I-1 - Preliminary Official Statement - UR Loan Agreement

City of Tiffin Schedule of Findings Year ended June 30, 2019 Relevant statutes: Chapter 28E.4 of the Code of Iowa states “Any public agency of this state may enter into an agreement with one or more public or private agencies for joint or cooperative action pursuant to the provisions of this chapter, including the creation of a separate entity to carry out the purpose of the agreement. Appropriate action by ordinance, resolution or otherwise pursuant to law of the governing bodies involved shall be necessary before any such agreement may enter into force.” Chapter 28E.7 of the Code of Iowa states in part, “No agreement made pursuant to this chapter shall relieve any public agency of any obligation or responsibility imposed upon it by law…” The Constitution of the State of Iowa establishes public funds criteria and requires that public funds may not be used for private benefit. We noted the following regarding the agreement and the City’s arrangement with the Fire Association: (a) The agreement and contract were not extended by City Council resolution for the fiscal year ended 2019, as required. During fiscal year 2019, the City made monthly dues payments to the Fire Association totaling $153,749. In addition, during fiscal year 2019, the City paid $80,967 in principal and interest on General Obligation series 2018A bonds issued for the purpose of financing $1,072,608 of fire equipment donated to the Fire Association. These payments were not made under an approved agreement. (b) Official Attorney General Opinions have stated on at least six occasions since 1972 that, “Political subdivisions and municipalities, including cities, counties, schools, and townships are municipal – governmental – entities. As governmental entities they are governed by elected bodies, are directly responsible to the public as a whole, and are subject to the limitations imposed on them by the state. Although a private organization may be formed to provide and support “public services” which are the same or similar to the services provided by government, the private organizations are not subject to the same degree of public accountability and oversight as governmental entities.” Private, non-profit organizations are not subject to audit requirements and, because the 28E agreement did not create a legally separate 28E entity (which would be subject to audit), the funds paid by the City to the Fire Association under the 28E agreement are not subject to the same scrutiny/audit requirements as the City. In addition, the Agreement with the Fire Association allows the Association Board to set the annual budget for the operation of the department, and for all major expenses and purchases of new fire vehicles and equipment, and requires the City to transmit all tax monies resulting from the fire protection levies to pay costs agreed to under the contract. This arrangement creates an inappropriate situation where the City is issuing a blank check to the Association, rather than paying for services as they are performed. 61