Kingsport's FY 2012 audit comes up clean

Matthew Lane • Jan 19, 2013 at 9:15 AM

KINGSPORT — Kingsport has again received a clean opinion on its finances from auditors — for the 13th straight year — with million-dollar increases in property and sales tax collections while the city’s overall debt rose to more than $225 million.

During a Board of Mayor and Aldermen work session earlier this month, city officials released the fiscal year 2012 audit, a comprehensive review of the city’s finances for the year ending June 30, 2012.

Auditors reviewed the city’s general fund, water fund, sewer fund and other minor funds as well as the finances of Kingsport City Schools. The city’s general fund covers everything from city administration to police and fire services to the parks and recreation department.

Kingsport’s finances received a clean opinion for the 13th year — the highest opinion offered — and for the 12th straight year the city received a certificate of achievement for excellence in financial reporting.

At the end of the fiscal year Kingsport’s unrestricted fund balance was $12.5 million; last year the amount was $12.1 million and in 2010 the city had $13.1 million in its unrestricted fund balance. Under a BMA imposed rule, Kingsport aims to keep $11.4 million in its unrestricted fund balance — essentially a rainy day fund to cover four months of operating expenses for the city.

According to the 2012 audit, property taxes grew by $1.1 million — from $47.1 million to $48.2 million. Kingsport’s property tax rate is $1.97 per $100 of assessed value. Sales tax collections were also up by nearly $2 million for the fiscal year, from $27.5 million to $29.47 million. Over the past decade, the only year when Kingsport has seen a drop in its year-to-year sales tax collections was in 2010.

Kingsport’s total debt increased by $18.5 million (9 percent) during the 2012 fiscal year, going from $206.6 million to just over $225 million. This increase is attributable to three bond issuances approved during the fiscal year for a variety of capital projects, including one for $3 million to cover the shortfall in the aquatic center project.

Last year, total debt decreased by $5.8 million, while in 2010 and 2009, Kingsport’s debt increased by $38 million and $40 million respectively. The city paid $9.9 million in debt service payments during the 2012 fiscal year, down slightly from the $10.2 million paid in fiscal year 2011.

The audit reported two material weaknesses and one significant deficiency in the city’s financial records for the fiscal year. Regarding the weaknesses, Kingsport did not record enough closure costs associated with the landfill and failed to record an adequate accrual for the workers compensation and general liability claims. The deficiency dealt with some seized drug funds not being reported in the correct fiscal year.

Kingsport maintained its Aa2 credit rating with Moody’s Investor Service and its AA- credit rating with Standard & Poor’s during the last fiscal year.

Water and sewer rates were again raised during the 2012 budget year. Customers inside the city limits saw their water rates increase 2 percent and their sewer rates increase 3 percent. Customers outside the city limits only saw their water rates go up by 1 percent.

Kingsport issued 741 building permits during the 2012 fiscal year, with an estimated value of $75.2 million. Last year, Kingsport issued 531 building permits with an estimated value of $65.6 million; in 2010 those figures were 581 and $56.2 million respectively.

On the residential side, Kingsport permitted 77 new, single-family homes in 2012 with a total construction cost of $13.5 million, an increase of 25 homes and $2.6 million in total value from the previous year.

The total number of full-time positions for the city jumped by 36 during the 2012 fiscal year — from 1,718 to 1,754. Kingsport City Schools got the bulk of that number (27), with all other departments adding one or two positions, except parks and recreation (which stayed the same) and the water department (which lost one).

Since 2003, Kingsport’s employee ranks have risen by 149.

The Bristol, Va. -based accounting firm of Brown, Edwards and Company performed the audit this fall for the city for $124,300.

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