Audit Results Are In — And Johnston's In Good Shape
The town council heard a presentation of the audit for fiscal 2011 at its meeting on Feb. 13.
How often have you heard words like "strong financial position" and "surplus" about municipal budgets these days?
Auditor Bob Civetti used just those words — and other such positive terms — in describing the results of his firm's audit of the town's fiscal 2011 budget to the town council on Feb. 13.
[A copy of the 2011 audit is attached to this article.]
At the council session, held at the municipal court, Civetti announced that the town finished the prior fiscal year — which ran July 1, 2010 through June 30, 2011 — with a combined $842,000 surplus, including both town and school operations.
When added to prior years' budget results, the town now has a combined $7.2 million surplus, with the town holding about $5.9 million in reserve — what is often called a "rainy day fund."
Civetti, in noting the financial difficulty of many other communities, said that Johnston's results are rare.
"It's unusual today that you're seeing surpluses not only on the town budget, but also the school department," Civetti explained.
Mayor Joseph Polisena termed the results "remarkable," especially considering how former Gov. Donald Carcieri succeeded in slashing state payments to cities and towns during his tenure, which ended in 2011.
"We had an $8.8 million cut from 2007 through 2011," Polisena explained, adding of Carcieri: "If he didn't cut the cities and towns, they wouldn't be in trouble — he single-handedly destroyed the cities and towns."
Councilman Ernest Pitochelli (I-Dist. 2), in a rare moment of disagreement with the mayor, reminded Polisena that the General Assembly had its role in the cuts to cities and towns, since the legislature's role is to approve the governor's proposed budgets.
"If they thought they were hurting, they could have stopped it," Pitochelli said.
Civetti also told the council that a few departments ran deficits during the last fiscal year, including:
- $457,000 in the legal budget;
- $414,000 in fire department overtime;
- $108,000 in the line item for police overtime.
On the legal department, Polisena said that Solicitor William Conley had succeeded in overturning several judgments against the town that dated from the tenure of the last former Mayor William Macera — including a $4.35 million default award stemming from a bullying case that could have cost the town as much as $14 million in bond fees and interest if Conley hadn't contested it.
Polisena noted that when he became mayor, "we were told there were no outstanding legal issues" — only to learn later that the town's attorneys under Macera hadn't contested the bullying judgment, or a $250,000 judgment from a 1998 wrongful termination suit brought by Fred Iafrate.
"When you stop to think if the money we've saved with the nonsensical lawsuits we had, we're ahead of the game," Polisena explained. "You have to defend the taxpayers."
On the town's pension system, which Polisena has said could run out of money in eight to 10 years, Civetti said Johnston's local retirement fund currently holds about $42 million, with an estimated $85 million unfunded liability.
Johnston also has a $12.6 million unfunded pension liability to the state Municipal Employees Retirement System, or MERS, which the General Assembly recently changed through a new law.
Based on studies done about the effect of the pension reform law, Civetti estimated that Johnston's liability will fall to $6.6 million in the current fiscal year; a reported $713,000 deficit in the town's payment to its fire pensions held by the state would also fall, to about $142,000, with the recent pension law.
"You can see the pension reform, what an impact it had," Civetti said.