Auditor: Bay getting low on cash
By Geoff Belcher
Jul 11, 2014, 20:16
Bay St. Louis has little money in its general fund and practically no reserve fund, an independent auditor told the city council on Tuesday, a problem which has Mayor Les Fillingame at odds with a couple of councilmen.
"There's been a downward trend in the total cash, especially the water and sewer fund and general fund," Mike Guel, CPA, of Gulfport-based auditing firm Wright, Ward, Hatten & Guel, told the council Tuesday, "so we'd like to see a reserve built so operations can continue over unexpected expenditures."
Guel, remarking on the city's 2013-14 audit report, said that by September, the city will have no more than $30,000 in its general fund. When Ward 6 Councilman Lonnie Falgout asked if the city has a reserve fund, Guel said "Oh, no."
The city's reserve fund, or lack thereof, has been an ongoing issue.
The state of Mississippi recommends that municipalities keep a reserve fund capable of paying three months' worth of bills. Most Coast cities comparable in size to Bay St. Louis keep about $2 million-$2.5 million in reserve.
In July 2013, Falgout and Ward 5 Councilman Joey Boudin balked when the mayor sought to use about $233,000 of the city's then-$250,000 reserve on the Main Street lighting project.
"There are all kinds of reserve funds," Fillingame said at the time. "It all depends on what these funds are for. ... Bay St. Louis never had a true reserve fund. You always want to keep more operating capital, sometimes there is just more trouble."
Guel said Tuesday that not having a healthy reserve fund could "put the city in jeopardy."
Falgout said Wednesday that the Fillingame administration "has put Bay St. Louis at a serious crossroad and what's on the other side is not good at all."
He said he fears that if the auditors report an "on-going concern" in the city's finances, the state may eventually step in to correct the situation.
Fillingame said Wednesday that Guel's report was serious, but offered nothing new or unexpected.
"Bay St. Louis is not in dire straits," Fillingame said. "The only thing that is really potentially going to be off the table if we don't address expenses is capital projects going forward.
"Most of the findings and most of the concerns in the audit report were from the shortness of cash towards the end of the last fiscal year, which actually caused us to fall behind on some of our bills. Everybody's been paid up-to-date now."
Fillingame said several factors have contributed to the problem, including the fact that FEMA did not provide expected reimbursements for Katrina-related projects; sales tax revenues continue to slide due to a lackluster economy; and gaming revenues are down Coast-wide.
The administration and the council have also had continuing debates over utility rates.
Currently, Bay St. Louis residents enjoy practically the lowest utility rates on the Coast, just a $35 fee based on a 3,000-gallon minimum usage; with a "step-up" fee of $3.80 per 1,000 gallons of additional usage. By comparison, Gulfport residents pay $43.70 for the 3,000 gallon-minimum, with a $10.45 step-up fee per 1,000 gallons of additional use.
City Clerk David Kolf pleaded with the council last month to adopt one of two options to counter the shortfall in utility revenues: Either add nine dollars to each customer's total utility bills, with an enhanced step-up fee; or a line-item increase to every customer's utility bill that could be removed once the debt service was paid.
The council voted the increase down four-to-three.
Both Falgout and Boudin said they wanted more time to go over the figures and explore other options.
"The council appears to be taking the position that Bay St. Louis's reputation as having the lowest utility rates and lowest property tax on the Coast is worth preserving at all costs," Fillingame said Wednesday, "and I don't necessarily agree with that.
"We can maintain operations like they are. Our biggest problem ongoing is coming up with funds for capital reserves (for) any major repairs coming up or any disaster.
Rev. Jeffery Reed, councilman for Ward 3, complained Tuesday about the city's dwindling sales-tax revenues. He pointed to other Mississippi communities similar in size to Bay St. Louis that had much higher incomes from sales tax.
Fillingame said Wednesday that he understood Reed's point, but "every city that he referenced is a major shopping hub that has ... all the big box retailers that cater to regional trade. Bay St. Louis is not blessed with any of those major retailers ... That's just he luck of the draw there. Ultimately, the I-10/603 interchange will probably develop and ultimately, we'll have some large retailers there, but we can only speculate what year that may occur. Every opportunity to solicit a new retailer, we do.
"Everything that we have set out to accomplish from a capital standpoint from the days immediately after Katrina has been achieved," Fillingame said. "Nothing has been left behind. Every project has been finished – within budget. From landscapes to splash pads, all the things that we have set out to accomplish for this little community have been done, at very little or no burden on the local taxpayers."
Unfortunately, he said, the time has come when more of the city's revenues will have to come from local pockets.
Boudin said Tuesday that he wants to consider every other viable option for reducing costs before raising any rates.
"I am looking forward to having the workshop with the auditors and then take
the necessary steps to make the city financially stable again," Ward 4 Councilman Bobby Compretta said. "We are going to have to cut expenses and raise revenue. We cannot keep trying to operate the city on the same revenue we did 10 years ago."
Guel told the council the complete 2013-14 audit report will be available for public viewing within a few days.
Falgout asked for a series of workshops for the council to hammer out the 2014-2015 budget, which must be complete by September. The council scheduled workshops on July 15 and 21 and Aug. 4 and 18.