People often find municipal finance confusing. That’s because often, it really is. Ohio law sets up multiple checks and balances to make sure that public funds are collected and spent in open and ethical ways. The City of Middletown annually receives awards for its open and comprehensive budgets and the state of Ohio just completed an audit of the city’s expenses for 2015 and awarded the City their Audit with Distinction award for comprehensive, ethical and correct expenditures under Ohio law. Below is a simplified, but still fairly confusing attempt to explain how we separate revenues and expenses. I hope it helps.
The City budget is divided into units known as funds for accounting purposes. The City accounts for its activities using many individual funds. For budgeting purposes, we have divided the funds into types: General Fund, Special Revenue Funds, Debt Service Funds, Capital Improvement Funds, Special Assessment Funds, Enterprise Funds, Internal Service Funds, Trust Funds, and Federal Grant Funds.
The General Fund is the City’s largest fund and is classified as a major fund. This fund supports most of the City’s basic governmental activities such as Police, Fire, Finance, Law, Information Systems, Parks Maintenance, Engineering, City Council, City Manager’s Office, Economic Development, Building Maintenance, Building Inspection and Planning. Major revenue sources for the General Fund are income taxes, property taxes, charges for services, intergovernmental revenue along with fines and forfeitures, interest from investments, and licenses and permits.
Revenue Categories as Avg. % of total General Fund Revenues:
TYPE % AMOUNT
City Income Tax 44.2%
Charges for Services 15.5%
Public Safety Levy Tax 11.1%
Property Taxes 9.1%
Miscellaneous Income 3.7%
Licenses & Permits 1.3%
Fines & Forfeitures 0.3%
Rentals & Leases 0.3%
Interest Income 0.2%
The Special Revenue Funds account for the revenue and expenditures that are legally restricted for specific purposes other than special assessments, expendable trusts, or major capital projects. Examples of Special Revenue Funds are: Municipal Court, Auto & Gas Tax, Health & Environment, Public Safety Levy, and the City Income Tax Funds. Income Tax Revenue pays for the Income Tax Department’s expenses, and the remainder is transferred to the General Fund or other funds to supplement those funds.
Below are the amounts transferred from Income Tax Fund to other Funds during 2016:
To General Fund $12,430,437
To Auto & Gas Tax Fund $450,000
To General Bond Retirement Fund $1,727,000
To Transit Fund $120,000
To Computer Replacement Fund $8,000
To Termination Pay Fund $660,000
To Public Safety Fund $3,178,558
To Airport Fund $85,000
To Health Fund $118,000
To Municipal Court Fund $250,000
To Conservancy Fund $34,000
To Capital Improvement Fund $350,000
Debt Service Funds account for the resources and payments of principal and interest for general long-term debt. Tax improvement districts called TIF’s are also included in this category. The largest debt fund is the General Obligation Bond Retirement Fund.
The Capital Improvement Funds account for financial resources designated for the construction or acquisition of major capital facilities and projects. The largest funds include the Capital Improvement Fund for general capital projects, the Water Capital Reserve Fund for water related projects, the Storm Water Capital Reserve Fund for storm water projects, the Sewer Capital Reserve Fund for sewer related projects, and the Airport Capital Improvement Fund for airport projects.
Special Assessment Funds are funds used to account for the financing of public improvements by assessments levied against the properties that benefit from the slated improvements.
Enterprise Funds include the Water Fund, Sewer Fund, and Storm Water Fund. When the City charges customers for the services it provides with the intention that the charges will fully cover the cost of the services, these activities are reported in Enterprise Funds.
Water charges pay for expenses of Water Billing Administration, Water Treatment Plant, Water Maintenance, Debt Service related to Water projects, Administrative Fees to the General Fund and Health Fund to reimburse those funds for administrative support, Computer Replacement Fund fees associated to the Water Fund, and the Water Capital Reserve Fund.
Sewer charges pay for expenses of Sewer Billing Administration, Waste Water Treatment Plant, Sewer Maintenance, Public Works and Utilities Administration, Debt Service related to Sewer projects, Administrative Fees to the General Fund and Health Fund to reimburse those funds for administrative support, Computer Replacement Fund fees associated to the Sewer Fund, and the Sewer Capital Reserve Fund.
Internal Service Funds are activities within the government that are centralized for efficiency in order to provide supplies and services to the other City programs and activities. The City has two internal service funds, the Municipal Garage and the Employee Benefits Fund (employee health insurance).
The Police Relief and Pension Fund and the Fire Relief and Pension Fund are the City’s two Trust Funds. These funds account for the pension benefits of the Police and Fire Divisions.
There is one Agency fund. The Joint Economic Development District (JEDD) fund handles tax collections for businesses located in a defined geographic area inside Liberty Township. Liberty Township, Mason, and Middletown receive a portion of these income tax revenues. The revenue the City of Middletown receives from this JEDD agreement is included in the revenue section of the Property Development Fund which is a Special Revenue Fund.
The Federal Grant Funds account for federal government grants designated for specific purposes. These funds are related to housing and community development activities. The Housing Assistance Fund, formerly the largest federal grant fund of $9+ million annually, was transferred to the counties in late 2014.
The City’s budget and expenditures are all available on the city web page at http://www.cityofmiddletown.org.