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Audit confirms Bay cash shortage
By Geoff Belcher
Aug 1, 2014, 21:01

An independent firm this week officially released its full report of the the city of Bay St. Louis' 2012-2013 audit, confirming what city officials have been debating for weeks: The city is running low on cash.
"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 last month, "so we'd like to see a reserve built so operations can continue over unexpected expenditures."
According to the full report, issued this week and available on the city's website, "management has not developed any plans to mitigate the cash flows shortages in the General Fund and the Utility Fund in order to timely meet the obligations of the city as they come due. ... As a result of this matter, we were unable to determine whether any adjustments might have been found necessary in respect to these cash flow shortages in the financial statements."
The report showed that at the end of the fiscal year on Sept. 30, 2013, "as the impact of the sluggish economy continued, budgeted general fund revenues were decreased by $805,022."
In addition, the property tax budget was reduced $362,506 from the year before; the budget for inter-governmental revenues was decreased $476,539; and gaming budgeted revenues were decreased by $147,607.
On the plus side, sales tax budget revenue was increased by $53,147 due to larger than anticipated sales tax receipts; and the budget for licenses and permits was increased by around $88,191 to to an increase in building permit revenues.
According to the report's economic outlook, "The city of Bay St. Louis offers citizens a high level of municipal services and the second lowest property tax levy in the state of Mississippi. With no expected changes to revenue, a cash reserve cannot be generated and the current level of services cannot be maintained."
In other words, the city must raise funds or cut services.
The audit also found that the city's utility rates are not keeping up: "During fiscal year 2013 and continuing in fiscal year 2014, the Bay St. Louis utility system did not generate revenue to meet operating expenses and debt payments. Current base rates for water, sewer and gas service are lower than the rates set in 1987. "Although utility rates were increased in October 2013, the increased revenues are not sufficient to ensure the operation, debt service and capital needs of the utility system," the report said.
Currently, the city of Bay St. Louis charges 15.09 mills for city services and 2.66 mills for the county library system; and 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.
The city of Long Beach property tax rate is 48.98 mills; and charges a $75 flat fee for utilities.
Overall, the auditing firm issued a disclaimer of opinion on the city's financial statements "as a whole, due to our inability to determine if the city will be able to meet its financial obligations as they become due because, as of the date of this report, management and those charged with governance have not developed any formal plan of action to mitigate these cash flow shortages."
Mayor Les Fillingame has urged the city council to raise utility fees and said he would entertain an increase in millage, but some members of the city council have said they would rather investigate ways to cut costs and alternate ways to raise revenues before enacting any rate hikes.
The mayor and council will meet in several more budget workshops before adopting the FY 2014-15 budget in September.


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