Auditor: City did ‘good job’ managing finances in light of sales tax situation

ROCKINGHAM — The City of Rockingham received an unmodified opinion, meaning a positive report, on their annual audit for the fiscal year ending June 30, 2021.

Ken Anderson, CPA of Anderson, Smith, & Wilke, PLLC, completed the independent auditor’s report, and presented it to the City Council Tuesday evening.

The general fund balance had an increase from $3,405,389 to $3,975,198 from 2020 to 2021. This was in spite of the loss of sales tax revenue from Richmond County’s switch to an ad valorem sales tax distribution.

“I think there’s several reasons for that,” Anderson said. “Even though there was a $675,000 loss compared to the year before, sales tax overall went significantly up.”

Rockingham raised the property tax rate from $0.48 to $0.58 in June of 2020, as well as deferred certain capital outlay projects, to address the situation.

Anderson clarified that the $675,000 loss was really more like a $400,000 to $500,000 loss, which doesn’t yet account for an additional $252,070 given to Rockingham by the county following an agreement on revenue sharing earlier this year.

“As far as the real numbers, it’s more in the say $300,000 range, as far as the loss for that,” Anderson said. “It wasn’t quite as much of an impact as before.”

One of those deferred capital outlay projects, the purchase of a new fire engine for the Rockingham Fire Department, was accomplished through the American Rescue Plan funds.

“I think the city did a very good job of managing the situation,” Anderson said.

The tax collection rate for Rockingham in 2021 was 99.35%.

“It’s really hard to do a lot better as far as tax collection than you guys do,” Anderson said, noting that the state average was around 97-98%.

The city’s audit report has been submitted and accepted by the Local Government Commission. The City had no budget over-expenditures during the year.

Move forward to be taken off UAL list

Rockingham, along with all five other municipalities in Richmond County, was placed on the Local Government Commission’s unit assistance list (UAL) in May of 2020. Their addition to the UAL was a direct result of the county switching to an ad valorem sales tax distribution method. Local governments are added to the unit assistance list (UAL) based on concerns over fiscal management, and it used to help the Commission’s staff direct their resources to focus on the communities in the most need of fiscal guidance.

While being added to the UAL is not a “punishment” for poor management, it does impact a government’s credit rating, and thus their ability to borrow money.

“We were under the gun to respond to that and to make necessary corrections to show that we could establish financial stability without that revenue,” said City Manager Monty Crump of the tax rate increase in 2020.

Crump asked Anderson about how they would go about getting off of the list. Anderson advised that a letter should be sent to Susan McCullen, Director of the Fiscal Management Section at the LGC. That letter would note the City’s performance on the audit and make a formal request to be removed from the list.

Anderson confirmed that there’s no other reason that Rockingham is on the list other than the sales tax switch. He said from discussions with a colleague about both Rockingham and Hamlet’s audit, he can’t guarantee their removal, but it looks positive for both municipalities.

Crump said that the watchlist has a “negative connotation,” particularly for bond and credit ratings.

“That’ll be a very positive thing for Rockingham to get off that list,” Crump said. “I think we have clearly, what City Council did — making the tough decisions on the tax increase and other things, I think we definitely demonstrated that we’re on a path to recover from that. If really doesn’t really matter why you’re on the list, you’re on the list. It’s kinda like sitting out in the hall in junior high — doesn’t matter what you did, you’re still in the hall.”