Financial Statement Drilldown: Is Bay St Louis budgeting revenues it will never collect?

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:

2013-2014 BSL Budget Worksheet

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:

Source, 2013-2014 Budget Report Obtained from City's Website. 2013 data incomplete but should not differ materially from actual
Source, 2013-2014 Budget Report Obtained from City’s Website. 2013 data incomplete but should not differ materially from actual

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):

Source: State Auditor's Office Online file copy of the City of Bay St Louis 2012 Contract Audit
Source: State Auditor’s Office Online file copy of the City of Bay St Louis 2012 Contract Audit

And the 2011 Audit:

BSL 2011 Audit Cap 1
Source: State Auditor’s Office Online file copy of the City of Bay St Louis 2011 Contract 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:

Source: 2013-2014 City Proposed Budget Worksheet obtained from City website
Source: 2013-2014 City Proposed Budget Worksheet obtained from City website

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.

7 thoughts on “Financial Statement Drilldown: Is Bay St Louis budgeting revenues it will never collect?”

  1. Glad you posted this, especially taking it straight from their reports. This information has two of the Councilmen starting to ask questions, and expect answers. They are the representatives of Wards 5 & 6.
    And there you have the reason for this Restore Bay St. Louis Facebook Page–not the finances–the digging efforts of these Councilmen. Restore is, I believe, simply an effort by City Hall, not to rid the city of a financial burden, but to rid City Hall of these two men through “de-annexation.” Only 7 months ago, these good people in 5 & 6 were good enough for the Mayor to court their votes. And, it is now proven there were financial problems then. So they now want to dump 1/3 of the cities wards, and taxpayers who have invested 8 years of taxes in the city because they are such a burden. Sorry, this adds up about as well as their numbers do.
    The last thing Bay St. Louis needs at this juncture in its history is an effort to divide and conquer. And if the criteria for being able to stay with the boundaries of the city is going to be how much is spent ward by ward–there needs to be a study of the books in about 18 months to see how much is being spent in ward 2 for the upcoming Harbor.
    I don’t think this effort is at all friendly to Bay St. Louis, especially at a time when the city needs all the ad valorem taxes and friends it can muster.

    1. I am delighted to lend some of my knowledge to the community. Property values are diminishing thus taxes must follow. Gaming taxes are down significantly as well from earlier times. Mississippi’s gaming revenues in 2013 matched the level from 1999 as competition from other states grow.

      I’ve taken a bit of time to read the Municipal Ad Valorem cap statute. If my first pass reading the statute is correct a city can go all the way to 20 mils without an election.

      I stay out of the political part and keep to the numbers but as a general rule the way to accomplish something like that is for everyone to join hands and start singing Kumbaya but that requires a level of trust I sense is currently missing from the landscape.

  2. Mayor Fillingame has talked down to me & the citizens of Bay St. Louis on a number of occasions saying that we “didn’t understand how gov’t worked” and that it only “appeared” that the City didn’t have money because I didn’t understand & that the money would be collected in a couple of months … DUH! Under full disclosure I must state that I am a resident of Ward 6 & that until this “Restore BSL” crap started & our only means of communication got behind it, I’ve been patient. Not anymore.

  3. Michelle,
    Just be aware of Restore because the way It is shaping up it appears to be coming from City Hall because of a post that was on the other day when a resident of ward 5 had been complaining that she hadn’t received the documents she requested online. Then “Restore” told her that he was sorry he hadn’t responded but it was because he had to get to the right computer. Well, the only computers that would be storing all of these documents about city business would be those at city hall, right? And the city clerk, who handles all this business, works only part time at city hall and his other part time job is at Habitat for Humanity–what does that tell you? Not to mention, of course, that the Mayor’s children are friends of the Restore page, and in fact were some of the first ones to join. Not to mention his administrative assistant.
    What lengths will these people go to in order to eliminate Falgout and Boudin from the city council? It is as complicated to de-annex as to annex according to state law, and the legal fees are something to consider for all of these so-called friends. Lawyers want retainers up front, hourly rates, and then the hourly rate goes up when it goes to court.
    And, don’t ever think your only means of communication with the elected officials are a facebook page.
    They meet twice a month,and there’s podium where you can address them face to face. I say attend the meetings, bring your neighbors, and make them earn the salaries your hard earned taxes are paying them. Don’t be used by anyone.

  4. Doug, a tip – see if there are any bond counsel grumbling to your local kleptocrats. General revenue bonds are secured by a pledge in many cases by all assets including revenues. Usually bond trustees require an annual report on all revenues, even for special obligation bonds. Look to see if there are any council meetings involving cryptic communications from bond counsel or if one of your local readers can do up the public record request for all communications in recent times w/bond counsel. Perhaps you might even find a coal mine canary a few months ago?

  5. Doug,
    “Restore Bay St. Louis” ( still won’t identify himself) is on their Facebook page now saying how things have been quiet on the page for the last couple of days. He’s blaming it on the weather. Could it be your post on the finances?Now he wants to bring up the de-annexation on the ballot in the next election–or just ask the Council to approve it through an ordinance at their next meeting. He’s even saying that Councilman Boudin suggested that at the last meeting.
    Could it be your figures from a professional position have given them something to think about?

    1. I would certainly hope so. Be interesting to see the anonymous person behind the deannexation movement unmask themselves at a City council meeting but to the extent they sign their email “Mad as Hell” I would not hold my breath.

      Randy Ponder pumped this group on the Seacoast Echo. Maybe he can come to the next council meeting and speak for them.

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