Newport Ends Fiscal Year with Sizable Surplus

NEWPORT, RI—The City-by-the-Sea ended the most-recent fiscal year with a healthy overall fiscal surplus despite a school budget deficit of about $700,000.

According to the city’s annual financial report prepared by the Finance Department, Newport ended the fiscal year ending June 30 of 2015 with a $2.24 million general fund surplus and the city’s total governmental general fund balance stood at $17.6 million, a marked increase over the prior year figure of $14.7 million.

City Finance Director Laura L. Sitrin said in a telephone interview on Monday that the city is in strong financial shape thanks to conservative budgeting and strong financial management practices.

“The city’s financial management is very strong and that’s from the City Council on down,” Sitrin said. “We’ve been very conservative and that leaves the city with flexibility.”

According to the report, which will be reviewed by the City Council this week, Newport’s net position increased by $19.631 million and the city’s assets now exceed its liabilities by $115 million. The city’s net position is the combined value of all assets minus liabilities and a barometer of financial health. Typically, when a city’s finances are on an upswing, the position increases and it decreases when times are bad.

In Newport’s case, the city’s position under governmental activities increased by $11.76 million on the government side due to an increase in property taxes to the tune of $2.7 million, or 3.02 percent over the prior year; the sale of the Underwood School for $2.4 million, human services grants of $1.6 million and “expenditure savings,” or spending freezes that were put into place in response to an anticipated school budget deficit.

Under “business-type activities,” which covers the city’s water, water pollution, parking and maritime funds, the numbers were also strong, increasing by $7.8 million thanks to a rate increase related to the $85 million water treatment plant project.

READ: Newport’s Comprehensive Annual Financial report.

The city’s total governmental fund balance stands at $45.7 million, of which $29.5 million is restricted, meaning the city can’t spend it because it is already committed for capital or contractual purposes or restricted “by outside legal sources.” An additional $2.8 million is assigned by the City Council, leaving $13.3 million unassigned, otherwise known as the city’s “rainy day fund.”

Along with additional tax revenue, the city benefited from $500,000 in unanticipated building permit fees, $838,000 used from a bond premium to pay debt service and the aforementioned discretionary spending freeze which reportedly saved $1 million.

On the school side, the fund balance took a $643,804 hit due to spending over budget. The school did receive an additional $136,053 in fiscal 2015 in state and federal aid, however.

Newport is now in the second year of its approved two-year budget covering fiscal 2016 and 2017. The city switched to a two-year budgeting process, which means the City Council will have a much more rapid review and approval process heading into the second year, certifying the tax rate and adjustments but foregoing the traditional weeks-long, department by department hearing process.

Still, the City Council is expected to spend a great deal of time poring over the audit and contemplating possible amendments to the approved budget.

Two-year budgeting has some advantages, Sitrin said.

“The big advantage for my department is it takes people away for three months to prepare the budget document,” Sitrin said. “It saves us a lot of time and it gives everyone a look at the next 12 months in terms of making decisions about budgets. It helps people plan ahead a little.”

Sitrin emphasized that the city’s surplus was used to cover the school district’s deficit when the City Council voted in December to transfer $702,000 to the school department.