Gering mayor calls Platte Institute’s findings ‘baloney’

January 9, 2019

SCOTTSBLUFF — In a recently issued policy brief from the Platte Institute, Policy Director Sarah Curry asked whether a lack of uniform accounting procedures among the state’s municipalities are having an indirect impact on property tax rates.

Nebraska has three primary accounting methods. Cash basis records transactions when cash is exchanged. Accrual basis records the effects of transactions when they occur, regardless of the timing of related cash flows. The third method is modified accrual, a combination of the former two.

Curry’s report, “Accounting for Property Taxes: Challenges for Local Government Finance,” urges that whenever possible, municipalities should convert to an accrual method, which is the one that follows Generally Accepted Accounting Practices.

She also urged that whenever possible, municipalities should issue a comprehensive annual financial report. That document provides more detailed financial and historical context to local government. The document should be clear enough that even someone without an accounting degree can understand the budget.

“It’s not asking too much for municipalities that collect tax dollars to issue a financial statement the average resident can understand,” Curry said.

She added that accounting practices can sometimes become so convoluted they can impact how policymakers like city council members make decisions.

That happened to York, Nebraska, which used traditional cash fund accounting, she said. The city council approved a number of major projects because the books looked like actual spending was below budget. But they were actually spending their reserve funds.

That could require York to slice more than $1 million from the budget and eliminate all capital expenditures. And even if the city doubled its property tax levy, solving the problem would be difficult.

York was one of six municipalities that became part of Curry’s policy paper. Gering was another. The report said “Gering increased the tax burden on citizens for economic development programs, while increasing its budget by 11.8 percent to pay for ballfields, a new Civic Plaza and more.”

Gering Mayor Tony Kaufman called the claim “baloney.” While the report revolves around property taxes, all the named projects were financed without property tax revenues.

“I don’t know what they’re trying to convey with that report,” he said. “When a major project like the ball park is completed, it’s going to increase your funding. But we have a funding mechanism to pay for it. Although it’s expenditure, we didn’t raise anyone’s taxes to pay for it.”

The projects for Gering were financed through a number of sources, including LB 840 Economic Development funding paid with sales taxes, local keno funds and grants from the Nebraska Department of Economic Development, Kaufman said.

Gering City Administrator Lane Danielzuk said Gering uses a modified accrual accounting method. Cash basis is used for transactions and modified accrual is used to generate financial statements that are reported to the state.

“Everything done in Gering is done in compliance with generally accepted accounting practices,” Danielzuk said. “Not many municipalities issue a comprehensive annual financial report because they lack the capacity it takes to do all the extra work it requires.”

Kaufman said no matter what method of accounting is used, a municipality would know about any problems that occur.

“If you’re overspending, there’s no way to camouflage it,” he said. “It’s going to show up as a cash shortage.”

Kaufman said the Platte Institute report was confusing because it focused on potential property tax hikes that might be necessary to pay for budget shortages.

“Gering has one of the lowest property taxes in the state for cities our size,” he said. “Property tax makes up 2 percent of our budget and it goes for supporting the schools.”

The entire Platte Institute report is available online from platteinstitute.org/policy.

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