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Audit summary shows improved city finances

By Jeffrey Pieters

jpieters@postbulletin.com

The Rochester city government's financial statements and practices again received a favorable review in the annual audit conducted by an independent outside firm.

City council members heard a summary presentation of the audit report on Monday from representatives of Smith, Schafer and Associates, a local accounting firm. No irregular practices or inaccuracies were pointed out in the presentation.

The presentation portrayed an improved financial picture for the city, which posted its first general-fund surplus in 2004 after three consecutive years of deficits. At year's end, the city's unreserved fund balance -- the financial reserves -- were equal to 40 percent of the annual budget, or within the range prescribed by the state auditor.

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The city's special revenue funds -- things such as the public library, the municipal recreation system, Mayo Civic Center and the airport -- in aggregate saw their fund balances fall for a third straight year.

The recreation system, in particular, suffered financially because one key facility -- the Rochester Recreation Center -- was partially closed some of the year for a mold-removal project.

Mayo Civic Center posted a $163,000 loss, its lowest in the eight years covered in the audit report, but officials said the facility is not intended to earn a profit. Instead, it adds value to city life and -- directly or indirectly -- helped generate $2.7 million in hotel-motel tax collections. Hotel-motel tax revenues have risen 78 percent since 1996, the report states.

Skyrocketing health-care costs were identified as a chief area for concern. The city, which is self-insured, has endured rate increases of 25 percent and 35 percent in the past two years.

Those kinds of annual increases "cannot be sustained," said Tom Wente, of Smith Schafer. "I can't believe they can be sustained."

The fast-rising costs are due, in part, to an extraordinary number of catastrophic benefits claims in recent years, city officials said.

"It's hard to keep up," said Finance Director Dale Martinson. "We had nine of them on a sheet, where we haven't had any before."

The auditor's report saw the city's growth continuing at a remarkable rate. The estimated market value of all the property in the city in 2005 rose to $6.42 billion, up $671 million, or 12 percent, from the year before.

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The city's population is up nearly 13,000 since 1999. Because of that, increased government spending is slightly lower on a per-capita basis.

Per person, the property taxes and state aid supporting Rochester's city government totaled $364 in 2004. It was $380 per person in 1999 and $387 per person in 1994. The city's 2004 population estimate was 94,820.

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