Audit reveals delayed payments caused problems for city budget

May 22--Hazleton City depleted a roughly $2.4 million fund balance it realized through a financial arrangement with the city redevelopment authority to finish 2012 with a $160,998 deficit, according to a recently released audit report.

Mayor Joseph Yannuzzi said the city would have finished the year in the black had it not been for a commercial sewer billing snafu that occurred when Don Wilkinson/Centax folded.

"I think we did all right for our first budget," the mayor said on Wednesday. "We would have done better if they had all our bills out on time."

A bottom-line look at Hazleton's finances over 2011 and 2012 gives a better indication of the city's financial performance because both years were impacted by a $5.6 million note that the city secured in 2011 through Hazleton Redevelopment Authority, Yannuzzi said.

Administrators also recommended increasing property taxes for 2013, which should put the city on more solid financial footing, he said.

While auditors caution that the city will continue facing challenges in raising revenue sufficient for maintaining public services, a consultant for the Pennsylvania Economy League said those struggles aren't exclusive to Hazleton.

"The only revenue the city really has to go with is the property tax," said Joe Boyle, a Pennsylvania Economy League consultant. "They can levy all of the fees and charges they want and every time they try something new they get sued. And, that's common with all municipalities."

A Luzerne County-wide reassessment provided some level of relief for cash-strapped municipalities, but Boyle said those communities have few alternatives to generating cash aside from hiking property taxes.

"That's painful but that's all they can do," Boyle said. "They only other thing they can do is cut services and they wouldn't do that."

Robert Moore -- of Dennis R. Moore and Associates -- the firm that performs city audits, said revenues from 2012 were impacted by Hazleton switching collection agencies.

Don Wilkinson/Centax -- which collected sewage transmission and other fees -- folded and the city turned collections over to H.A. Berkheimer.

Payments for commercial sewage transmission fees that should have been billed in 2012 weren't collected until 2013, Yannuzzi said. A total amount of those delayed payments wasn't available on Wednesday, but the mayor said it would have turned the nearly $161,000 deficit into a surplus.

"We found out they didn't bill commercial sewer (customers)," Yannuzzi said. "The revenue collection -- that's what put us in a hole."

A former acting city administrator reported in October 2012 that Wilkinson failed to bill $1.04 million worth of sewer transmission fees that were budgeted for.

A $5.6 million guaranteed lease-revenue note that the city borrowed in 2011 through the Hazleton Redevelopment Authority also impacted finances.

The city borrowed the money to pay years of outstanding debts that accrued.

That borrowing inflated Hazleton's fund balance in 2011 and turned a $2.6 million deficit that it inherited at the beginning of the year into a $2.4 million surplus, Moore said.

According to the 2012 audit, general fund expenses exceeded revenue by $2.55 million.

The city used a mix of transfers and $2.45 million from its fund balance to finish the year with a $160,998 general fund deficit, the report says.

The city has taken steps through 2011 and 2012 to curb expenses, including reducing insurance costs by about $120,000 over the two-year period and replacing the city administrator and other department head positions with lower-paid employees, Yannuzzi said.

Tax and fee increases that were levied for 2013 increased total revenue from about $7.6 million to about $8.6 million, the mayor noted.

The 2013 audit will reflect a similar lag in revenue because storm water maintenance fees were levied for 2013 but bills were not mailed until earlier this month, Yannuzzi said.

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