Franklin takes proactive stance to audit issues, but council told city needs to address utility fund deficit

The Franklin City Council heard from Kristin Holcombe of Kolder, Slaven & Co. during the monthly meeting held Tuesday, Nov. 21.
According to Holcombe, the City of Franklin has taken a proactive stance to addressing findings in the city’s annual audit, but also warned that the city may need to consider further increasing utility rates in order to turn the utility fund’s net deficit into a net positive.
The accounting firm looked at the city’s revenue stream in comparison to similar communities, Holcombe said. Franklin’s percentage of revenues from utilities was a lower portion of its total revenues than in similar cities.
“What we noticed was charges for services along the lines of utilities was about 26 percent for the City of Franklin, whereas for similar municipalities, this was usually 40 to 60 percent,” Holcombe said. “So again, indicative of utility rates being a little lesser than maybe they should be. Also, corresponding expenditures are about 40 percent of total expenses. So those percentages should be a little bit closer.”
The city’s intergovernmental revenues declined in 2023, and with no more American Rescue Plan Act funds coming in from the federal government, those numbers are likely to level off, she said.
“(In) 2022 and 2023 … there was about $1.4 million in ARPA funds in both of those years, so absent ARPA funds in future years, absent any additional grants that you may apply for, you’ll see that kind of level off,” Holcombe said of the intergovernmental revenues.
Utility revenues slightly decreased, she said, but utility costs went up drastically because of inflation and increasing costs of services and goods.
Expenditures for Franklin are similar to other local municipalities, Holcombe said.
Public safety costs rose significantly in 2023, she noted, which appears to be largely due to an increase in the police force.
Two other areas that saw steep increases in expenditures and expenses were annotation and utilities, due to inflationary pressures.
“But again, we don’t see this same increase on the revenue side, so as a result of that, the utility fund had a significant net loss this year, which increased the deficit that was on the financial statements,” she said.
The city had a net loss of between half a million to 1.5 million dollars each year from 2019 to 2021.
“In 2022 and 2023, we are right at about a break-even figure,” Holcombe said. “However, I will point out, the last two years there was $1.4 million of ARPA revenues that was received, so that is not expected going forward. That is something to be mindful of. You might need to start looking at cutting back on expenses or seeking grants from other intergovernmental agencies or outside agencies to help with cash flows.”
Overall, she said, the city is taking a proactive approach to manage.
“So good job in that respect,” Holcombe said.
“Mr. Ed (Hay, city chief financial officer) and I and the entire team will be taking these entire audits seriously, because that is the life blood of our city, and we have to take care of our books,” Mayor Eugene Foulcard said.
Chief Administrative Officer Karen LeBlanc and all of the department heads including Police Chief Cedric Handy, Fire Chief Chuck Bourgeois and Director of Utilities Bernard Daniels all play a role in ensuring that the city keeps its finances in line, the mayor said.