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City Council hears favorable report from auditors

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By Keith McCoy

The Mountain Brook City Council held its regular meeting for Monday, March 22, via Zoom and heard some positive news about the overall health of the city’s finances from a Birmingham auditing firm.

Jason Harpe and Catherine Cannon of Carr, Riggs & Ingram LLC presented the council with a draft of their annual financial audit of Mountain Brook for the fiscal year that ended September 30.

The firm looked at the city’s accrual balance sheet, which includes long-term assets and liabilities, and its fund balance sheet, Harpe said.

On the accrual balance sheet, the city “really doesn’t have any long-term debt, as far as big bond debt,” he said.

The city also added about $858,000 to its general fund balance, “which is certainly very positive after the year that we just went through,” Harpe said.

That sum represents about 190 days of operating funds for the city, Harpe said.

The “rule of thumb” is for cities to maintain at least 90 days of operating funds, so the city of Mountain Brook is in good shape in that regard, he said.

Harpe also said city officials had done a good job in preparing the documents they submitted to the auditors.

“We are offering an unmodified auditing opinion, which is certainly the one you want,” Harpe said. The financial statements are materially correct.”

Cannon said that Carr, Riggs & Ingram also conducted a single audit, an additional compliance audit that is required when a city spends in excess of $750,000 in federal money.

In 2020, the city of Mountain Brook spent some federal funds for the construction of sidewalks and also received some COVID-19 relief money through the federal CAREs act passed in last spring.

“It’s a clean single audit,” Cannon said, noting that there were no issues that auditors had to report.

Harpe noted that the city’s accrual balance sheet reflects a net unfunded pension liability of about $31 million, an increase of about $500,000 from the previous year.

Such unfunded pension liabilities are present currently in “all cities and all governments in America,” he said.

The city also has a post-employment benefit liability of about $3.6 million for medical care promised to retirees, Harpe said, which represents a decrease of about $250,000 from the previous year.

Mayor Stewart Welch III said recently that this unfunded pension liability has been a “big concern” for city officials.

During his remarks at the State of the City event hosted by the Mountain Brook Chamber of Commerce on Feb. 19, Welch said the city hired a consultant in 2020 to do a “deep dive” and look for a solution to the problem.

“We are convinced that the problem will resolve itself over the next 20 or 30 years,” Welch said.

The council took another step to address the issue later in the March 22 meeting by voting to make a larger contribution to the state retirement fund for the 2021 fiscal year.

Members passed a resolution to make an excess pension contribution for 2021 — and to authorize ongoing excess city pension contributions — at the rate of 4.67% of covered payroll.

The city has been making larger payments to the state retirement fund for several years but paused last year due to concerns about the effects of the COVID-19 pandemic.

“We froze the excess contributions last year because of the uncertainty,” said Steven Boone, the city’s finance director and assistant city manager.

“But 2021 is tracking well ahead of what we expected, so I think we can reestablish this at the full amount that we originally planned to do,” Boone said.

Sidewalk funding

Alicia Bailey of Sain Associates presented the council with revised cost estimates for installing sidewalks on Brookwood Road from Crossville Road to the city limits — estimates are higher than one presented previously.

Several residents of the affected neighborhood were present on the council’s Zoom call for March 8 and requested that the city apply for a federal TAP (Transportation Alternative Program) grant to complete the project. 

Bailey said that, after the March 8 meeting, an engineer looked again at options for installing sidewalks on both sides of the road.

On the left side driving northeast, there is a ditch. On the right side driving northeast, there is a slope. Both sides present some difficulties, Bailey said.

The estimated project cost on the ditch side would be $1,458,000, with the cost to the city — should it receive a TAP grant — being about $818,000. Using this side could possibly require the city should purchase some additional right of way.

The estimated project cost on the slope side would be $1,522,000 with a city match of about $882,000.

Several council members, including Alice Womack, Billy Pritchard and Council President Virginia Smith, expressed concern about the cost.

“This number is gut-wrenching for me,” Womack said.

“I think there needs to be a lot more investigative work on this,” Pritchard said, noting that the city needs a clear understanding of the issues and challenges involved in building sidewalks on either side of the road. 

Bailey and members also discussed the possibility that the city could perhaps wait a little longer and explore funding the project through a different federal program — the CMAQ (Congestion Mitigation and Air Quality Improvement) program — which would allow for a smaller match by the city.

Bailey told City Manager Sam Gaston that she could present additional information regarding the city’s options by the council’s next regular meeting on April 12.

Harpe said he expected few changes to be made in the final version of the audit.

Here are a few of the other items that members approved:

The council and Mayor Stewart Welch III also proclaimed that April will be both Autism Acceptance Month and National Child Abuse Prevention Month in the city.

The council’s next regular meeting is scheduled for April 12 at 7 p.m. 

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