And the question in the post title begs the next key question in “Is City is expending the revenues it will never receive?”. The answer to both questions appears to be yes if the City budget is more than a simple piece of paper with numbers on it. First up is an analysis of Revenue account 201, where Ad Valorm Tax Revenue from Real Property is coded. Here is the salient portion of the 2013-2014 City Budget:
We can see that in 2012-2013 the City Budget called for total revenues for this line item, the largest of all the Ad Valorem Tax Revenue sources, of $1,680,000 yet as of September 12, 2013 only $1,284,724 had been collected. That amount ($1,284,724) should be very close to the final number aka actual for the 2012-2013 Fiscal Year as very little Real Property Ad Valorem tax is paid at that time of the year since the property taxes were due in January. Therefore using that number for 2012-2013 means that line item was short $395,276 in Real Property Tax Ad Valorem Revenues, which represents in excess of 10% of total budgeted revenues. Following is a chart which shows the 3 year trend for this revenue line item:
RFP was all over this fact in comments linking a 2011 WLOX story on the problem:
Bay St. Louis mayor sets record straight about finances ~ Michelle Lady
Revenues may not be exactly what officials projected but he says it is no reason to worry.
Fillingame said, “Last year our initial budget projections for our general budget, which by in large is the biggest in the city, started at a little more than $12 million and by the end of the year revenues came in at about $11.1 million.”
But he explains, do not let those numbers mislead you.
“Most of that $7.7 million, by in large the biggest portion of it, was just grant revenues that were not utilized. So if you don’t have the expenditures on the grant side then you don’t draw the revenues so it’s really a net zero affect on the budget,” Fillingame said.
In fact last year the city ended with a surplus which was put into a rainy day fund.
By the end of the 2012-2013 fiscal year the rainy day fund was gone as the City began to run late paying its bills. How about some lovely music:
The reason there is a much bigger problem now is because the trend of budgeting more revenues than will ultimately be received is nothing new. Here is the salient snippet from the FY2012 City Audit (these numbers are the total of all taxes instead of only the 201 line item):
And the 2011 Audit:
Based on the above I can’t quantify exactly how much the 201 account was short for those years but clearly there is a problem overestimating the amount of revenues the city will collect in taxes. So now that the City is broke, what did the Mayor and gang do with the 2013-2014 budget for the 201 line item? Well they doubled down and increased the budgeted revenues in the 201 line item to $1,749,280.
In fairness to the Mayor both the 2011 and 2012 Audits indicate he reduced expenditures to compensate somewhat but the rainy day fund was also expended and now the City is $500,000 in debt so the shortfalls have not been completely offset with spending cuts. My problem is I see no point in budgeting and expending revenues based upon estimates that appear worthless from a financial planning standpoint. By budgeting and expending I am saying that the 2013-2014 approved budget has total revenues (including the 201 account) of $7,775,080 and total expenditures of $7,694,369 which yields excess of revenues over expenditures of $80,711. The following graphic explains the folly of a city fooling itself via misleading budget:
I personally do not see the point using unrealistic numbers in a budget, especially if it is supposed to more than a simple piece of paper with numbers on it. Does the Mayor and city council have the coming 2013-2014 budget cuts already mapped out mentally or are we flying blind on a magic carpet? I reckon we’ll all find out the answer somewhere around June or July of this year.