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December 12, 2013
Lawsuit shows up on Tooele 2013 audit

Even though city has not paid a dime of $20.7 million 

Tooele City’s combined expenses and liabilities exceeded the city’s government-wide income by more than $23.3 million during the 2012-2013 fiscal year, according to an independent audit of the city’s financial standing.

An 80-page report presented on Dec. 4 to the city council by Lewis Young Robertson & Burningham, a Salt Lake City-based municipal securities firm, illustrates the city’s current financial position.

When all income, expenses, assets and liabilities are taken into account, the city’s total value or “net position” is equivalent to more than $155.3 million. This denotes a generally strong financial position, according to Jason Burningham, the auditor who presented the report.

However, Burningham also said there were some “interesting issues” detailed in the report.

The city’s net position decreased by $23.3 million during the course of the year, largely due to increased liabilities brought on by the loss of the ongoing lawsuit with Overlake developer Tooele Associates.

Although the city has yet to make any payments toward the judgment and has announced its intent to appeal, the independent auditor listed the entire $20.7 million judgment as a liability that must be taken into account with the city’s financial standing.

According to the report, including the $20.7 million judgment in the audit is in accordance with nation-wide accounting practices.

Tooele City Mayor Patrick Dunlavy said that the auditor worked closely with the city during the process, and that the city was aware the lawsuit loss would be listed on the 2013 audit.

“They just had to account that at some point. We may have to address it,” he said. “In the event that we aren’t successful with the appeal, the law allows us to pay that in many different ways—it’s not like we have to write a check the next day.”

Additionally, the audit found that the remaining decrease could be attributed to the city’s Redevelopment Agency, which exceeded its 2013 revenue by nearly $4 million.

Glenn Caldwell, finance director for Tooele City, said the additional expenses went toward paying the city’s portion of the new Tooele Applied Technology College that opened last June. The expense was planned into the budget, so the city expected a net loss in the RDA.

Mayor Dunlavy explained that the city agreed to use funds from the RDA to help pay for TATC in order to convince the state legislature to give financial support for the college a higher priority.

“We put up a lot of the city’s money to fund that,” he said, “knowing that it would help in the long run.” The Utah Legislature appropriated $10 million for TATC’s construction.

Dunlavy said the city believed that the training provided by TATC to area residents would attract potential employers to the area and bring in additional income to make up for the expense.

The audit report did note that recent economic stagnation in the area has impacted the city’s financial standing.

Despite the overall decrease in the city’s combined financial position, Tooele’s general fund ended the year with a net increase. According to the audit, the general fund had about $3.1 million in unassigned funding—money yet to be allocated to a particular expense—at its disposal.

This is not the first year an independent audit has reported a net position decrease for the city. An audit of the 2011-2012 fiscal year reported a net decrease of more than $4 million, according to the report by Robertson & Burningham.

However, the city also saw a net increase in revenue over the previous fiscal year by more than $5.5 million. Income from grants brought in an additional $2.4 million over 2012. Road grants intended to fund the extension of Tooele Boulevard to TATC accounted for a good portion of that increase, Caldwell said.

The city also saw a $500,000 revenue increase from taxes, more than doubled the amount of income it received from impact fees, and saw revenue from the sale of water rights increase from $100 in 2012 to $129,913 in 2013, according to the report.

While Robertson & Burningham indicated its opinion that the audit represented an accurate depiction of the city’s financial standing, the report noted a few small discrepancies discovered in city records, particularly in relation to land transactions and the re-issuance of bonds during the prior fiscal year.

Caldwell said these issues were related to changes in the state’s accounting guidelines, and Dunlavy added that small errors are to be expected within a municipality’s records.

“Sometimes that happens when you’re handling the amount of money we do,” the mayor said. “We only had three or four, and they were very minor. They identify those, and we correct them.”

Dunlavy said that overall, he was pleased with the report and believed it reflected the city’s strong financial standing.

“We’re conservative with our money, and we do it the right way,” he said. As a result, he said, the city is well-positioned to continue to provide the services Tooele citizens expect.

Caldwell said the auditor plans to make a few minor changes to the language of the report over the next week. Once the report is finalized, the audit will be posted to the city’s website for public review.

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