Marathon County has, in my opinion, been providing materially false information in its audited financial statements for many years. When this was pointed out, the response was to double down on the misinformation in an effort to continue to raise property taxes and avoid a repeal of the wheel tax.
While it is probably too late to avoid a stain on the reputations of Chair Gibbs, HRFC Chair Robinson, and Administrator Leonhard, it should not be too late for newly hired Finance Director Sam Fenske. Sam has a choice to make between providing accurate and transparent financial information to the Board Supervisors and Marathon County residents or supporting the misinformation and lack of transparency of the past. This could be a career changing decision for Sam either way and she needs to make the decision today.
If I were looking for a legal solution, I might look here or here. However, I am instead seeking a political solution. Any Supervisor who cares about honesty, transparency, and their constituents needs to vote yes for Amendment 6, Amendment 7, and the new Amendment to reduce the property tax increase by $1,000,000 which was offered by Supervisor Foote.
Marathon County is either clearly misstating the County’s Working Capital Policy or intentionally misstating the amount of Working Capital Balance calculated per the policy
The County’s (non highway) Working Capital Policy is clearly and unambiguously stated in the Audited Financial Reports as “That policy is to maintain a working capital fund of 8.3% of the current year’s general fund, social improvement fund and debt service fund’s budgeted expenditures.”
Based on my research while I was on the County Board, I believe this to be an accurate statement of the County’s working capital policy. By this definition, the working capital fund should be $9,111,447.19, per the calculations of the Finance Director.
Because there are potentially also reserves in the Social Improvement Fund, Debt Service Fund, Grant Fund, and Parks Funds, those reserves, if any, should be included in the calculation of the working reserves. For simplicity I am just using the General Fund reserves for the immediate discussion.
Per the audit, “The balance at year-end was $29,798,541 and is included in unassigned general fund balance.” It turns out that this balance is apparently not calculated per the stated policy, but rather is calculated by adjusting the previous year’s number up or down based on the change of expenditures year to year.
In effect the calculated number has been wrong for years (based on the stated policy) and will always be wrong as it is always based off of the previous years incorrect number.
Even if a policy was previously adopted by the Board – that I am not aware of – that supports the working capital calculation to make adjustments from the previous year’s incorrect number, this would not eliminate the dishonesty and misstatements in the Audited Financial Statements. The policy is clearly and unambiguously stated and is directly followed by a number that is calculated according to some other policy.
This is not just an esoteric point. The incorrectly calculated required fund balance was used by the County Administrator in an email to all Supervisors to argue against reducing the proposed tax increase.
Using the capital reserves correctly calculated per the stated policy, the “Remaining Unassigned” Balance was actually $27,309,452.81 at the end of 2023 rather than the $6,622,359 stated by Administrator Leonhard.
It would seem that using $1,000,000 of the $27,309,452.81 “Remaining Unassigned” Reserves to reduce the proposed property tax increase would be a very reasonable decision.
The County Administrator’s statement regarding the Social Improvement Fund assigned balance is misleading or at least lacks context.
At least $1,000,000 and possibly $3,000,000 of the $4,230,000 assignment should now be released due to the recent very generous $1,000,000 grant from the B.A. & Esther Greenheck Foundation and possibly $2,000,000 in Federal funding.
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The County says that the $11.4 Million Employee Benefit Fund is a Custodial Fund. Our auditor says it is additional Reserves. Who is correct?
From Administrator Leonhard and Finance Director Fenske:
From 2023 Audited Financial Statements
From the County’s Auditor, John Rader – … if you’re curious of other places that we audit and I would be a little bit reluctant to put too much weight on this those are those blue dots so um 61% for the county you know if you look back we only have historical information for some of the other counties. I will add though the county also maintains about $11.3 million in the employee benefits uh fund which is an internal service fund. It basically charges other departments and it accumulates funds sufficient for the payment of those benefits out of that fund if you pulled that into your General Fund then you would be at 78% okay and that again is pretty similar from last year that employee benefits fund did go up this year about a million dollars um so definitely no concern there. You also have a a fund balance policy u that you can see spelled out at the top here …
Solid Waste
This is definitely a concern. I brought this to the attention of the Solid Waste Board while I was serving on that Board in the fall of2023.
The Solid Waste Department is evaluating rates to help address this issue. The RNG agreement, which was championed by Administrator Leonhard, may also provide future financial resources to add to the reserves.
In the short term, the Solid Waste Department can (or has) purchase a Bond to cover the DNR requirement.
I don’t believe that this long term issue should impact the Board’s current decision to reduce the proposed property tax increase and repeal the wheel tax.
Highway Fund
As previously posted, the Highway funds have been steadily increasing over the last few years.
The 2023 Budget included around $8.5 million from Highway Reserves (the image is blurry and difficult to read), yet the Unrestricted Highway Net Position actually increased by $1,926,242 during 2023. As a result, I believe it is justified for the Supervisors to be skeptical of claims of future shortages in the Highway Reserves without clear and detailed information.
It is important to note that the Board has not voted to build a new Highway Facility, has not agreed that is necessary to spend $59 million on a Facility if one were to be built, and has not set a policy to over tax Marathon County taxpayers to build reserves for a potential Highway facility.
Marathon County Leadership doubles down on misinformation
The following email was sent from Administrator Leonhard to all County Board Supervisors.
Chair Gibbs: … so I can’t support taking a million dollars and that would effectively leave the unrestricted uh along with taking into consideration the $8 million that has spent it would take the working uh the uh fund balance the general fund below the working capital reserve requirement uh that we have in our operating fund …
Actually, this is misinformation considering that the “Remaining Unassigned” Balance was actually $27,309,452.81 at the end of 2023 and there is an additional $11.3 million in the Employee Benefit Fund that our Auditor considers as reserves.
This post is the opinion of David Baker.
REFERENCES:
Worksheet to Calculate Working Capital from Finance Director Fenske
