Opinion: Spin vs. reality with IVGID general manager
November 26, 2014
EDITOR'S NOTE: In the below column, Mr. Katz points to an increase in the Recreation Fee over the past five years. When looking at the district's finances the past five fiscal years (from 2009-10 to 2013-14), the beach facility fee was $113 and the recreation facility fee was $623 ($736 total) in 2009-10. Those numbers currently are $100 and $730 ($830 total), which have not changed over the past four years, since 2010-11.
Many of us had hoped that our new IVGID general manager would act decisively to change the "culture" of IVGID.
Instead, our GM has been assimilated into that culture. In his Nov. 13 GM's corner, "Our finances are in great position," he asserts that "the District's auditor … (has) issued an unqualified opinion on our latest Comprehensive Annual Financial Report ('CAFR') … (and) reported no material weaknesses in our (internal) controls … the best audit report that can be issued."
Many will blindly believe Mr. Pinkerton's assertions hook, line and sinker. But if you take the time to read the CAFR, you will discover that our auditor has explicitly rendered no opinion whatsoever insofar as: "the effectiveness of IVGID's internal control;" "the deficiency or a combination of deficiencies in IVGID's internal control;" whether IVGID's financial statements are "free from material misstatement;" whether IVGID is "in compliance with laws, regulations and contracts;" and, "management's overview and analysis of (IVGID's) financial statements" (i.e., Mr. Pinkerton's spin of "an unqualified (clean) opinion … the best audit report that can be issued").
Rather than answering the financial questions most of us think audits answer, our audit was commissioned "solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of (IVGID's) … internal control or … compliance."
Why then did we spend over $50,000 for this type of audit?
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Mr. Pinkerton tells us he's a numbers guy. He then goes on to revel in a number of "key points over the past five years" that according to him present a glowing picture. Let's separate reality from this additional spin:
Spin: "We've invested $21M in capital assets." Reality: This money came from the subsidy provided by our increased and unnecessarily excessive Rec Fees, spent on assets like $50K lawnmowers, $275K snow groomers and $45K in electric vehicle charging stations.
Spin: "Utility revenues have increased by 30%." Reality: IVGID has increased the median residential user's water bill by nearly 25%, and sewer bill by 58%.
Spin: "Our (recreational) user fee revenues have been relatively stable." Reality: Staff has not been able to increase revenues. What happened to Global Golf Advisors' $35K "playbook?"
Spin: "Annual expenses have increased." Reality: Staff has not been able to reduce expenses.
Spin: Our recreation fee cost to "property owners has remained flat." Reality: The Rec Fee has increased nearly 12.8% for those with beach access, and over 17% for those without it.
Spin: "Our governmental revenues [property and (consolidated) taxes] … have … increase(d)" roughly 37%. Reality: Why then haven't our bottom line losses been reduced?
Spin: 58% of "our (recreational) bonded indebtedness has" been retired. Reality: Why then hasn't our Rec Fee been reduced given it pays for bond servicing costs?
Spin: "The vast majority of our non-utility (i.e., recreation) debt will be retired by 2018." Reality: It's my opinion staff intends to keep our Rec Fee where it is so it can pay for implementation of the DP Master Plan.
Spin: We have "$20.2M (of) … unrestricted cash." Reality: The same we had on June 30, 2009.
Spin: "Unrestricted cash … is nearly 50% greater than our total outstanding (bonded) indebtedness of $14.0M." Reality: Why would you expect anything less given so much of our bonded indebtedness has been retired?
Notwithstanding the foregoing, our "improved" financial condition is really as a result of:
1. Increased Rec and Beach Fees,
2. Increased water and sewer rates,
3. The application of increased water and sewer rates to reserves "to fund future capital improvement needs,"
4. The payoff of outstanding recreational bonded indebtedness ($9.694M since June 30, 2009),
5. The expenditure of between $5M-$7M less on recreational capital improvement projects than originally budgeted (yet paid by our Rec Fees); and
6. The assessment of higher Rec Fees than those required to make our recreational facilities "available for our use" (IVGID's represented limited statutory authority).
All of this has resulted in positive cash flow which has been assigned to "reserves" rather than used to reduce our Rec Fees in future years.
In other words, the Board has allowed staff to intentionally collect Rec Fees at unnecessarily excessive levels for purposes other than those limited represented purposes.
This has allowed staff to create a "slush fund" available to spend on future unidentified, unbudgeted and unappropriated "pet projects" like electric vehicle charging stations, the updated DP Master Plan and now a consultant to sell that Plan to a populace which is firmly against it.
Now that you know "reality," what exactly do you intend to do about it?
Aaron Katz is an Incline Village resident.