Bay Council refuses to raise rates
By Dwayne Bremer
Jul 23, 2014, 09:10
The Bay St. Louis City Council held yet another lengthy meeting Monday to discuss its finances and a possible utility rate hike, and once again, the meeting resulted in no action being taken.
Bank sends stern message:
The meeting began with Hancock Bank Bond Trustee Jason Thomas delivering an ultimatum of sorts to the council.
Thomas told the council that its recent re-financing of a $1.6 million bond carried the stipulation that the city pledged "full faith and credit" to pay it off.
Full faith and credit means that the city must dedicate money to pay the annual bond payment, Thomas said.
He said the city can dedicate the funds by either levying ad valorem taxes or dedicating alternative methods of payment.
Thomas said that under the terms of the loan, the city council must decide how to pay for the bond by Sept. 1.
Councilman-At-Large Mike Favre asked how the council could dedicate funds before it knew what it's revenue would be.
"We are talking about an increase to pay for this bond, but we don't know if an increase is going to be necessary," Favre said.
Auditor says city has a cash-flow problem:
Jennifer Bell, auditor for Wright, Ward, Hatten & Guel told the council Monday that her office would be issuing a "disclaimer of opinion" regarding the city's 2013-2014 audit.
A disclaimer of opinion means the auditing firm cannot or does not want to issue an opinion on the city's finances. It is the first disclaimer the city has received in the seven years which Bell's company has been auditing the city, she said.
"There are too many uncertainness or contingencies to form an opinion," she said. "Management and administration have not implemented a cash-flow plan. We are not sure that there will be enough revenue to meet all of the costs."
Another issue, she said, is that the city council has been aware of the findings since April and done nothing to improve revenue or cut costs.
"We have never issued a report like this in the past seven years," Bell said. "Your operating revenues are not meeting your obligations. I told the city council in April, but the council has taken no action."
Utility fund versus general fund:
Ward Five Councilman Joey Boudin asked if the city's financial problems were limited to it's general fund or it's utility fund.
Bell said her firm audits the city as a whole and that if something is not done soon, tough decisions will have to follow.
"Do you want to maintain the current level of services you have?" Bell asked. "A lot of the transactions in 2014 occurred in the utility fund, but we look at governing body as a whole, both the utility and general fund. Based on the decrease in revenue and increase in spending, we feel that management has got to make some decisions."
Favre suggested that the city reorganize its utility fund workforce to decrease the funds obligations. Favre said there are currently 19 full-time employees under the utility fund umbrella.
Several of those employees do not work for utilities full time and if they were moved to the general fund side, it would free up several hundreds of thousands of dollars, Favre said.
"Some of these people should be on the general fund side," Favre said. "I know that may cause us to raise millage, but they should be where they belong."
Fillingame said that the utility fund payroll does not include other employees who work in utilities, but are paid under the general fund ledger. Fillingame, who has staunchly defended the utility payroll recently, said he and City Comptroller David Kopf have been over and over the utility payroll and it would be the same, even if percentages of all employees who work in utility's were calculated it would still be the same.
"I think you may be a little confused Mike," Fillingame said. "The costs of utilities is going to remain static."
"I'm not confused," Favre quipped back. "It's right here in black and white."
Tough times and tough decisions:
Bay St. Louis has seen a significant drop in revenue in recent years, primarily in sales and gaming tax.
Ward One Councilman Doug Seal said the city's gaming revenue is down 29 percent in the past ten years, and sales tax is down about 13 percent.
"That is forty-two percent of our revenue," Seal said.
To offset costs in the utility fund and to help pay for the recent bond re-finance, Fillingame asked for a utility rate hike of $9 per customer, per month.
The council denied a similar request for a rate hike last month by a 4-3 vote.
Kopf said the rate hike was necessary to support the utility fund.
"We have talked utilities into the ground," Kopf said. "We are still working on 30-year-old rates."
In addition to paying off the city's debt and covering the costs for the utility system, Kopf said, the city needs to look towards the future.
"We have to generate capital to maintain our system," he said. "Some of sewer-lines have been in the ground for 50 years."
The proposed $9 a month raise would generate about $345,000 a year, officials said.
After three hours of talking, the council tabled the mayor's request for a $9 utility rate hike.
The council agreed to take up the matter again at Tuesday's meeting, but the results of that discussion were not available by press time Tuesday.