Yukon’s finances are in much better shape this year than in previous years, a financial expert said Tuesday.
Frank Crawford, with Crawford and Associates, said the city’s financial condition is at about a 5.9 on a scale of 10.
Crawford, whose company performs the city’s annual audit, uses a formula called Performeter to gauge the city’s financial health. He said as of June 30, 2016, the city’s health was improving after an almost disastrous year that saw most of Yukon’s reserve funds drained.
Crawford said the formula uses 18 ratios to determine the city;’s financial health. The formula is both nationally and internationally recognized.
Crawford said the formula uses a combination of the city’s financial position, its financial performance and capability to determine its overall health.
As of the end of the 2016 fiscal year, the city’s financial position was at a 2.1. It could have been worse, Crawford said.
Financial performance is how well the city did compared to the previous year, and financial capability is based on the city’s ability to generate revenues.
The city’s financial performance for 2016 was ranked at 9.3. Much of that occurred after February 2016, a few months after the city learned its finances were in shambles. During that time, the city made a number of tough financial decisions, including cutting project, reducing spending, increasing reevnue and laying off a number of employees.
The city received a 6.1 on its financial capabilities, based on the ability to raise revenue through its utilities.
Crawford said reviewing the history of the city of Yukon’s finances shows that in 2011, the city would have earned a 6.5. By the end of 2015, it had fallen to 4.8.
“If we had measured this in January of 2016, instead of in June, you would have been in the threes. … I remember coming here and warning you that I was afraid you were going to run out of cash in six months. You were well on your way down,” he said.
The city took several steps, including hiring Jim Crosby, who had served previously as the Yukon city manager, to return in the same capacity.
“In that last five months, you actually recovered a little. You climbed out of that hole you were in. You were probably at a three and got almost back to a six at the end of 2016,” Crawford said.
As for the city’s financial position, he said it was near a 2.1 because the city had burned through all of its revenue sources, including sales tax and the city’s reserves.
“What saved you for the year is that you performed well. You cut back expense, raised some revenue and paid off some debt. You did all the things that were right to have a good performance for that year. But that performance still didn’t dig us out of a hole that we had gotten into,” Crawford said.
Yukon Mayor Mike McEachern asked how the city’s just recent year looks.
“2017 was a tricky year. We’re still closing out the books, and it hasn’t been audited yet. I think we are going to hover about where we are now. There may be a little increase, but there won’t be a big boom. But the movement will likely be upward. Everything has been relatively positive,” he said.
“It will inch its way back up to respectability.”
One area of concern, said Crawford, is the city’s pension fund for employees that are not represented by either the police or fire unions.
He said it is underfunded at about 80 percent.
Crawford said that doesn’t mean the fund is in danger, only that it should be funded at a higher level.
“If you are funded at around 81 percent, you are not in any danger of the fund going bankrupt. I would like for it to be fully funded before I put it in the green,” he said.
The funding level hasn’t changed much in several years, he said.
“I don’t want you to be comfortable with 81 percent. I would like to see it start moving,” Crawford said.
Crawford also pointed out that the city has always made its contributions to the fund. The investments just haven’t paid the dividends that were projected.
“As long as the city makes its contributions, then it is up to the investments,” he said.
Another area of concern is the city’s cash flow. Crawford said the goal is for the city to have $2 for every $1 spent. In 2016, that number was around 90 cents per $1.
“That could mean that some vendors might not get paid on time,” he said.
“That goes along with what I had expected. Your available cash was dwindling.”
He said that should improve this year as well. He expects that level to be $1.25 available for each dollar spent.
Crosby said Wednesday that he was pleased with the Performeter results.
“I think we are moving forward. We haven’t taken care of all the problems yet. One of the things that could hurt us is that our sales tax didn’t increase,” he said.
Crosby pointed out that Yukon’s results are about the same as everyone in the metropolitan area. The returns have been fairly flat, although they improved some in the past few months.
The city’s reserves, which were depleted by midway through FY-2016, also are being rebuilt. The city has about $2.5 million available in case of emergencies.
The city’s debt position continues to improve, as well.
“We’re not fully recovered. It is going to take a couple of years to get back to where we can build our reserves back to where they need to be. We’re on the mend and are headed in the right direction,” Crosby said.
The city manager said that despite the improvements, the city will continue to be conservative in its spending, and will watch the budget closely.
“We try and take a very conservative approach to your operations,” he said.