More Counties Turning to Local Income Tax

By Jason G. Semler, CPA, Partner, May 03, 2018

Local Income Tax (LIT) is a resource that communities are increasingly relying on as pressures build on property tax revenues. With the greater flexibility now allowed since CAGIT, CEDIT and COIT were consolidated into a single LIT, you may wonder what options you have with the various rate components and how your county’s total rate stacks up to your peers.

Current LIT statute allows for a Property Tax Relief rate up to a maximum of 1.25% and a total Expenditure rate (which can be allocated between Certified Shares, Public Safety and/or Economic Development components) up to a maximum of 2.50%, for a maximum total rate of 3.75%. The 3.75% limit is prior to any additional county-specific Special Purpose rate approved through legislation.

In 2017, 22 of Indiana’s 92 counties adjusted their LIT rate. Only one county reduced its total rate, through the expiration of a Special Purpose component. Three counties maintained the same total rate, while reallocating amongst the various components. The remaining eighteen counties increased their total rate, with increases ranging from 0.10% to 1.30%. For fiscal year 2018, Indiana counties maintain rates ranging from 0.35% to 3.38%, with a state-wide average of 1.67% and mean of 1.73% for the 92 counties.

2018 LIT Rates for Indiana’s 92 Counties

 

If your community is struggling with the constant challenge of doing more with less, remember that Local Income Tax is a resource available to provide important dollars for the essential services that your constituents expect. Your Umbaugh team will provide an analysis of your options and the impact of any action, and we are ready to assist if an adjustment to your county’s rate makes sense. Please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Next Level Roads Program (Part 1)

By Jeffrey P. Rowe, CPA, Partner, May 03, 2018

In 2017 the State announced a 20-year program to begin implementing projects aimed at improving the condition of the State’s roads and bridges.  The State released a plan for INDOT projects to be completed during the first five years and can be found at http://nextlevelroads.indot.in.gov. The program contains the following projects:

  • $5.1 billion in total investment
  • 122 lane miles added
  • 9,628 lane miles resurfaced
  • 1,295 bridges rehabbed or replaced

The five year projects are all approved, scheduled and fully funded which creates an opportunity for local projects to be completed concurrently with the INDOT projects to take advantage of construction conditions that exist and allow for local projects to be done at the least cost possible as well as minimize the number of disruptions.

If your community would like to explore working concurrently with INDOT as it proceeds with its projects, you should contact the local INDOT district office (https://entapps.indot.in.gov/dotmaps/districtmaps/) and/or your Metropolitan Planning Organization ("MPO") at (http://www.indianampo.com/indiana-mpo-regions.html).

In the next part of this series, we will further explore the next level roads program and how developing an asset management plan can aid in combining multiple projects together to save money and minimize disruptions.

If you have questions regarding the next level road funding program or would like assistance with your planning or funding needs, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Update:  Supplemental LIT Distributions

By Paige E. Sansone, CPA, Partner, April 19, 2018

Previously, we published an article that stated the supplemental distribution of LIT (to be distributed in May) should be receipted to the Rainy Day Fund.  We have recently obtained information from the State Board of Accounts that indicates the supplemental distribution may be receipted to the Rainy Day Fund or the General Fund unless otherwise directed.   If the distribution includes Economic Development and/or Public Safety LIT those amounts may be receipted to the LIT Economic Development (EDIT) and LIT Public Safety funds. The uses of the supplemental distributions are limited to the uses of the fund into which they are receipted.

According to an informational report from the State Budget Agency dated November 15, 2017, the counties listed below have excess balances above 15% in their trust accounts.  Please note that the numbers listed below are estimates.  The actual distributions will not be finalized until May, 2018.

 

County

Estimated
Supplemental
LIT by County
Boone  $         916, 428
Clark 2,385,506
Crawford              157,041
Dearborn 241,150
DeKalb 235,689
Dubois 602,173
Elkhart 3,445,381
Floyd 1,617,889
Gibson 1,650,594
Hamilton 12,680,207
Hendricks 852,868
Howard 750,177
Kosciusko 6,234,666
LaGrange 44,345
Orange 57,734
Owen 1,777,855
Randolph 259,368
St. Joseph 4,424,392
Switzerland        49,365
Tippecanoe 1,492,728
Wabash 1,022,821
Warrick 628,372

 

If you have questions about Supplement LIT or any other budgetary planning, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Does Your Website Have a Link to Gateway?

By Eric Walsh, CPA, Partner, April 19, 2018

If your political subdivision has a website, you are required to permanently display a link to the Indiana Gateway for Government Units website on your homepage.  The requirement is referenced below:

Political Subdivision Summary of Publication on Internet Website

After July 31, 2017, the Department of Local Government Finance ("DLGF") shall publish an annual summary of each political subdivision on the Indiana transparency Internet web site on the dates determined by the DLGF.

A political subdivision shall prominently display on the main Internet web page of the political subdivision's
Internet website the link provided by the DLGF to the Indiana transparency Internet website.

If you have questions regarding the information above or need assistance, please contact us at .(JavaScript must be enabled to view this email address)

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

2019 Budget Deadlines

By Paige E. Sansone, CPA, Partner, April 05, 2018

Even though we have just started the second quarter of the year, it is time to start thinking about preparing your 2019 Budget.  Please note that two budget deadlines have moved up this year to allow the Department of Local Government Finance (“DLGF”) to complete budget certifications by January 1. Cumulative Fund proposals are now due to DLGF by April 30 and Pre-Budget Worksheets are due in Gateway by May 1.

If you are new to your position, the budget deadlines for you and your staff are listed below.  Even if you are an experienced pro, this list is a good refresher.

  • April 30 – Deadline to submit proposed cumulative fund to DLGF (applies to establishing a new fund or reestablishing the rate on an existing fund)
  • May 1 – Pre-Budget Worksheet due in Gateway
  • May 31 – Deadline for County Auditor to distribute supplement LIT distributions (if applicable)
  • July 16  – DLGF provides estimate of maximum levy for 2019
  • July 31 – DLGF provides estimates of circuit breaker tax credits for 2019
  • August – At their first meeting in August, the County Fiscal Body is required to review property tax levies and circuit breakers for each taxing unit and distribute a written recommendation
  • August 1 – Deadline for County Auditor to certify net assessed values to the DLGF
  • September 3 – Deadline for units that require a binding review to submit proposed 2019 Budget to appropriate fiscal body
  • October 1 – Deadline for State Budget Agency to certify income tax distributions for 2019.
  • October 12 – Deadline to post Notice to Taxpayers (Budget Form 3) of the 2019 budget in Gateway.  This date applies only if adopting on November 1.  Please note that the notice must be posted at least 10 days prior to the Public Hearing on the budget.
  • October 19 - Deadline to file an excess levy appeal with the DLGF (excluding shortfall appeal)
  • October 22 – Deadline to hold a Public Hearing on the 2019 budget.  Please note that the Public Hearing must be held at least 10 days prior to budget adoption.
  • November 1 - Deadline for second and third class cities to adopt salary ordinances for employees other than elected officials.
  • November 1- Deadline to adopt the 2019 budget (appropriations, tax rates, and levies) 
  • November 5 (or 2 days after adoption) – Deadline to submit 2019 adopted budgets to DLGF through its online Gateway system
  • December 14 – Deadline to submit additional appropriations to DLGF
  • December 30 - Deadline to file a shortfall excess levy appeal with the DLGF
  • December 31 – Deadline for Towns and Counties to adopt salary ordinances for 2019
  • December 31 – Deadline for second and third class cities to adopt salary ordinances for elected officials for 2019

Budget forms must be completed on the Gateway budget program.  Once your budget has been submitted through Gateway and certified by the DLGF, the information is available for public viewing.  The DLGF’s deadline to certify budgets is January 1 (or January 15 if the unit is issuing new debt by December 31, 2018 or files a shortfall excess levy appeal).

This is the general timetable.  Exceptions and differences exist, such as for Appointed Boards and Special Districts.  Please contact us for the specific budget adoption requirements for your taxing unit.

It is a best practice to have someone take an additional look at your budget before its adoption.  [In light of the current budget complexities.]  If you have questions or need assistance in preparing or reviewing your budget, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Tax Rate or Tax Levy Management:  Questions School Corporations Need to Consider

By Belvia B. Gray, CIPMA, Partner, April 05, 2018

As part of their project planning process, school corporations need to determine whether their goal is maintaining the tax rate (debt service of total tax rate) at a certain level or keeping the tax levy near current levels.

Deciding whether to pursue a tax rate or tax levy management strategy can be complicated, but considering these seven factors can make it easier:

  1. How long will the current debt service levy continue to meet the school corporation’s funding needs?
  2. Is the tax base projected to change in the short- or long-term (decline, stabilize or grow)?
  3. How will adjustments to the debt service levy impact circuit breaker losses?
  4. For school corporation’s eligible for the protected tax waiver: Will the protected tax waiver remain or will tax cap losses be managed another way?   
  5. How will TIF or other significant assessed value changes affect the school corporation’s tax base and the magnitude of circuit breaker losses?
  6. Will taxpayers support increased spending?
  7.  What is the right mix of spending vs. taxpayer relief?

The answers to these questions can help guide your school corporation toward the best solution to meet its capital needs. Umbaugh can assist you with thinking through these types of questions and developing a plan that meets your school corporation’s needs. Please contact us at .(JavaScript must be enabled to view this email address) for assistance and more information.

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Now is the Time for Asset Management Planning

By Jeffrey P. Rowe, CPA, Partner, March 22, 2018

Recent studies by the EPA and American Water Works Association (AWWA) estimate the nation’s infrastructure replacement needs in the hundreds of billions of dollars. These studies reinforce Indiana’s own findings. The Indiana Finance Authority’s (IFA) 2016 study identified an immediate need for $2.3 billion just to replace outdated water infrastructure assets.  At the same time, many Indiana communities are facing implementation of wastewater long-term control plans, which for some communities is the largest infrastructure project they have ever undertaken. 

Taking a passive approach to addressing infrastructure needs is no longer a viable strategy. Indiana utilities need to develop financial plans for asset renewals in combination with long-term control growth. Doing so will enable them to plan for the timely replacement of an aging infrastructure while managing large fluctuations in utility rates.  This was recently reinforced by the Governor signing into law SEA 362 which requires the development of an asset management plan if a water or wastewater utility seeks to participate in the State Revolving Fund Loan Program (SRF) or in the event a permit is being issued or amended for the purpose of the inclusion of a newly constructed or newly acquired plant; or the expansion of an existing plant.

Options are available to utilities seeking to fund their asset renewal needs. Depending on the level of need, a properly prepared financial plan can be funded through the utility’s rate-funded capital plan, cash on hand, or included in a bond financing. In addition, the SRF is encouraging communities to begin the  process by allowing asset management planning  costs, such as engineering and financial advisory fees to be eligible for funding in conjunction with other project-related costs. 

Regardless of how communities decide to pay for infrastructure improvements, it is increasingly important to recognize that these needs will not go away on their own, and the initial step of developing a financial plan needs to start soon.

If you have questions about asset management planning or would like assistance with your funding needs, please contact us at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Supplemental Local Income Tax (“LIT”) Distributions in May 2018

By Paige E. Sansone, CPA, Partner, March 22, 2018

Each year, the State Budget Agency makes a determination as to whether each county’s local income tax trust balance (held at the State level) exceeds 15% of certified distributions.  Excess balances above 15% are to be distributed to each affected county as “Supplemental LIT” by May 31.  Supplemental LIT should be deposited in a unit’s Rainy Day Fund and must be appropriated by the local fiscal body.

In May, the DLGF will provide to County Auditors the allocation by taxing unit of Supplement LIT. According to an informational report from the State Budget Agency dated November 15, 2017, the counties listed below have excess balances above 15% in their trust accounts.  Please note that the numbers listed below are estimates.  The acutal distributions will not be finalized until May.

 

County

 

Estimated
Supplemental
LIT by County

Boone

 

$            916, 428

Clark

 

2,385,506

Crawford

 

157,041

Dearborn

 

241,150

DeKalb

 

235,689

Dubois

 

602,173

Elkhart

 

3,445,381

Floyd

 

1,617,889

Gibson

 

1,650,594

Hamilton

 

12,680,207

Hendricks

 

852,868

Howard

 

750,177

Kosciusko

 

6,234,666

LaGrange

 

44,345

Orange

 

57,734

Owen

 

1,777,855

Randolph

 

259,368

St. Joseph

 

4,424,392

Switzerland

 

49,365

Tippecanoe

 

1,492,728

Wabash

 

1,022,821

Warrick

 

628,372

 

If you have questions about Supplement LIT, or any other budgetary planning, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Pieces of the Puzzle - AV & LIT Analysis

By Andrew O. Mouser, Manager, March 08, 2018

As a public official, you may at times feel stuck in the detail of what is affecting local government funding in your community. Often, taking a moment to step back from the specifics to see the big picture can prove invaluable. To help you, we have created a focused Assessed Value and Local Income Tax Analysis service, or as we call it, AV & LIT Analysis.

Assessed Value (AV) plays a large role in how budgets convert to tax rates and Circuit Breaker pressures.

  • What percentage of your tax base is made up of agricultural and farm land, industrial and commercial property or residential homes and apartments?
  • How does the age and occupancy rate of your housing stock affect your AV?
  • What impact do large utility or industrial equipment investments have on your tax base?
  • What are the single largest AV investments across your multi-county region?
  • How is your community affected by anticipated future decrease in farmland AV as pointed out previously in the New Indiana Farm Ground Tax Valuation Reduction article.

The answers to questions like these provide insight to what your future AV might look like, which then allows you to better project future property tax dollars you’ll have available to provide services.

Umbaugh will identify the AV components and drivers in your tax base, diagnose trends and benchmark your community to its peers. If the signs point to increasing pressures on property tax revenues, you may need to consider exploring your Local Income Tax (LIT) options, a resource that communities are increasingly turning to. The Umbaugh AV & LIT Analysis will provide beneficial information to explain not only where your community is coming from, but also where it may be headed in the years to come.

If you have questions about our new Umbaugh AV & LIT Analysis, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

TIF Management:  Part Two

By Matt Eckerle, Principal, March 08, 2018

As noted in the last TIF article, if you are planning to issue debt payable from tax increment or to fund projects on a pay-as-you-go basis, you should be aware of the possible revenue impacts of the expiration of your TIF area and its components so you can better manage your planning strategy. Below is a checklist of other important items to consider when evaluating your TIF areas and planning the use of your TIF resources:

  • The effects of existing and proposed property tax abatements;
  • Scope of new construction underway in the TIF area;
  • Outstanding and probable property tax appeals;
  • The effects of potential building demolitions;
  • The financial health of the taxpayers in the area and understanding the risk of potential business closures;
  • Possible changes in tax status for TIF taxpayers, (a for example, a parcel changing from taxable to tax-exempt status);
  • The requirements of outstanding obligations payable from the tax increment revenues; and
  • Possible opportunities to cooperate with the overlapping taxing units, including the school corporation.

Actively managing your TIF areas will help the community maintain an up-to-date understanding of its ability to meet its current and future obligations. Proper management also provides needed context to inform important decisions when using TIF as a financial planning resource.

Umbaugh can assist you with developing comprehensive analyses and action plans for your TIF areas. Please contact us at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Natural Disaster Levy Appeal

By Paige E. Sansone, CPA, Partner, March 05, 2018

Many communities throughout the State are suffering loss due to flood damage and facing expensive clean-up efforts.  After emergency management is complete, finance officers will turn toward financial recovery for extraordinary costs.  Fortunately, State Law allows for a temporary increase in property taxes to pay costs related to a natural disaster.  Per Indiana code, civil taxing units (excluding school corporations) can file an excess levy appeal with the Department of Local Government Finance (DLGF) by October 19, 2018 for taxes payable in 2019. 

A levy increase could be granted for one year to reimburse or pay for costs associated with flood damage and clean up. A successful appeal will require careful tracking of all expenses related to flood damage so information can be itemized and included with the DLGF’s levy appeal application. In addition, like any other levy appeal, the unit must demonstrate financial need. 

Umbaugh will review this information and the process in detail at the upcoming Spring Budget workshops (offered in conjunction with AIM).     

If you have questions, need assistance with excess levy appeals or any other budgetary planning, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Attention:  New CCD Deadline

By Paige E. Sansone, CPA, Principal, February 22, 2018

If you have a CCD fund, you may have noticed the rate declining over the past few years, possibly related to reassessment and annual trending. As a reminder, maximum CCD fund rates are:

  • Municipalities
    • $.05 – in counties that adopted CAGIT or COIT
    • $.04 – in counties that previously did not adopt CAGIT or COIT
  • Counties
    • $.0333 – in counties that adopted CAGIT or COIT
    • $.0233 – in counties that previously did not adopt CAGIT or COIT

The process to establish a CCD Fund or re-establish the rate to the maximum is the same, but be aware that the required process takes time and the Notice of Adoption must be submitted to DLGF by April 30. This is a new deadline and is much earlier than previous years. The previous deadline was August 31.

The process is generally as follows:

  • The legislative or fiscal body must approve the rate after conducting an advertised public hearing.
  • A Notice of Adoption is published which starts a 30-day remonstrance period whereby 50 or more taxpayers may file an objection.
  • When the remonstrance period ends, proofs of publication, signed ordinance or resolution and a procedure checklist (available from the DLGF) are forwarded to DLGF no later than April 30.

So, to complete the tasks required given the new deadline for submission, the county or municipality must start the process by March.  If you have questions, need assistance with establishing a cumulative fund or budget planning, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Long Term TIF Management:  Part One in a Series

By Matt Eckerle, Principal, February 22, 2018

Tax Increment Financing (TIF) is a well-recognized economic development tool in Indiana and nationally. TIF is used in Indiana to help facilitate development in areas where new development might not otherwise occur. TIF areas in Indiana, depending on their date of establishment and the presence of outstanding debt, may have a term of 25 years to 30 years. Given the frequent legislative changes affecting TIF, active management is a necessity.

Not actively managing your TIF areas can lead to strategic financial issues downstream. As TIF areas mature it is important to methodically analyze them to understand their past, present and future. 

Active management of TIF areas is especially important if you plan to issue debt payable from tax increment. You must know the possible revenue impacts of the expiration of your TIFs or portions of your TIF area.

The term of a TIF area depends on the date of the Declaratory Resolution’s adoption. This chart for Indiana illustrates the impact of expiration dates for three basic configurations:    

Date TIF Established

Expiration Date

TIF area is established before July 1, 1995.

TIF expires the later of 2025 or following the final maturity of obligations outstanding as of July 1, 2015.

TIF area is established between July 1, 1995 and July 1, 2008.

TIF expires 30 years after the adoption of the Declaratory Resolution.

TIF area is established after July 1, 2008.

TIF expires 25 years after the date the first obligation payable was incurred.

In circumstances where a TIF area has been expanded over time there can be different expiration dates for portions of the area based on the resolution dates for the initial establishment and subsequent expansions. These “nested” TIF areas add complexity to your TIF strategy which must be considered in your short-term and long-term planning for the capture of incremental assessed value and using TIF revenues.

In an upcoming issue of Vision we will highlight additional important items to consider in the TIF planning process. The evolution of a TIF area and its components may not be obvious. Umbaugh can assist you with tracking and maximizing your TIF area’s potential.

If you have any questions, please contact us at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Reminder:  Gateway Debt Verification Due March 1

By Susan Borries Reed, Director of Disclosure Strategy and Services, February 13, 2018

Local units of government will once again be required to complete an annual review and verify the accuracy of its debt on the State’s Gateway website.  Debt that must be verified includes:

  • All bonds and loans (except temporary loans)
  • Lease rentals of real property;
  • Equipment that is under a lease-to-own arrangement (not short-term leases for equipment like copiers and vehicles; and
  • For cities, towns and counties, any utility or redevelopment commission debt.

Additionally, issuers need to provide supporting documentation for any debt that was issued after January 1 2013.  For debt issued with an official statement, the official statement needs to be filed.  However, for debt that did not require an official statement (not subject to SEC Rule 15c2-12), the Department of Local Government Finance, requires that “bond covenants be filed”.  Most bond covenants should be captured by filing the authorizing document (indenture, resolution, or ordinance) and bond purchase or loan agreement.

Should you require assistance or have any questions, either with the verification process or providing the supporting documents, please contact Umbaugh at .(JavaScript must be enabled to view this email address).

 

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Don’t Miss Redevelopment Commission 2018 Reporting Deadlines

By Matt Eckerle, Principal, February 07, 2018

Redevelopment Commissions must meet several reporting deadlines during the 2018 calendar year. It is important to adhere to these requirements as the Department of Local Government Finance (DLGF) tracks compliance and failure to meet the excess notification and neutralization deadlines can jeopardize your ability to capture incremental assessed value.  Below is an outline of filing and deadline requirements for 2018, and to see more detail click here: Download More Information

April 1: Annual Report of the Redevelopment Commission Treasurer on the Financial Status
The treasurer of the Redevelopment Commission, which is the fiscal officer of the unit, is required to report the Commission’s financial status to the Commission.

April 15: Previous Year’s Activities of the Commission and of Each Allocation Area: the TIF Management Report
Redevelopment Commissions must report the previous year’s activities by the Commission to the fiscal body of the unit, the executive of the unit and to the DLGF through the Gateway system.

June 15: Upcoming Excess AV Pass-Through 
Written notice must be provided to the unit’s fiscal body, the overlapping taxing units, the County Auditor and the DLGF stating the amount of excess incremental assessed value, if any, that will be passed through to overlapping taxing units from each allocation area.

Before August 1: Neutralization of Base AVs for the Upcoming Year
The County Auditor must complete a DLGF form to neutralize the effects of reassessment or trending of real property in each allocation area of the county.

If you have questions or need assistance with TIF timing and reporting requests, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Other Post-Employment Benefits (OPEB) Filing Due March 1

By Paige E. Sansone, CPA, Partner, February 07, 2018

What is OPEB?

“OPEB” stands for Other Post-Employment Benefits. Pension is the most common post-employment benefit. As the name suggests, Other Post-Employment Benefits (“OPEB”) are benefits other than pensions. Typical examples are health, dental, vision and life insurances; prescription or other healthcare benefits; and other benefits provided to eligible retirees and, in some cases, their beneficiaries.

What is the purpose of OPEB Reporting and why is it important?

The purpose is to report for the preceding year, current liability, unfunded liability, assets, contributions, and expenses associated with non-pension benefits offered to retirees. Accounting and reporting standards for pension plans have existed for many years, but similar standards did not exist for OPEB.  OPEB is a part of the compensation that employees earn each year, even though benefits are paid after employment has ended. Therefore, the cost of these future benefits is a part of the cost of providing public services today. Since most governments report only their cash outlays for OPEB in a given year, rather than the employer’s incurred cost of OPEB earned by employees in that year, the numbers can be vastly different. Due to this potential inequity, those who read or analyze financial statements do not have complete information to assess the cost of public services and to evaluate the financial position and financial health of the government. In Indiana, the OPEB reporting required by the Department of Local Government Finance via Gateway closes this gap by requiring basic information and estimates.  

Who is required to file an OPEB Report?

All political subdivisions must file the report even if it does not offer OPEB. This applies to counties, cities, towns, airport authorities, libraries, townships, schools, regional sewer districts, fire protection districts, solid waste management districts, conservancy districts, and other special taxing districts. 

Is an actuarial valuation required in order to complete the OPEB Report on Gateway?

No, an actuarial valuation is not required to complete the Gateway OPEB report; however, there is a requirement under GASB 45 to have an actuarial valuation every 2 years (for units with more than 200 employees) and every 3 years (for units with 200 employees or less). 

If you have questions or need help determining OPEB liabilities, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Umbaugh #5 in National Rankings

By Umbaugh Announcements, February 01, 2018

Once again, we are proud to be ranked in the top ten of all municipal advisors in the U.S. by the Thomson Reuters reporting company. For 2017, Umbaugh ranked fifth in the nation for the number of public market municipal bonds with a par amount of $10 million or less.

Moreover, Umbaugh served as municipal advisor to more than 344 bond issues in 2017 ranging from $237,000 to over $285 million and totaling over $3.4 billion par. These statistics include the Indiana State Revolving Fund, USDA Rural Development financings, and private placements on which Umbaugh worked last year.

The financed projects ranged from schools, utilities, economic development, roads, libraries and other projects to improve the quality of life for the clients we serve.  Thank you for the trust and confidence you placed in us!

As the funding environment becomes more complex, and as the regulatory requirements bring a greater level of scrutiny, it is important for issuers to work with advisors who have a depth of experience. As our tag line says: “It’s all about Experience.”

If you have any questions or comments, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Upcoming Deadlines for 2018

By Paige E. Sansone, January 25, 2018

As the New Year begins, it is time to focus on wrapping up the previous year.  At the close of December, all records must be posted and reconciled with bank statements as promptly as possible.  Utilities and other departments maintaining separate records must also be reconciled.  Below are upcoming deadlines prescribed by the State Board of Accounts for the first few months of the year. Please note that this is not a comprehensive list; you should check the State Board of Accounts Accounting and Compliance Guidelines Manuals for more information at http://www.in.gov/sboa.

 

Deadline

Report

Filing Method or Recipient

January 31

Certified Report of Names, Addresses, Duties and Compensation of Public Employees (Form 100-R)

Gateway

January 31

W-2's

Employees

January 31

File withholding statements W-2 and WH-2 together with Yearly Reconcilement of Employer's Quarterly Tax Returns W-3 and WH-3

District Director of Internal Revenue and Indiana Department of Revenue

March 1

Annual Financial Report for 2016 (This report must also be published by this deadline)

Note: Schools, charter schools and turn-around academies are due August 29

Gateway

March 1

Gateway Debt Management – Annual Affirmation

Gateway

March 1

Prepare list of old outstanding checks (unpaid for 2 years) for cancellation

Fiscal Officer and
Fiscal Body

March 1

Video Franchise Fee Report

IURC

March 1

Other Post Employment Benefits Report ("OPEB")

Gateway

March 5

Signed Attestation Statement for Annual Financial Report mailed to State Board of Accounts

State Board of Accounts
(via mail)

April 15

TIF Management

Gateway

 

If you have any questions about the above deadlines, or need assistance, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Umbaugh Partner Doug Baldessari Elected IWEA Vice President

By Announcements, January 25, 2018

Doug Baldessari, CPA, has been elected Vice-President of the Indiana Water Environment Association (IWEA).  He begins his term this month.  He has served on the IWEA Board of Directors for the past three years as Secretary/Treasurer.  Doug has also been involved with IWEA through his service on the Joint Utility Management Committee and as the Utilities Industry Group Leader for Umbaugh.

Together with the other board members and volunteers, Doug is committed to IWEA’s mission of preserving and protecting Indiana's waterways through educating its members and the citizens of Indiana about the importance of our water environment.   He received the IWEA Tumblebug award in 2014.

Doug’s practice includes financial studies and projects for municipally-owned water, sewage and stormwater utilities, not-for-profit water, regional water and sewer districts and conservancy districts. These projects often involve rate-making, bond financing, and capital projects planning. Doug is a registered Municipal Advisor with the U. S. Securities and Exchange Commission. He currently serves on the Board of Directors of the Indiana CPA Society.

Congratulations Doug for exemplifying Umbaugh’s core values of leadership and our deep commitment to the utilities industry and the associations that serve our clients. Please join us in recognizing .(JavaScript must be enabled to view this email address) on his achievement.

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Umbaugh Announces New Partner

By Umbaugh Announcements, January 11, 2018

We are proud to announce Belvia B. Gray became a partner at Umbaugh on January 1st.  Belvia has been involved in many areas of practice at Umbaugh, but she is especially active in bond issues for schools and libraries, budgeting and legislative analysis.  She is a registered municipal advisor with the U. S. Securities and Exchange Commission (“SEC”).

Belvia was a founding board member for the Indiana Women in Public Finance Association. She previously served on the Butler University Alumni Board of Directors.

She earned a Bachelor of Arts degree in political science and public relations from Butler University and a Master of Public Affairs degree from the School of Public and Environmental Affairs at Indiana University – Bloomington with concentrations in public financial management, policy analysis and economic development. She joined Umbaugh in 2005 and is based in the Indianapolis office.

We value all our personnel and are especially pleased to watch someone meet the challenges presented and grow into greater responsibilities. 

Please join us in congratulating .(JavaScript must be enabled to view this email address) on her accomplishment.

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Promotion to Principal

By Announcements, January 11, 2018

Andre J. Riley was selected for promotion based on his commitment to Umbaugh's core values of Excellence, Innovation, Independence, Integrity and Collaboration.

Andre has been with Umbaugh since October 2003 and is based in the Indianapolis office. Andre is a registered municipal advisor with the U. S. Securities and Exchange Commission ("SEC"). Andre is a member of the American Institute of Certified Public Accountants, the Indiana CPA Society and the Indiana Water Environment Association.

Andre's experience includes financial studies and projects for municipally-owned water, sewage and stormwater utilities, not-for-profit water, regional water and sewer districts and conservancy districts. In addition, he assists utility clients with financial management services ranging from financial management reports, financial accounting and reporting, budget services and utility controller assistance.

Andre grew up in Louisville, Kentucky and received his Bachelor of Science in Business Economics from the University of Kentucky. Andre obtained his Masters of Professional Accounting from Indiana University's Kelly School of Business.

Please join us in congratulating .(JavaScript must be enabled to view this email address) in his promotion to principal.

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

WIFIA Assistance Available

By Scott A. Miller, CPA, Partner, March 02, 2017

In 2014, Congress passed the Water Infrastructure Finance and Innovation Act of 2014 which established a federal credit program known as WIFIA. Administered by the U.S. Environmental Protection Agency (EPA), the program is designed to accelerate investment in water and wastewater infrastructure projects that have national or regional significance.  Since adoption, EPA has worked to develop the rules and framework for the program and is now ready to begin funding projects.  In legislation adopted late last year, Congress provided $20 million in budget authority which EPA estimates may provide more than $1 billion in credit assistance and may finance over $2 billion in water infrastructure projects.

Letters of Interest (LOIs) for the first funding cycle are now being accepted by EPA through April 10, 2017.  A second submittal period will begin August 1, 2017 and run through September 29, 2017 if funding remains available.  EPA will use the LOIs to evaluate, score and select proposed projects for funding based on a variety of criteria including the significance of the project on a national and regional basis, the credit worthiness of the borrower, the likelihood that WIFIA funding will accelerate the project, the use of innovative approaches and environmental impact among several others.  Selected projects will be invited to submit an application for WIFIA credit assistance.

Selected projects are eligible to receive credit assistance in the form of secured direct loans or loan guarantees.  The maximum amount of assistance to a project is 49% of eligible project costs.  The remaining 51% of project costs can be funded using tax-exempt or taxable bonds, loans, grants and equity.  Projects benefiting communities with a population greater than 25,000 must have a total estimated cost of at least $20 million while projects benefiting smaller communities must have a minimum total estimated cost of $5 million.

If you would like additional information about the WIFIA program, or if you would like assistance in determining whether your project might benefit from WIFIA, please contact us at .(JavaScript must be enabled to view this email address).

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.

Promotion to Principal

By Umbaugh Announcements, February 23, 2017

Heidi Amspaugh was selected for promotion based on her commitment to Umbaugh's core values of Excellence, Innovation, Independence, Integrity and Collaboration.

Heidi Amspaugh joined Umbaugh as an Analyst in 2006 after working as an intern. She graduated from Indiana University - Bloomington with a Bachelor of Science degree in Public Affairs from the School of Public and Environmental Affairs (SPEA) with a concentration in Public Financial Management, and with a certificate in Non-Profit Management. She is a registered Municipal Advisor and holds a Certified Independent Professional Municipal Advisor (CIPMA) designation.

Heidi has been involved in many areas of the firm’s practice, including economic development, tax increment finance (TIF), structuring incentive packages for industrial/commercial prospects, and the financial planning associated with the issuance of both tax-exempt and taxable bonds for communities around the State.

Heidi has been on various panels discussing public financial management topics for the School of Public and Environmental Affairs at Indiana University – Bloomington and for many Indiana associations. She serves on the Board of the National Association of Municipal Advisors (NAMA) and was recently elected as Treasurer for Indiana Economic Development Association (IEDA).

Please join us in congratulating .(JavaScript must be enabled to view this email address) on her promotion to principal.

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at vision@umbaugh.com.


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